Breaking Down the Implications of the 5% Treasury: What it Means for Your Investments

Are you ready to decode the riddle of the recent 10-Year Treasury Yield surge with us? Strap yourself in as we unravel the factors driving this shift and discuss its potential ripple effects throughout the financial landscape. This episode brings to light the impact of an inverted yield curve on corporate America and how companies can capitalize on this trend to mitigate the sting of rising interest rates.

As we venture deeper into the topic, we throw the spotlight on the repercussions of the rising 10-Year Treasury Yield on the stock market, geopolitical dynamics, and even the speaker race in the House of Representatives. We also investigate the increasing default rate on car payments and the potential aftershocks of escalating mortgage rates on the housing market. Plus, we peel back the layers of recent M&A activity and issues concerning Foxconn and Apple.

Finally, we'll navigate you through the labyrinth of investing in the current climate. Pension funds are veering towards bonds to secure close to 8% returns without the risks of equities. But are AI-powered ETFs the golden goose they are touted to be? We scrutinize their performance and shed light on why bank stocks are bearing the brunt despite favorable earnings. So tune in for this enlightening discussion and wrap your head around the conundrum of the rising 10-Year Treasury Yield - it's an episode you won't want to miss!

** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice.

For full disclosures, ADVs, and CRS Forms, please visit https://heroldlantern.com/disclosure **

To learn about becoming a Herold & Lantern Investments valued client, please visit https://heroldlantern.com/wealth-advisory-contact-form

Follow and Like Us on Youtube, Facebook, Twitter, and LinkedIn | @HeroldLantern

Transcript

Alan Eppers: 0:00

And now introducing Mr Keith Lanton.

Keith Lanton: 0:05

Hi, good morning Monday, october 23rd, more than two-thirds of the way through month of October, which so far has certainly proven to be a challenging month for equity and fixed income markets after a challenging September. So this time of year has this year lived up to its reputation as being more challenging for the market, so not as market-friendly? Of course, we've got another eight days to go for the final save for October of this year to be tallied. I'm going to talk this morning about what's taking place in the bond market, which is, in my opinion, what's driving almost all asset classes, including stocks. Morning we are seeing the 10-year treasury is at a 4.98% after going through 5% again this morning this morning, that breakthrough the 5% level happening for the first time in more traditional trading hours. So this is an important psychological level and an important level in terms of the implications it has for markets, assets repricing of assets, expectations going forward. So I'm going to talk about this 10-year treasury this morning definitively breaking through this 5%. Last time it did that, the 10-year yield reaching 5% was back in July of 2007. That was over 16 years ago, just a few months ago, on June 1st of this year. So, looking back less than five months ago, the 10-year treasury was at a 3.6%. So less than five months, the yield is increased by a whopping 140 basis points, or, percentage-wise, we have seen the yield go up by 38.8%.

Keith Lanton: 2:02

Prior to this move, the treasury yield curve was deeply inverted. What does that mean? That means that short-term rates, like the Fed funds rate, which is at 5.25% to 5.5%, was a lot higher than the 10-year rate, which was sitting at 3.6% almost 2% less. And that's what causes a curve to be what's called inverted. Normally, yield curves are positively sloping. What that means is that short-term rates are higher than long-term rates. So if you're drawing a graph and on the X axis you have time and on the Y axis you have rates, normally you have an upward-sloping yield curve, meaning that the longer you go out, the more you get paid, because the more risk you're taking in terms of what's called term premium or time.

Keith Lanton: 2:46

But we were experiencing this negative situation in terms of yields going out further, meaning that they were lower or the curve was inverted. Why was the curve inverted and why is it flattening now? Well, the curve was inverted because markets as recently as June again less than five months ago were expecting the economy to slow down by now. Expectations were that at the beginning of next year we would see a perhaps quote-unquote shallow recession and that would lead to the biggest expectation of why rates were lower because the expectation was that the Federal Reserve was going to start cutting interest rates sometime in the beginning of 2024. Yet in just a few months, expectations have changed and we can look back and say, hey, well, that looks kind of obvious, but expectations have changed despite all that's taken place in the world.

