Is cardboard demand a warning sign of a slowing economy? Can AI revenue cover all the debt it’s created? SEC scrutiny on private investments, Home sale proceeds & More

Is a reduction in cardboard demand a warning sign of a slowing economy?

The simple answer is yes, but it also is one of many indicators we are seeing. Cardboard is used in many items in the economy from pizza boxes to the multiple items you get delivered from online stores. The numbers show that box shipments after reaching record highs during the pandemic are now down to levels not seen since 2016. If you look at a per-person basis, the numbers are pretty staggering, as they are down over 20% from their 1999 peak. Part of this decline could be from companies like Amazon that have reduced cardboard consumption by shipping some items in paper and plastic mailers and potentially even becoming more efficient in their packaging practices, I remember seeing many times a box inside of a box.

From what I can tell, I think they no longer do that, which would be a big reduction in cardboard. The price of container board has been on the rise over the years, which can cause users of cardboard to reduce their consumption as the price of corrugated sheets has risen 30% from six years ago to $945 per ton. I would not predict based on this data about cardboard that the economy is heading into a recession, but it is something definitely worth adding to the list to remember!

Will the revenue from AI cover all the debt and expenses it created?

AI is definitely part of the future, but has overbuilding surpassed the revenue that it can create? When one steps back and looks at the numbers they are staggering. Over the past three years, major tech firms have committed more funds towards AI data centers than it cost to build the U.S. interstate highway system that took 40 years to build. These numbers are even adjusted for inflation. In the next five years, the AI infrastructure spending will require $2 trillion in annual AI revenue. If you think that’s a lot of revenue you are correct. In 2024 the combined revenue of Amazon, Apple, Alphabet, Microsoft, Meta and Nvidia did not hit $2 trillion. It is also five times the amount of money spent globally on subscription software.

Consumers have enjoyed the free use of AI, but it appears for businesses paying more than thirty dollars a month per user is the breaking point. AI executives claim the technology could add 10% to the global GDP in the years to come. With that thought they are saying the benefit comes when it can replace a large number of jobs and that the savings would be enough to pay back what they invested. My question is, if you’re replacing all these jobs, consumers will have less money to spend and probably won’t need or care about AI. There are many history lessons about bubbles that did not pay off because of the over excitement on inventions with such things as canals, electricity and railroads just to name a few.

People may remember the excitement over the Internet and the building of tens of millions of miles of fiber optic cables in the ground. The amount spent was the equivalent to about one percent of the US GDP over a half a decade. The justification from the “experts” was that the Internet use was doubling every hundred days. The reality was only about 1/4 of the expectation came to fruition with traffic doubling every year. Most of the fiber cables were useless until about 10 years later thanks to video streaming. A report out of MIT said they found 95% of organizations surveyed are receiving no return on their AI product investments. In another study from the University of Chicago showed that AI chatbots had no significant impact on workers earnings, recorded hours or wages. I still believe AI will be here to stay, but the question is have the expectations gone too far? I think they have! 

Finally, some scrutiny on private investments from the SEC!

The SEC has an investment advisory committee that was formed back 15 years ago that provides guidance to the regulator. Recently, the committee approved a set of recommendations on how to deal with the private market and protect the less sophisticated investors. The recommendations cover the key problems with private investments for investors, which include how they come up with valuations, how complex they are and that they are not a liquid investment. I thought it was also a wise move that they recommended the SEC demand better disclosures and also who can and cannot invest in private markets. I was very happy to see that they’re not just putting across the board if you have a net worth of X amount you can invest in private investments. The recommendation was based on the investor's level of investment sophistication.

I’m hoping the SEC comes up with these rules quickly before more people find themselves in a private investment that they cannot get out of and perhaps lose all their money. Today would not be soon enough to pass this legislation. My recommendation is if you’re not in any type of private investments, don’t go into them! No matter how good your broker makes it sound, remember he or she is likely getting a big fat commission to put your money into these high-risk investments.

Financial Planning: Keeping more of your Home Sale Proceeds

Selling your primary residence can result in a substantial profit, but the IRS provides a valuable tax break to help offset that gain. Individuals can exclude up to $250,000 of capital gains ($500,000 for married couples filing jointly) if they’ve owned and lived in the home for at least two of the past five years. Be careful not to confuse this with selling an investment property, which does not qualify for the primary residence exclusion. Instead, gains from investment property sales may be deferred using a 1031 exchange, where the seller reinvests the proceeds into another investment property. By contrast, with a primary residence sale, you can use the proceeds however you like, and the gain is excluded up to the allowable limit without any reinvestment requirement.

