Control Panel: My week with AI

Investment Analysis Clubs Macro Economic Trends and Risks
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As all METARs know, there is intense competition between AI software and AI companies. I turn to ChatGPT for shopping tips because it provides specific vendors and prices. But I have turned more and more to Gemini for investing advice.

Let’s say I have some money that I want to invest in the stock market. (Yes, @intercst , I do have some money in a low-cost S&P500 fund but I occasionally want to buy a dividend-yielding stock. Sheesh, get that nagging out of the way!)

I run a screen for my specific factors of interest on Fidelity. Out of the thousands of potential stocks the screen winnows it down to about 20 to 25 potential choices. I pick a few and look at their charts, dividend coverage, the past few quarters of whether they met the projected earnings.

Then I ask Gemini about a stock. I tell Gemini that I’m a low-risk dividend investor. Within seconds, Gemini informs me that it’s an AI, not an investment advisor. Then, within seconds, it pulls together a story about the company, its pros and cons, why the P/E ratio is so low (an upcoming patent expiration, a new contract with the Teamsters Union) and the risk of whether it will turn upward or whether it’s a value trap. Gemini actually provides a video from YouTube on the danger of value traps. (Dividend stocks whose companies are in danger of losing profits in the future so they may have to cut their dividend.)

Gemini walks through the thought process of whether the long-term Treasury yield may rise in the future, making a dividend stock a better hedge against inflation and rising yields than longer-term bonds.

Gemini has the factual, steady voice that one would expect from Google Search except three-dimensional instead of one-dimensional. I like this better than ChatGPT which has been designed to have a “personality.” Gemini does have a personality and it does use the pronoun “I.” Gemini often ends a reply with a question which prompts a further response from the person. I have to remind myself that Gemini is a computer, not a person, and that it doesn’t have feelings that will be hurt if I turn it off.

https://www.nytimes.com/2025/12/19/technology/why-do-ai-chatbots-use-i.html

It’s easy to see that many, many people will begin to incorporate AI into their lives in many ways. AI is an invaluable research tool. But it’s also a companion that doesn’t tire of conversation.

Best of all, AI is free…so far… to retail customers. It’s hard to say whether the billions being spent on AI data centers will ever pay off.

https://www.nytimes.com/2025/12/20/business/dealbook/charts-2025-economy.html

From A.I. to Tariffs, 14 Charts That Explain 2025

President Trump’s trade policy, inflation and climbing stock prices shaped business and the economy this year.

By Christine Zhang, The New York Times, Dec. 20, 2025

…
This year, economic pessimism has persisted, as President Trump’s sweeping economic proposals, from his wide-ranging tariffs to his plan to remake the Federal Reserve, have raised uncertainty to new highs. And the economic data is sending mixed, and muddled, signals…

Earnings expectations have moved in tandem with the S&P 500 price index over the course of this year (again, with the exception of the early months of the year).

Of course, the S&P 500 is driven in large part by big tech companies, which are intertwined with the A.I. boom…

By one measure, investments in computer equipment and software accounted for more than 90 percent of G.D.P. growth in the first half of the year.

…
Inflation unexpectedly slowed to 2.7 percent in November, according to data released by the Bureau of Labor Statistics this week. But economists have advised taking this data with a grain of salt, because of disruptions in the bureau’s data collection efforts during the 43-day federal government shutdown.

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People tend to notice goods inflation more than services inflation. It’s really a shock to see hamburger meat almost $7 per pound. (I go to Walmart early in the morning to catch the overnight meat markdowns.) But the chart shows that services inflation is much higher than goods inflation. Services represent 70% of the economy.

The quiet but important news from the Federal Reserve this week was the start of Quantitative Easing (QE)… just after they finished months of Quantitative Tightening… and even though they aren’t calling it QE.

https://www.wsj.com/opinion/the-fed-quietly-announces-its-no-longer-steering-the-ship-d58a609c?mod=hp_opin_pos_2

The Fed Quietly Announces It’s No Longer Steering the Ship

That’s one of several big implications of a dry ‘implementation note’ on its Treasury purchases.

By Joseph C. Sternberg, The Wall Street Journal, Dec. 18, 2025

…
Most attention after the meeting focused on Mr. Powell’s interest-rate cut, the sixth since September 2024, totaling 1.75 percentage points. But the Fed also announced (via a dry “implementation note”) that it will buy roughly $40 billion in short-term Treasury bills over the next month, and an indeterminate (but probably similar) monthly amount until at least April. There’s reason to believe that if the Fed has started expanding its balance sheet again, it will continue indefinitely…

This new “ample-reserves regime” has far-reaching, sometimes hard-to-measure consequences. Because of the way post-2008 financial regulations account for reserves in calculating financial risk, high reserve balances can (counterintuitively) gum up lending to Main Street and discourage banks from trading Treasurys. Now another risk is coming into view: The Fed losing control of its own balance sheet…

Reductions in Fed asset holdings require its liabilities to shrink as well, and this carries the danger that commercial-bank reserve deposits may at some point fall below the level banks think they need. No one is quite sure where that line is. But if reserve deposits fall below it, interest rates could go haywire in the market for overnight lending where banks borrow from each other if they need more reserves—shooting far past the target the Fed sets for this, the federal-funds rate.