Keith Lanton: 3:37

If someone told you four and a half months ago there's going to be a war in the Middle East between Israel and Hamas, there is going to be a continuation of the war in Russia and Ukraine, with really no end in sight to that conflict. The tensions with China are going to continue to dial up. In fact, this morning, china saying that they are going to pursue a tax investigation into Foxconn, which is the company that helps Apple manufacture their iPhones in China, and the US continuing our policy of restricting high-tech chip sales to the Chinese. Also, if you knew that there was going to be a real prospect of a government shutdown, if you knew that the House of Representatives was going to be in disarray, that they were going to be without a speaker for the first time ever in American history and that that was going to last at least three weeks. As we stand now, we knew that student loan payments, after the Supreme Court had said that Biden administration can't forgive student loans, that those student loan payments were going to kick in on October 1st.

Keith Lanton: 4:45

Even in June, before we saw this increase in the 10-year treasury, we had already experienced mortgage increase in interest rates, from mortgage rates to 30-year mortgages being below 3%. At that time they were up to 6.5%. Now we're talking yields for mortgages up near 8%. And we had all heard of the fact that all that stimulus money that had been given out, all that excess savings that the individuals had built up, had been worked down significantly. So it makes sense, when you look back just a few months to suffice why markets expected a slowdown.

Keith Lanton: 5:21

Well, what happened? Why are we all of a sudden not seeing the slowdown? Or perhaps we'll see what the future brings? But why did we not see the slowdown yet? What happened?

Keith Lanton: 5:30

Well, one argument is that the inverted yield curve enabled corporations to switch their borrowing of money from relatively short-term to relatively long-term. Logical conclusion You're a corporate treasurer at a Fortune 500 company. You could borrow money at 5.5% for one year, assuming you get the government rate, but your rate is tied to that Fed funds rate. Or you could go out 10 years and pay about 2% less. So the impact to you as a corporate treasurer or a corporation here in America is that you can offset some of that rising interest rates by changing your term premium, taking advantage, in other words, of that inverted yield curve. Also, typically what happens when things slow down, when the Fed starts to raise rates, folks start getting real nervous, just like the banks did about lending to corporate America. But the banks got nervous, but private equity and the bond market didn't get so nervous and they kept feeling comfortable lending to corporate America despite the fact that things were getting less certain. So what happened is the risk premium or the spread between treasuries and corporate debt did not widen nearly as much as it usually does, enabling corporate America to continue to borrow at fairly reasonable rates. So you could make the argument that monetary policy is not as tight as it seemed when long-term rates provided a cheaper way out for corporate America.

Keith Lanton: 7:00

What else happened? Well, housing prices have stayed very robust. They have held up extremely well, despite the fact that we've seen interest rates go from sub 3% we mentioned, to 6.5% over the summer and now we're sitting at 8%. We'll see if there's an economic impact at this level. So why have housing prices held up so well? Well, one is because we've heard many times and it's true that there is a lot less supply in the marketplace for the fact that many Americans intelligently refinanced their mortgages when rates were low and locked in rates that were below 3% on their mortgages. So now there is a lot less incentive to move. You sell your house that's paying 3% or less interest on, and buy a new one and pay 8%. So therefore the incentive to move is low. So the amount of supply is low because people aren't selling their houses. But supply is also low because the home builders have gotten a lot more disciplined in terms of their home construction after the 2005 through 2007 financial crisis or housing crisis that we had here in America.

Keith Lanton: 8:05

So what happens is when you get religion, so to speak, if you're in the home building business and you get really terrified because your business is at risk, as it was in that time period for the home builders suddenly they had bought all this land, they were going to build all these houses and then the housing market collapsed and many of them were fighting for their lives. So typically, when you have a near-death experience, you typically learn from that and say I'm not putting myself in that position again. And that's what the home builders did. And they have gotten a lot more disciplined and have been a lot more cautious in terms of building new houses and have only chosen the most prime, most plump opportunities and, as a result, we have a housing shortage here because new home construction is down significantly from where it was 25, 30 years ago on a relative basis relative to the size of our population. So it can arguably be said that we have about one and a half million homes fewer that have been built than would have been built in other times, because we had this near-death experience previously, causing shortage of homes on the market.

Keith Lanton: 9:12

So, despite the fact that demand has fallen, supply has fallen even more, so home prices have held up. Americans feel wealthier, so they are still willing to spend. Also, we've heard many times that job growth has remained robust, wages for workers, while arguably not necessarily keeping pace with inflation, but they have been rising. We've seen union settlements with the UPS and the airlines and the pilots and workers out in California with Kaiser, and then we've got the UAW still on strike seeking higher wages. So job market, at least at the moment, remains fairly strong to very strong. And we also have fiscal policy here encouraging the manufacturer here in the United States of things like chips and all sorts of industrial plants here in the United States as a result of fiscal policy.

