dsmWealth: May 15, 2025

With investing, the AI robots can help — to a point
BY STEVE DINNEN

My twentysomething friend Walter Yu is just starting to get into investing. He has an advanced degree in biostatistics and was all ears at a recent presentation about using artificial intelligence to help him decide how to invest.

“Without AI, you need to manually read and calculate the historical data and events,” he told me, citing an example about a short-term investment in an insurance stock. “But with AI, it can help you to do the calculation and predict the chances of success.”

AI is double marching into our lives. Earlier this month I wrote about its ability to influence, or even control, legal matters, both civil and criminal. Now comes an opportunity to discuss the wisdom, or at least applicability, of using AI to outwit the pros on Wall Street

When it comes to the broader economy, Kelly Flynn (pictured), founder and chief investment officer of the Des Moines-based Prospective Value Partners, said it seems pretty clear that AI will boost productivity and thus stimulate the GDP. When it comes to investing, he prefaced his remarks by saying they deal only with finance and economics and not the bigger questions: Should we do this? Will this be good for us? Maybe, maybe not.

Flynn thinks of AI as the next phase of what began as “quant investing” in the 1980s, when firms like AQR Capital Management and Dimensional Fund Advisors emerged from academic research, which clearly identified certain specific asset classes as successful outperformers. They did zero fundamental analysis and never spoke with managers; they simply bought and sold based on various quantitative metrics. And some have been quite successful.

Today it’s AI, through new tools available off-the-shelf for investors. The Arizona-based TruTrade, for example, is advertising a way to empower investors with trading software and what it calls AI-driven “portfolio management solutions.”

Will this technology have an advantage over those of us who still pore over those seemingly Jurassic-era 10Ks and 10Qs? Undoubtedly. But Flynn offers some important caveats.

First, if AI investing is really successful and becomes ubiquitous, Flynn suspects it will have diminishing returns. “If so many have access to the technology, then any outperformance could be canceled out because so many others are doing the same thing,” he said.

Second, Flynn said he can imagine a much more volatile market with so much AI informing investment decisions. As smart as AI is, it is ultimately developed by humans and certainly cannot predict the future. If so many AI-influenced investors lean a certain way and then something surprising happens, he suspects the consequences will be more extreme.

He concluded with a cautionary tale about Long Term Capital Management (LTCM), founded by Nobel laureates and staffed with preeminent finance academics who employed a quant strategy with advanced technology. The project went belly-up so spectacularly that it created a broader global financial panic. It’s an important reminder: No matter how brilliant the managers, with too much leverage and the smallest mistake, profits can tumble and bring down innocent bystanders.

So how will AI-driven investing evolve? We shall see.

Buffett's buffet: Berkshire Hathaway's endless smorgasbord
BY STEVE DINNEN

Fancy a Dilly Bar? Dairy Queen has as many as you could ever desire, brought to you by Warren Buffet and Berkshire Hathaway Inc. You can drive there in an auto insured by GEICO, another Berkshire Hathaway company. The car might be fueled at a Berkshire-owned Flying J truck stop. But “no shirt, no shoes, no service,” right? Try some Berkshire-owned Tony Lama boots, Russell athletic wear or, underneath it all, Fruit of the Loom. The kids will sport some Garanimals. All of this is, and more, comes by way of Berkshire Hathaway.

My friend Walter Yu came to the notion of using AI to buy stocks while he was at an investing seminar across the street from Berkshire Hathaway’s recent annual shareholders meeting in Omaha. Thousands gather every year to hear CEO Warren Buffett amiably expound on the ways of Wall Street and investing. Dozens of meetings pop up in the vicinity, where attendees can drop in after the main event to learn how they can become better investors.

No surprise: AI took center stage this year. But apparently, nobody asked Buffett whether he uses AI, and since he’s retiring, we may never know. But he became very famous and very, very wealthy by paying attention in class at Columbia University to Professor Benjamin Graham, author of “The Intelligent Investor.”

Here are a few other Berkshire businesses that demonstrate just how far the empire extends, especially here in Iowa: Duracell batteries, Mid-American Energy, Benjamin Moore paint, Pampered Chef, Vanity Fair lingerie, Nebraska Furniture Mart, Acme Brick. And in southern Iowa, some of those goods roll in on Berkshire BNSF freight trains.

How to be your own consumer watchdog
BY LAURA PETRECCA FOR KIPLINGER

Since his return to the White House, President Trump has launched an aggressive campaign to cut government costs and streamline operations. In the process, he’s revamping federal agencies that handle everything from tax returns and Social Security payments to consumer financial protections.

Trump’s Department of Government Efficiency (DOGE) has instituted hiring freezes, mass layoffs and reorganizations at agencies such as the IRS, the Consumer Financial Protection Bureau and the Social Security Administration.

In addition, the president dismissed several Democratic agency commissioners and signed an executive order requiring government agencies to identify 10 existing rules, regulations or guidance documents to be repealed for every new one issued.

Supporters applaud the push for reduced bureaucracy. Critics are concerned about weakened consumer protections and DOGE’s potential access to sensitive consumer data, such as Social Security numbers.

Some of the latest initiatives await congressional approval or are tied up in court battles. Still, one thing is clear: It’s an ideal time to review your financial safeguards and get tax records and other paperwork organized, and remain informed about changes coming down the pike.

Read the full article for six practical tips.

401(k) giant to allow private markets investments in its retirement portfolios
BY ANNE TERGESEN FOR THE WALL STREET JOURNAL

More retirement savers are about to see private markets investments in their portfolios.

The 401(k) giant Empower will start allowing private credit, equity and real estate in some of the accounts it administers later this year. The firm announced Wednesday that it has joined with seven firms to offer these investments, including Apollo Global Management and Partners Group.

Wall Street firms have been pushing to get private investments into the hands of individual investors, and they see the $12.4 trillion market for 401(k)-type retirement plans as crucial to this growth. Empower, which oversees $1.8 trillion in 401(k)-type plans for 19 million people, is the biggest plan provider yet to offer these investments in 401(k)s.

“A lot of private asset managers see tremendous opportunity there,” said Ed Murphy, chief executive officer of Empower. “And we believe there are tremendous opportunities for retirement investors in private investing.”

Still, it is tough to introduce these asset classes into 401(k) plans, which typically hold public stocks and bonds. Private investments are less liquid and harder to value. And many employers — who have the final say on whether to offer these funds for their employees — tend to avoid investments with high fees for fear of being sued.

Read more from the Wall Street Journal.