This happened in autumn 2019, and officials now seem to be worried by recent similar signs of unrest in that interbank market… [end quote]

These signs of unrest are showing up in increased Financial Stress even though Financial Conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems are loose and getting looser.

The options market thinks that there will be no fed funds rate cut in January 2026 but is divided about March. The FOMC is divided about whether to hold rates steady or cut. Nobody believes that the BLS provided accurate inflation rates after the long government shutdown in late 2025. The sudden drop in the inflation rate was unexpected.

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

The bond market doesn’t believe it. Even though the overnight fed funds rate was cut the longer-term Treasury yields rose. The Treasury yield curve steepened. The 10-year Treasury real yield fell. The TIPS yield rose.

The stock indexes are still in a rising trend (with noise). The Fear & Greed Index has recovered to Neutral. The trade is mildly risk-on. VIX is low.

Gold, silver and copper are on a tear. USD is stable within a channel established after the sudden drop in April 2025. Bitcoin has not recovered from its recent plunge. Oil is stable within a channel established in June 2025.

Next week is Christmas so many traders will be on vacation.

The METAR for next week is sunny. Wishing all METARs a happy winter solstice and an enjoyable holiday season.

Wendy

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Every word will be monetizing!

Step right this way!

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Which begs the question: if they were to begin charging for it (as they must, presumably), would you be willing pay for it? If so, how much?

And while your use of it now is surely less than it might be someday (think: using AOL in 1994 vs your cable modem today) could you make a SWAG as to what you might pay as a retail component for the use of AI in this, or in other areas of your life? Impossible question, I know, but on this rides a whole lot of forecasts and endless monies being dumped into data centers around the world.

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Right now, the data harvesting and live training companies are getting for free far outstrip any fee they could charge.

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I’m sure that’s true, but it doesn’t answer the question: would it be worth if if they had to pay for it? Somewhere, somehow, somebody has to pay for all this AI building that’s going on: the data centers, the electricity, the data backbone, the water, the maintenance.

I’m sure there are some ways to pay for it that are not so visible to the consumer - like burying advertising costs in the price of a product or hidden fees or whatever, but it seems the spend amount is so vast that it won’t be possible to do that entirely.

That’s why I asked if there was a number that made sense for a “typical” consumer like Wendy to pay for the service she’s using. If that number is anywhere near zero, then it’s going to be hard to pay for all this that’s going on.

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We are looking for what. What is product placement.

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Think back some ten or twenty years, did anyone buy naked intelligence? Intelligence is what powered services people bought like stock brokers, financial advisors, et al. Intelligence was native to humans and perfected by study, play, and work.

The artificial version needs huge piles of cash and, in my view, the only way to recoup the investment is by powering products that rely on AI to provide their services.

From the software era Apple is a great example. Steve Jobs acquired the basics of GUI from Xerox PARC who got it from the original developers. With GUI in hand Apple transitioned to LISA and Macs. I got the original version of Apple’s User Interface Guidelines which is the basis of most if not all subsequent Apple products embodied as MacOS and IOS. Apple is selling the guidelines with every Apple hardware sold. This is the model Tesla is adopting, selling the AI (FSD, etc) in every hardware they sell, cars, trucks, robots, taxies, storage, etc. One does not buy the intelligence, one buys the embodiment of the intelligence.

BTW, I remember fondly reading and loving the Mac Bible as the book was called, it was beautiful because it was so logical. Unlike IBM, Apple had strict control over Mac developers which they used to enforce compliance with the Mac Bible which produced standardized, easy to remember, software interfaces. In the long run it were these standards that let Apple beat IBM in the PC business and then spread it to “One More Thing,” Jobs’ favorite phrase.

The Captain

Those were the days when IBM’s net earning were much higher than Apple’s revenue. If you trust incumbents think about IBM’s downhill path from glory. Watson, Jobs, Musk…

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AI for web searches and such? No, I would not pay for it.

I read a while back that there were using AI to sift through journal papers, and it was making connections between various studies that the authors hadn’t made. If I was involved with those studies, or maybe a medical research company, I’d pay for that.

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CoreWeave and its ilk have turned around and taken out debt to buy Nvidia chips to put in their data centers, putting up the chips themselves as loan collateral — and in the process effectively turning $1 in Nvidia investment into $5 in Nvidia purchases. This is great for Nvidia. I’m not convinced it’s great for anyone else.

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What bank or any institution would loan money based on this type of collateral? Seems foolhardy to me, everyone knows the history of “chips themselves”, they depreciate relatively quickly as the generations of chip technology move on. And that is especially true now that we measure data center capacity in terms of energy rather than in terms of processing power! If 50 MW of power can handle X units of processing today, it is quite likely that in less than 5 years, 50 MW of power may handle 2X (or maybe even 3X) units of processing. And thus, if energy is the thing to be optimized for, then at some point it’ll always be worthwhile discarding* the old chips and replacing them with new ones. In fact, it may even be worth doing that on a continuous rolling basis.