Keith Lanton: 10:03

So put it all together, all that reasoning on why, despite the fact that rates have risen, we have seen a continuation of a strong economy, and this is now pressuring the bond market and pressuring the longer end now for the first time in a real, meaningful way, of the bond market. And you could put it all together and conclude that, at least up until now, up until four or five months ago, monetary policy perhaps wasn't as tight as we all thought, but now we are seeing 10-year treasuries at or near 5%. We're seeing five-year treasuries at or near 5%. We're seeing the 30-year treasury about about a 5.1%. Mortgage rates are over 8%, car loans in many cases north of 10%. We also are going to experience social security recipients who enjoyed a north of 9% hike because of the inflation that took place in 2022. Well, this year they're going to only see a 3.2% increase. We're starting to see that the job security is falling as folks who, for the first time in many cases in their lives, are starting to feel less secure in their jobs, starting to at least hear about layoffs amongst some of their friends and colleagues and are starting to get a little nervous and they're starting to job hop less. And student loan payments, as I mentioned earlier, kicked in October 1st. It's going to take some time perhaps for some of those folks to get used to making those payments again. But now here we are.

Keith Lanton: 11:36

These risks, with these higher rates and with these events, arguably speaking to the fact that the risk reward prospect are changing, the dynamics are changing between stocks and bonds. When you can lock in 5% on a 10-year treasury security, you can get 4% to 5% on a high-quality municipal bond. You start saying to yourself the substitution effect, is it worth it? Is it worth keeping myself invested as much as I have been invested in equities relative to my fixed income portion of my portfolio? This is not something that a lot of people thought about when rates were 2% or 3%, that they're starting to think about with rates of 5% or more on different fixed income investments and you can make the argument that for the first time in two decades and twenty years, if you look at the relative valuation of equities and the relative valuation of bonds, that you've got to make a case and say to yourself that fixed income is looking maybe not attractive enough for each individual person listening right now, but for some of us fixed income is getting awfully interesting. Fixed income also has a lot more Cushion in the event of a future rise in interest rates because of the fact that you're now getting a much higher coupon payment while you wait for your principal back.

Keith Lanton: 12:52

So two years ago you bought a ten year bond yielding one and a half percent. That bond currently, with interest rates now at about five percent, would be trading around seventy seven cents on the dollar. You need more years to go to maturity. You paid a hundred. It's seventy seven. You down twenty three percent on principal but the consolation prizes. You got one and a half percent interest per year or three percent. So currently sell that bond. You down twenty percent.

Keith Lanton: 13:18

Today, if you're making the calculation of, should I buy a ten year treasury, you're going to get an interest rate of five percent If interest rates in two years from now are seven percent, which is something that significantly exceeds most economists estimates, but we know that they've been wrong. So let's say interest rates move up to seven percent in two years from now. Well, that bond is going to trade around eighty eight cents on the dollar, but you've collected five percent now for two years, not one and a half percent. So you've collected ten percent. So even if you see an interest rate increase over the next two years from five percent to seven percent in the ten year treasury, in two years from now your overall loss and fixed income will have been two percent Instead of twenty percent in the first example I gave, arguably making a point that the risk reward and fixed income has shifted in this, perhaps a lot more attractive than it was two years ago or, arguably, than it was on June 1st when the ten year treasury was at three point six percent. So where are we now? It's taking place. This morning I mentioned ten year treasury touching five percent. It is now in around four point nine seven percent.

Keith Lanton: 14:28

The fact that we've pulled back from five percent is helping futures come off their worst levels. In the morning before the ten years started, it's run to five percent. This morning we were seeing a future slightly to the green, but now less red, but nevertheless red. Dow futures down about one hundred and twenty five point, s&p futures down about thirteen, nasdaq futures down about fifty and oil is down twenty cents this morning on concerns that these higher rates will potentially cause economy to slow and there'll be less demand for oil. Stock futures closed below their two hundred day moving average on Friday this morning. Relatively weak mega caps are having a strong influence on the broader market. I mentioned situation with Foxconn and that story there as it relates to Apple. So Apple also this morning down a little over one percent.