Importantly, even if your income exceeds the thresholds for the 3.8% Net Investment Income Tax (NIIT) ,$200,000 for single filers or $250,000 for joint filers, the portion of the gain excluded under this rule is not subject to NIIT. Only any gain above the $250,000/$500,000 exclusion could be subject to the tax. Most states, including California, conform to the federal exclusion, meaning they also will not tax gains up to the $250,000/$500,000 limit. For those expecting taxable gain, timing the sale in a year with lower income can help reduce the capital gains tax rate, since some or all of the gain may fall into the 0% or 15% capital gains brackets.

It’s also wise to keep records of capital improvements such as remodels, additions, or system upgrades since these increase your cost basis and reduce the taxable portion of any gain. With proper planning, documentation, and a clear understanding of these rules, many homeowners can sell their primary residence while minimizing or even avoiding capital gains tax.

Looks like some investors are getting the message that the stock market is too high

Money market funds recently hit an all-time record of $7.7 trillion, showing that some investors are concerned about the overvaluation of the markets. This is good that all investors are not throwing caution to the wind and are satisfied to put some of their money into short-term funds, earning 4%, while they wait out the potential storm heading our way. It appears that since 2022, money market funds have seen a nice increase, considering they were just around $5 trillion at that time.

If you’re wondering if nearly $8 trillion in money market is a large amount, go back to 2017, that year there was only a little over $2.5 trillion in money markets. Investors in money markets will experience over the next month or so probably a quarter percent drop in their yields, but that should not be enough to scare them into risker assets at this time. I would hope that from the reading that I did, it appears that some investors are just being cautious and putting 20 to 30% of their money into money markets, while keeping the rest invested. A 100% allocation in money markets is never a good idea. I think holding that 20-30% allocation is a prudent move at this time because no one knows when the storm will come. It could come tomorrow or next year, but we are confident a storm is coming, and I believe it's better to be prepared for it.

Don’t blame rising food prices just on tariffs

Last month consumers saw fruit and vegetables increase 2% and prices for apples and lettuce in particular climbed 3.5%. Tomato prices climbed another 4.5% on top of July's 3.3% increase. Beef prices continued to climb as they saw an increase of 2.7% and coffee climbed 3.6%, which now makes it 21% more expensive than one year ago. Before you jump all over the President and say this is all because of the tariffs, you have to look at it from the perspective of the farmers. Yes, some of the cost increase is from tariffs, but the cost of fertilizer in August was up 9.2% from the previous year.

Labor costs have also risen, but it’s hard to get an exact figure since roughly 40% of agricultural workers were undocumented. The reason for rising food costs is not just the higher costs for production, but distribution and higher transportation costs are also having an impact as well. Weather this year has not been in favor of the farmer and has caused some disruption with harvest and livestock production. Unfortunately, going forward, it is predicted that these issues will continue to push the price of food higher for the near future. That means for those going grocery shopping, you need to continue to compare prices and look for the sales.

AMEX raises platinum card fee 29%, is it worth it?

It was only a matter of time before AMEX raised their fee on their Platinum Card after Chase raised their fee on the Sapphire Reserve Card to $795. If you want the status of having an AMEX Platinum Card, it will now cost you $895, a 29% increase from the $695 they were charging before. The AMEX Platinum Card came out over 65 years ago in 1958 with an annual fee of just six dollars. The marketing AMEX does is phenomenal and I think many will continue to hold the card and pay the extra $200 because the company has increased the rewards by $2000 to $3500. Holders of the card will still get access to airport lounges and seats at fashion week events in New York, which I’m not sure how that benefits holders around the country. But what holders may not realize is these other perks like the $600 hotel credit is $300 every six months. This is true with many of the perks you get like the $300 reward at Lululemon is really only $75 a quarter.

If you buy all your stuff at Christmas time, you only get a $75 credit. Don’t expect to receive $200 off your next Uber bill for that Black car ride, it is only $15 a month, except for December when you get an additional $20. The highest earning 10% of Americans accounted for 49.2% of all the spending in the second quarter of 2025, which is the highest on record since 1989 when they began keeping track. I have a hard time believing that these people with that income are going to spend time going on the website and doing all the accounting to keep track of their credits to maximize their rewards. I think many hold it just because of the status that comes with the card. Myself, I like my 2% cash back reward on all my purchases from my Wells Fargo credit card. I don’t have to keep track of anything; I just get a nice check in the mail when I ask Wells Fargo to send it. I save $895 every year because my annual fee on the Wells Fargo Active Cash Card is zero. I like clean and simple when it comes to my credit card rewards.

Which way are mortgage rates heading?

That’s a big question many people ask and I wish I could say with certainty I could give you the exact direction, but all I can do is give you information to hopefully allow you to make a more intelligent decision if you’re dealing with a mortgage. People wonder why mortgages are tied closer to the 10-year Treasury than the Fed short-term overnight interest rate, which is impacted when the Federal Reserve cuts rates. The reason for the tie to the 10-year Treasury is that the expected amount of time a homeowner will hold their mortgage before either selling their house or refinancing that mortgage is longer term.