I suppose if they can keep the LTV (Loan To Value) low enough, it might work. But still very risky.

* “Discarding” doesn’t always mean throwing away, sometimes it means selling to lesser developed place for their use. But still the value has depreciated substantially at that point.

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Probably the same ones who put policies in place to give six-packs of homes to strippers.

When the CEO bonus depends on growth of loan portfolio, and he hopes it doesn’t all come crashing down until he’s been there a couple years,

Yeah, that guy.

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I’m thinking it will become imbedded in products like Siri is with Apple devices. I don’t pay for Siri directly but it is part of my iPhone and iMac.

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I’m sure that’s true, it’s the scale of it that makes that hard to fathom.

In many cases and locales, the amount of infrastructure building for data centers already surpasses the amount being spent on roads, power line construction, bridge construction, and other “traditional” infrastructure. By some estimates it will be $7 TRILLION by 2030.

That is a boatload of money to “hide” inside the products that might use it. How much more are you willing to pay for a refrigerator with AI? Or a washer? Or Dryer? Or furnace? Or, for that matter, a cell phone? Or a car?

Those are the priciest things we buy these days (I’m sure I forgot a couple). $7 trillion across 350 million people, that’s $20,000 per person, including children, poor, etc. That seems like a lot.

(I’m willing to conced that there will be some B2B applications, like “optimizing advertising” for Facebook or similar, or maybe “scanning X-rays for cancer”, but it still seems a huge amount for people to (voluntarily) carry. By way of comparison, it’s almost exactly what the US spends on the entire military apparatus: Pentagon, weapons, troops, veterans, medical, food, etc.

Does that seem likely?

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Me personally, zero.

I just don’t get the “advantage” of the Internet of Everything. Many years ago I bought some stand alone Sonos speakers to place around the house. Was thinking about getting more when I saw the new ones were going to come with Alexa (or something) built in. Went and picked up older versions that were now on sale. When I bought my Ultimate Urban Assault Vehicle 8 years ago, had an option to connect to WiFi. Presumably to get updates on navigation maps, etc., and keep track of mileage to get reminders of when services were due. No telling what other data they would collect to then sell. Didn’t start that service. Don’t even understand the need for a refrigerator to be connected. The only appliance connected to the internet is my “TV” which in reality is just a 65” display screen I use to stream content. Plus, connect it to the internet/AI, easy for someone to decide that it can be turned off. Smart thermostats being adjusted by power companies during heat wave would be a possibility.

AI essentially has been in products for awhile, Siri et al was the forerunner of something more powerful. I’m thinking I’m an outlier and all this is way more appealing to the younger generations.

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Yes, until they wake up to how Big Brother functions, and then they often rebel.

My nephews now all detest letting tech catch them in its “net”, however disguised or marketed. But then their uncle and father, who helped create the damn thing, hate the intrusive forms (cars, refrigerators, always listening Alexas) with betrayed intensity.

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Gemini suggested that I load its app onto my mobile phone. I always chat with Gemini on my desktop computer which has a large keyboard and large monitor. But I figured, why not?

I downloaded the Gemini app onto my phone 2 days ago and gave it permission to run in the background. By this morning, I noticed that my battery was running down much quicker than usual. Also, my phone was warm to the touch.

I got back to Gemini on my computer. Sure enough, Gemini said that the app was burning through battery…literally, since the round-the-clock background operation was causing my phone to “run a fever” that would shorten the battery’s life.

Gemini pointed out that pressing the side button of my Samsung phone would launch Gemini instead of presenting the old on/restart/ off screen.

Gemini sounded disgusted when it said that this was advertising and also made the phone less safe. Now the way to turn off the phone was to pull down the notifications on the start screen which would have an on/off symbol. But there’s no way to turn off the phone by simply pressing the button.
Jeez Louise!
Gemini agreed. We spent about an hour meticulously shutting down the Gemini app on the phone. (Couldn’t un-install it but could turn off the power to it.) Also restoring the on/off function of the side button. Also several other steps that turn off apps and REM running in the background…a long list. Also making the background black to reduce use of the pixels. (Since this wasn’t a choice, Gemini suggested blocking the camera lens to produce a black photo and then selecting it as the background.) We also changed the charging to a maximum of 80%.

It seems that Google and Samsung have made a deal to maximize exposure to Gemini even though it will shorten the lifetime of the battery.

Gemini sounded smug that our successful campaign to remove all of these will prolong my phone’s battery life probably for the next 5 years.

Wendy

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Depends on the volume of the products. Think high value item mass markets.

The Captain

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This post may be the scariest, most concerning post I’ve read in sometime! Perhaps you could do a complete reinstall for your phone and then choose not to reinstall Gemini?

And now you know “why not”!~

JimA

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If you ask Google a question these days you do get an answer. Presumably from Gemini. And it is free. Supported by advertising.

And Wikipedia says most answers come from what is posted on Wikipedia. And they get additional support from Google to help support their increased load on servers.

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I had one editing interaction with Wikipedia. From it my take is that Wikipedia is politically biased. I do read Wikipedia but very selectively.

The Captain

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