Keith Lanton: 15:22

Of course we have rising geopolitical tensions in the Middle East Gaza health ministry saying that that toll there has risen to over five thousand. Israel is stepping up its airstrikes against the mass. Meanwhile Israel's military is contending with increased tax from Hezbollah, which is based in Lebanon. Also the concerns that that there was an airstrike in the West Bank front that's taking place between Israel and Lebanon and, of course, the situation in Gaza increasing the potential for a regional conflict. As I mentioned earlier, house of Representatives still without a speaker. There are now nine GOP candidates who have declared their interest in the speaker position. Some of these candidates are making a pledge that if they do not receive the final nod, that they will support whomever does receive the most vote to run for speaker and perhaps that is a solution that will get the House over the finish line and the Republicans could agree on a speaker. House Republicans are expected to hold a candidate forum later tonight.

Keith Lanton: 16:21

No economic data out of note today. There has been a spate of M&A activity highlighted by Chevron's CVX, the symbol. They have fifty three billion all. Stock. Acquisition of Hess symbol HES. It's going to be acquired by Chevron for one hundred and seventy one dollars per share. It's fifty three billion dollar valuation.

Keith Lanton: 16:44

Other stock in the news Pfizer. Pfizer, the recipient of of Roche buying irritable bowel treatment firm Televant for seven point one billion billion dollars. Pfizer and the company called Rovian both had rights to the primary drug that Tel Avon owned and will be potential pay payors or recipients of some of that funding there from Swiss drugmaker Roche Morning. German car maker Volkswagen has cut its outlook. Some other news this morning CNN saying that US wants Israel to delay their ground counter offensive to allow time for the release of more hostages.

Keith Lanton: 17:27

Washington Post talking about our deficit. Us government spent six hundred and fifty nine billion on debt payments, which doubled over the past two years. The budget deficit unexpectedly increased this year to about two trillion. We talked about that on last week. All Bloomberg reporting the car owners are falling behind on payments at the highest rate on record just talked about that. The interest rates for these payment accelerating rapidly and that's probably one of the reasons that these payments are going into default. Uaw president Fane saying live in a Facebook video that the union has received new are first from two of the big three automakers, and those two are GM and slantus. No news on the negotiations between the UAW and Ford. And Mr Fane saying no new strikes for now.

Keith Lanton: 18:14

According to the Detroit free press, equity in the season. Asia began the week on a lower note, although volume is reduced due to holiday closures in Hong Kong and New Zealand, and major European industries are also in the red markets overseas in general, both in Europe and Asia, down about three quarters of one percent this week. What's going on? Well, perhaps biggest event in terms of earnings for the third quarter, in terms of the number of large cap tech companies, reporting is happening this week. On Tuesday, big tech kicks off their results from Alphabet and Microsoft after the close meta and Amazon follow with reports on Wednesday. Those four stocks make up eighteen percent of the S&P 500. Gm and Ford two of the three Detroit automakers where the UAW is striking announced earnings on Tuesday and Thursday respectively. Management will provide an update on talks with the UAW.

Keith Lanton: 19:10

Busy week for economic data starts with an estimate of third quarter GDP on Thursday and ends with the personal consumption expenditure price index for September on Friday. Economist GDP or gross domestic product that is seasonally adjusted 3.3%, and core PCE that's the personal consumption expenditures index, which strips out food and energy prices, rising to 3.6%. Moving on to Barons driving home some of the talk about the treasury rates and yields Barons saying, with bond yields rising homes and they say stocks look increasingly overvalued. For the benchmark 10-year note, the next technical line in the sand after 5% is 5.3%. That's where yields topped out in 2007. Mortgage rates have more than doubled over the past 12 to 18 months and Barons saying that that could start to have an impact on housing prices. Wall Street Journal this morning out with an article that elicits the fact that home prices are the most expensive relative to renting than they have been in recent American history. But good news is that we are starting to see some softening in prices of homes being built as home buyers are starting to provide buy downs to reduce mortgage rates. So basically, a concession instead of price, a concession on financing, and what we're starting to see is that the home builders are starting to get concerned. Their confidence index declined this month to its lowest level since February.

Keith Lanton: 20:56

We talked about treasuries and treasuries offering a much stronger competition to equities, to stocks, and Barons talks about that as the bar for returns from riskier investments and their relative valuations make bonds increasingly look attractive. Treasuries have become more competitive with equities as the yields have climbed above the earnings yield of the S&P 500, which is the inverse of the stock price earnings ratio. So if you take the PE and you reverse it and you make it the EP earnings to price, many look at that and compare it to the 10 year treasury. Ned Davis research wrote in recent client notes that the three month T-bill top the earnings to price ratio back in March and just in September the earnings to price ratio is exceeded by the 10 year treasury note. Also of note is that pension funds, which are big acquirers of assets and they typically have to earn a bogey of 7 to 8% in order to satisfy their funding requirements in the future, that a lot of those pension funds have, in recent years, been buying equities as their best and, some could argue, their only viable shot of meeting that 7 to 8% target. But now, with corporate bonds yielding in the mid 6% range, you may see some of these pension funds shifting more and more assets into bonds in order to get close to that 8% without taking on the risk of equities.

