Are Bonds the New Equities? How Investors Are Rethinking Risk in a Volatile Market

April 22, 2024
Season 6, Episode 15

Dive headfirst into the heart of the financial markets; we're dissecting everything from the tech sector's earnings groove to the implications of recent market pullbacks for your investment portfolio. As bond yields rise and pension funds shift their strategies, we're here to unpack the necessity for investors to recalibrate their risk radar. Holidays like Passover and Orthodox Easter serve as a backdrop to our deep exploration of a slew of factors impacting your money moves—from the US-China tango affecting global dynamics to the electric vehicle race, the gripping advances in AI, and the endurance test facing our electrical grids. And let's not breeze past the elephant in the room: inflation's grip and the chess game of political maneuvers that play out on the market's valuation board.

Feeling the earth move under the markets? You're not alone. We're honing in on the seismic shifts, where robust retail sales fan the flames of inflation fears and interest rate hike speculations. The geopolitical chessboard is set, with pieces like Iran and Israel nudging oil prices and potentially rocking the market's boat. Watch closely as the S&P 500's latest dance around its 50-day moving average might just be foreshadowing a broader economic ballet—or stumble. But it's not all about the doom and gloom; we're also spotlighting commodity trends and prepping you for the symphony of earnings reports that could sing volumes about where we're headed next.

And for the grand finale, we're journeying into the AI revolution that's transforming industries and daily life as we know it. From political scuffles playing out in real-time to tech giants' earnings suspenses, we're analyzing AI's role across the board. Healthcare innovations are saving lives, consumer tech is brimming with potential, and industries like energy are on the cusp of transformation. Remember, the insights shared in our conversation are just the tip of the iceberg, meant to edify and inspire your personal investment strategy. So plug in, tune out the noise, and let's chart the course through these thrilling and unpredictable market waters together.

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

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Transcript

Alan Eppers: 0:00

And now introducing Mr Keith Lanton.

Keith Lanton: 0:03

Hey, good morning. Today is Monday, April 22nd. We're just getting into high gear for earnings season. This week, we'll see some major tech companies report earnings and give us some more insights into the US economy and the strength of the economy, and that might give us some further insights into what may happen with interest rates. Last week, we saw a pullback in the US equity markets. We're going to talk about that this morning and what we may have in store over the next several weeks, as well as some theses that we can expound upon. That will give us, hopefully, some food for thought in terms of where markets may be going in the future, where the best places to invest in the future are, how we may want to position our portfolios, depending on our risk profile.

Keith Lanton: 0:55

Last week's sell-off on top of the previous couple of weeks of weakness perhaps may have caused a reset in some investors' minds after they've gotten so used to consistent gains and start to recognize that perhaps their risk tolerance isn't quite as robust as they had thought. Markets don't just go up in a straight line and we're starting to get some potential for a pullback. Of course, no one's got a crystal ball, but you've got to be willing to experience meaningful declines in your portfolio if you're going to remain heavily allocated to equities and if you are not, do not have that constitution. You have to reset and rethink, especially with interest rates being where they are, where the substitution effect for equities is that you can get meaningful returns in bonds. We're starting to see pension funds Bloomberg wrote a big piece last week where pension funds are starting to seriously reallocate funds out of stocks into bonds and individual investors need to think whether or not that is appropriate for them as well. So I want to start off by wishing everyone who's celebrating a happy Passover. Passover begins this evening, so that holiday getting kicked off and we have Orthodox Easter also upcoming. So, for everybody who's focused on those events, wishing you very happy holidays. So this morning I want to get us started and then I'm going to talk about the markets, talk about Barron's. Barron's talked a lot about AI, some interesting articles that I will share with you. Talk about, possibly, if we have time to talk about Roth conversions and whether or not they make sense and why to do them, and then turn things over to Brad to give us some more insights into the bond market. And we see these yields moving higher and, as I mentioned, as these yields move higher, it becomes increasingly attractive to invest in fixed income, and Brad will give us his thoughts on that as well. So what are we worried about? Why is it that we feel concern or angst or thoughts that perhaps we should reposition our portfolios? Perhaps we should reposition our portfolios In no particular order.