The only tool that the Federal Reserve has to really move the price of mortgages is purchasing Mortgage-Backed Securities, which they did back in 2008 and during Covid in an effort to restart the housing market and help improve the overall stability. When the Federal Reserve purchased Mortgage-Backed Securities, they kept interest rates low on mortgages, and it encouraged people to buy homes and refinance their mortgages to put more money in their pockets. The reason I don’t see that happening now is even though the housing market is slow, if they stimulated the market further, they could increase inflation, which is not the goal of the Fed at this time currently. Based on the information I see I believe we will see mortgage rates in a current trading range up or down around a quarter of a percent for the next six months or so.

Will the revenue from AI cover all the debt and expenses it created?

AI is definitely part of the future, but has overbuilding surpassed the revenue that it can create? When one steps back and looks at the numbers they are staggering. Over the past three years, major tech firms have committed more funds towards AI data centers than it cost to build the U.S. interstate highway system that took 40 years to build. These numbers are even adjusted for inflation. In the next five years, the AI infrastructure spending will require $2 trillion in annual AI revenue. If you think that’s a lot of revenue you are correct. In 2024 the combined revenue of Amazon, Apple, Alphabet, Microsoft, Meta and Nvidia did not hit $2 trillion. It is also five times the amount of money spent globally on subscription software. Consumers have enjoyed the free use of AI, but it appears for businesses paying more than thirty dollars a month per user is the breaking point. AI executives claim the technology could add 10% to the global GDP in the years to come.

With that thought they are saying the benefit comes when it can replace a large number of jobs and that the savings would be enough to pay back what they invested. My question is, if you’re replacing all these jobs, consumers will have less money to spend and probably won’t need or care about AI. There are many history lessons about bubbles that did not pay off because of the over excitement on inventions with such things as canals, electricity and railroads just to name a few. People may remember the excitement over the Internet and the building of tens of millions of miles of fiber optic cables in the ground. The amount spent was the equivalent to about one percent of the US GDP over a half a decade. The justification from the “experts” was that the Internet use was doubling every hundred days. The reality was only about 1/4 of the expectation came to fruition with traffic doubling every year. Most of the fiber cables were useless until about 10 years later thanks to video streaming.

A report out of MIT said they found 95% of organizations surveyed are receiving no return on their AI product investments. In another study from the University of Chicago showed that AI chatbots had no significant impact on workers earnings, recorded hours or wages. I still believe AI will be here to stay, but the question is have the expectations gone too far? I think they have! 

China controls roughly 85% of the global processing in rare earth materials. Can the USA compete?

It really is not a question; the USA has to compete or else our economy and our country will be in dire straits perhaps as soon as the next decade. There are 17 rare earth elements with names that most cannot pronounce, but they’re becoming more important because they are used in catalytic converters, to refine oil, and even polish glass. The big one that is not really thought of as rare earths is magnets. Magnets account for about 40% of total rare earth demand because they are used in many items like iPhones, electric vehicle batteries, and even the F-35 fighter jets. There are now some public companies in the U.S. like MP Materials coming on strong and they have their own mining and processing plants.

The US government has taken through warrants a $400 million preferred equity stake in the company, which now makes the US the largest shareholder. As time goes on, we will see other types of incentives for rare earth companies in the United States. China got so far ahead of us because of the red tape and permitting that was required in the US. China fast tracked many of their mines and processing plants to get them up and running, while here in the US the plans sat on someone’s desk waiting for approval. It should also be noted in China the government is the largest shareholder in some of these mining companies, and they are willing to take small margins like 4%, which would be unheard of in the United States.

Going forward, I think you will see less red tape and a faster permitting process with rare earth minerals so we can have more rare earth minerals here and not be held hostage to the communist Chinese government in the future.

Back to the office has hit a slowdown!

Companies like Amazon, JPMorgan Chase, and Dell have pretty much gone back to having most employees in the office five days a week and there are companies like Paramount Studios and NBC Universal that told employees to commit to coming to the office five days a week or else take a buyout. With that said, there are still your diehards out there who got used to working from home and are refusing to go back to the office full-time.

Some companies like Amazon ran into trouble when they required employees to come back to the office full time as they forgot to match up the number of people coming back to the number of desks for people to sit at. Also, there weren't enough parking spaces and even video conferencing rooms were overflowing. To get the diehards back, it may take some more time. Numbers show that if they want perfect attendance from their employees that are still working from home, they can get that with the employees coming in one day a week. But when they start asking for three days or more per week, that is when the resistance starts, and the success rate falls below 75%.

If the economy does slow down, you will see a higher compliance because employers will want employees to be more efficient, and employees would likely be more scared to lose their job as getting another one quickly would be more challenging.