Keith Lanton: 22:34

So one of the topics that we've heard so much about this year, and one of the driving forces in the equity markets, especially in NASDAQ this year, has been all the talk about artificial intelligence, or AI, and how it can do so many things better than humans and how it's going to potentially replace humans, and all that may be true, but Barron's points out that, at least when it comes to picking stocks, at least so far, ai has shown itself not to be so smart, at least so far. So so far this year, before today, the Invesco QQQ trust is up about 39% year to date. The semiconductor ETF SMH is up about 47% year to date. A lot of this reflective of its top holding, nvidia. So the QQQ and the SMH have certainly been the hot investments of 2023 so far, but what has not been hot?

Keith Lanton: 23:36

Well, the few ETFs that use artificial intelligence for portfolio construction, and now these funds have longer term track records. They've been out a while, so we've got three and five year track records, so we can say that this is not just a short term phenomena. Evenly newly launched or repurposed ETFs using AI to pick stocks, all lagging behind broader markets. The oldest ETF that was created using AI is called the AI powered equity ETF, symbol as AI EQ, and that that ETF is up about six and a half percent year to date and has an annualized five year return of four percent. The largest AI ETF by assets is the 1.6 billion dollar index based spider S&P Ken Show new economies composite ETF, mouthful KOMP, which will turn five later this year, and it's up eight basis points 0.08% year to date and down 4.3% on a three year annualized return basis. And then as a passively managed ETF in the AI space, so one that just strictly relying on computers and algorithms, and that's the Merlin AI full bear fighter ETF symbol as WIZ, and that's actually down a little over 1% for the year and down 3% on a three year average.

Keith Lanton: 25:00

Some of these ETFs use IBM's Watson's language processing ability to scour millions of financial and non-financial data points for over 6,000 companies, targeting a risk adjusted return versus the broader US market, and currently this strategy is suggesting to be overweight financials and industrials while significantly underweighting technology. We will see if this AI is smarter than AI has been, at least over the last three and five years, once again underscoring the fact that AI certainly has lots of great uses I would argue, great uses for paths that have linear thinking, at least at this point where, if X happens, then Y, as opposed to, at least so far, trying to predict the future, so to speak, based on data points that so far man has not been able to perfect and therefore the computers who are using the history of man have not been able to do any better. We're going to talk a little bit more. Brad is following the events of the bond market this morning and he won't be on the call as he's feverishly analyzing and taking a look at what's going on, as the 10-year treasury approach is 5%. So just going to talk about a few more topics, one of which is one of the sectors that AI suggests is taking a look at and that is beating up bank stocks. And Barron said beating up bank stocks get no respect.

Keith Lanton: 26:21

Quarter after quarter, the nation's banks have proven their durability amid a challenging economic environment. They've passed federal reserve stress tests, even after a spate of upheaval rocked the banking industry in March. Earnings have been robust, beating estimates at almost all of the large banks, on both the top and bottom lines. But if you look at stocks, you certainly wouldn't know it by looking at how they've performed. Analysts at Capital Economics saying we think that the economic growth in the US will falter, which is generally associated with less credit, lower fee income and more provisioning and higher credit losses. All that could spell bad news for banks, perhaps part of the explanation for what's going on. But for nearly two years, a period characterized by rampant inflation and rapidly rising interest rates typically a bad time for banks banks have remained incredibly robust and in fact you could argue a lot of bad news has gotten priced into the banks, even though a lot of bad things haven't happened to the big banks at least as of this juncture. As a result, the SPIDER S&P ETF now trades at seven times forward earnings at 0.9 times book value, both of which are quite low by historical standards. Meanwhile, investors can snatch a 3.7% yield by investing in the index, which is lower than the 10-year treasury of 5%, but a payout that comes with the chance of stock appreciation. Two stocks mentioned in this article Goldman Sachs, which has given up its foray into consumer banking, is refocusing on its core strengths. That stock is trading roughly at book value, which has historically been a good entry point, and the second one is CIRCITY Group, which has more problems but is even cheaper, at just 1.5 or 0.5 times tangible book value. Investors have been burned over and over by CITI bank stock, but CEO Gene Frazier's streamlining of the bank, barron says, is finally beginning to take hold.