Keith Lanton: 3:06

Some of the things that are rattling around in the world right now. One, us geopolitical tensions with China. Two, a booming Chinese manufacturing in electric vehicles, batteries, cars, semiconductors. Concerns that they're going to swallow up these industries in whole. Electrical vehicles in general. Will they take off as expected? Is there an AI bubble? Could it burst? Who will make money on AI besides NVIDIA? Can anybody compete with NVIDIA Going to definitely talk about that?

Keith Lanton: 3:36

Speaking about AI, the grid can it hold up? What are our electricity prices going to be in the future? How much data center demand is there going to be to consume electricity? We are in the midst of a boom of nearshoring to Mexico. What are the implications of that? Of course, the war in the Middle East and the risk to oil prices.

Keith Lanton: 3:58

Another one that is front and center inflation. It's been hot. Will there be any rate cuts this year? Could there be hikes? Could higher rates perversely be driving inflation higher? This thinking seems to be gaining converts, folks who are starting to think that higher rates and the fact that higher rates may be allowing companies to raise prices boost profits, raising the stock market, rising stock market, causing folks to feel richer and therefore they are spending more money. And, on top of it, higher rates are paying real money to people who were holding onto cash before. They were getting zero. Now they may be getting 4%, 5%, 6% and perhaps that could be inflationary.

Keith Lanton: 4:39

Worries about the US deficit that has been certainly growing, some would say exploding. The strength in the US dollar is expected to decline this year and now it's starting to move higher. What does the significant rise in gold prices mean for the markets moving forward and what is it telling us about the markets, the rise in gold prices? Of course we have the election on the horizon and what does that mean? The US outperforming our G7 peers Tied to that is what's the meaning of the slow European growth that's been going on for a number of years War in Ukraine and Europeans? Are they going to be spending more on defense? Speaking of defense, american defense spending Do we need to spend more. Do we need to spend more on ships? Problems out there that many of us are feeling High cost of home ownership and high cost of insurance. What's going on with our cities? Here in the United States, folks are working from home more, downtown's are less full and some are suggesting that this is leading to an urban doom loop.

Keith Lanton: 5:49

Crypto Commodity halving took place on Friday. Bitcoin has gone some would say parabolic the last several months, and what does that mean? And finally, is sports gambling creating a generational crisis among young American men? Is sports gambling creating a generational crisis among young American men? Interestingly, we had one of the first sports scandals, with a player being banned from the NBA on betting that his team would lose and feigning injury. Is that a sign of some more to come in our sports world?

Keith Lanton: 6:26

Some facts about the markets, and perhaps this will give us some other things to think about once we digest these facts. Of the 500 largest US stocks by market cap, valuations between the top 10 and the remaining 490 stocks have widened to an extreme not seen since the dot-com bubble. In previous instances, when the gap got this wide, the bottom 490 stocks have historically gone on to outperform their top 10 counterparts by an average of 4.5% five years later. In terms of our expectations for equity markets, perhaps we are being overly optimistic. A recent international survey revealed that individual investors expect the stock market to beat inflation by quite a lot 12.8% annually over the long term. That's more than double the actual number, considering inflation-adjusted returns from global equities from 1900 to 2023. Those gains averaged 5.1% over inflation. Right now, investors are expecting 12.8%.