Keith Lanton: 28:13

Barron once talked about Netflix and Netflix, one of those technology companies which has done the shift from growth where this is a company exclusively focused on getting new users and new eyeballs at any price, even if those users were sharing passwords, and now we're seeing Netflix focused on profits. This is a trend we're starting to see within the technology space, which means we, as consumers, can expect to see price increases, which is what we're getting from Netflix, which perhaps good for the stock, not as good as those of us who use Netflix or our consumers of it. So Netflix raising the price of their premium plan to $22.99 from $19.99, basic plan to $11.99 from $9.99. One of the reasons that they are seeing numerous analysts upgrade after the earnings that, as well as the fact that they added lots of new users to their service, partially as a result of that password sharing crackdown. Now this is a strategy that we're seeing Facebook explore. We're seeing Elon Musk at X, formerly known as Twitter, start to think about charging for his product and platform, and we as consumers can potentially expect to see more of this going forward. Arguably, some of the inexpensive products that we used to purchase at Amazon have gotten more expensive One perhaps as a result of inflation and two perhaps Amazon seeking to turn a profit and no longer just seek out market share.

Keith Lanton: 29:47

Finally, I'll finish off with a commodity story to talk about, and then we'll open it up to questions, thoughts and comments, and that commodity is gold, which has been moving up quietly, despite the fact that interest rates have been moving up. Gold in the last few months has approaching its highs. This morning Gold is down about $5 an ounce, but we have growing deficits here in the United States, government shutdowns, war in the Ukraine and Middle East. If there was ever a time to add gold to a portfolio, barron says this would be it. The only problem gold doesn't pay a dividend, so you get the timing wrong and you're looking at the dead money. Gold mining stocks, whoever do, pay dividends, and gold is a good hedge against local currency devaluation and the fear of something and fear is on the rise. There is also persistent inflation and the risks of the Federal Reserve failing to achieve a soft landing for the US economy.

Keith Lanton: 30:45

So how do you own gold? Well, one option is owning an ETF that holds the precious metal. State Street has the spider gold share symbol, gld, and the I shares gold symbol, iau. Both seek to mirror gold price changes by owning the real thing, which is kept in vaults. Another option is to buy gold mining stocks. Gold miner Newmont symbol, nem, for instance, targets a $1 per share annual dividend at a gold price of 1400 per Troi ounce. Payments vary depending on cash flow, which depends mainly on the price of gold. At $1 per share per year, newmont stock would yield about 2.5% of current prices, and investors get an extra 12 cents or so a year for every $100 above that $1400 an ounce. So, with gold averaging about 1900 over the past year, newmont is paying out about 40 cents a quarter, $1.60 a year or currently. Based on that, you're getting paid about 4% to hold Newmont stock. Now Newmont has had a tough year. The stock's down about 14%. National Bank of Canada analysts progest a strong second half of the company with production rising to 3.3 million ounces compared to 2.5 million in the first half of the year. A big second half is part of the reason this analyst rates the shares are brought by is a price target of about $67 US compared to 40 currently.

Keith Lanton: 32:15

Another gold related stock mentioned in this Barron's article is Franco Navada. Symbol Frank November, victor FNV. This is a gold streamer. Streamers purchase an amount of someone else's mine production. Therefore they are not necessarily in the mining business. They typically do this for an upfront payment at a fixed, relatively low price as the metal is delivered and then they hope to sell it for a profit. Franco helps finance new mining projects and has historically had a nose for good ones. At about $140 a share Franco Navada sells stock yields about 1%. The dividend has grown to 34 cents in the most recent quarter from 6 cents a quarter 10 years ago. What's more it hasn't been cut during that span, which has seen gold prices vary from 1,000 an ounce to $2,000 an ounce.

Alan Eppers: 33:11

Thank you for listening to Mr Keith Lanton. This podcast is available on most platforms, including Apple Podcasts, Spotify and Pandora. For more information, please visit our website at www. heroldlantern. com.

Sophie Cohen: 33:29

Opinions expressed herein are subject to change and not necessarily the opinion of the firm. Past performance is no guarantee of future results. The information presented herein is for informational purposes only and is not intended to provide personal investment advice. It is important that you consider your tolerance for risk and investment goals when making investment decisions. Investing in securities does involve risk and the potential of losing money. The material does not constitute research, investment advice or trade recommendations.