Keith Lanton: 7:26

Typically, you see this over-optimism toward market highs and speaking of one of the great factors of the 20th century, one of the main ways that Americans digested news and relaxed was through broadcast television. The news and relaxed was through broadcast television and last month, even with March madness, viewership dropped 6% from February to March. When looking at viewership year-over-year on broadcast television, it was down 10% year-over-year in March and streaming continues to be the most popular way to watch TV, now accounting for 38.5% of all TV watching usage. Talking about the markets and the weakness that we experienced last week, we just talked about all those factors that are leading to angst and perhaps it's a good list to think about why many of us often feel uneasy when we think about the financial markets, why many of us often feel uneasy when we think about the financial markets. Looking back to last week, the S&P dropped 3% on pace for its third consecutive week of declines, the Dow was down three-tenths of a percent and the tech-heavy Nasdaq was down 5.3%. Worse than the drops themselves, every rally in the S&P 500 last week was sold with gains turning to losses by the end of the day. The S&P 500 is still up 21% from its late October low.

Keith Lanton: 8:50

Investors, though, now seem to realize that economic and geopolitical landscapes have turned, perhaps some thinking they have turned against the investors. And why is that the case? Well, it starts with the economic data. It's just been very strong. Some would say too strong. That sounds ironic, too strong data being bad news in terms of demonstrating that the consumer is alive and kicking. But the focus right now is on what that means for inflation, and perhaps we are running too hot. March retail sales rose a hotter than expected 4% year over year, up from 2.1% in February. That added to concerns that Jerome Powell and the Federal Reserve will bring inflation down. More Data like that was reflected in the Fed Fund's futures pricing as market participants adjusted their expectations of a June rate, cut probability down to 16% from 56% just one month ago, and this morning we're seeing the two-year Treasury tick up back to 5% and this means that folks think that inflation may be higher for longer and this means that interest rates may be higher for longer. Some are suggesting that a more restrictive Fed would remove one tailwind that has helped stocks rally this year.

Keith Lanton: 10:08

Geopolitics adds a headwind between Iran's attack on Israel on April 13th and Israel's response on Thursday, investing almost feels like it requires a degree in game theory rather than finance. The potential for additional flare-ups could also help support oil prices. Even if Brent crude futures fell about 5% last week after hitting $90 following Israel's response, brent is still up 13% for the year and if it can trade meaningfully higher from here, oil prices could be an additional headwind for those folks who are expecting inflation to moderate. So those issues, those geopolitical issues, aren't going to resolve themselves overnight. The longer they last, then that leads to a problem for the stock market, which is currently trading at around 20 times forward earnings, because the average has been about 16.5 since 2000. So when things aren't looking super rosy and you've got multiples a little higher than normal, well, that leads them to suggest that perhaps markets are due for a pullback.

Keith Lanton: 11:09

This week we are going to get the first look at the gross domestic product. It's expected to come in strong and this could perhaps lower multiples and perhaps give many comfort that the strong market is justifiable by those strong earnings. But the S&P last week, from a technical basis, dipped below its 50-day moving average and when it does that, the index often goes on to drop a little more after it's dropped 5%. So we have experienced now a 5% drop in the S&P, and when the market, and the S&P specifically, has dropped 5% and it drops below its 50-day moving average, means that there's a more greater probability that we will see what some would term a correction and we go on to a 10% decline or another 5% from where we are today. If you're a technician, if you're looking at the next level of buying support after the markets have broken their 50-day moving average, well that's very often the 200-day moving average, but that's all the way down at 4,671 on the S&P. The S&P is a little bit over 5,000. So that would mean an additional 6% drop from here, which would bring the sell-off all the way down to north of 11%, if in fact that were to happen and this would be a normal pullback, and normal pullbacks happen in normal quote-unquote non-recession years. So if this year we do not experience a recession, it would be very normal to experience a pullback of 10% and the million-dollar question, at least for the next several weeks, is are we in the beginning of a normal correction and therefore could we dip some more? I guess we'll get some more insights into that as we get more earnings information.

Keith Lanton: 13:21

One notable mover this morning is gold, which is down about $50. Yes, that's correct $50 an ounce down 2%. Silver this morning down 4%, down $1.25 an ounce. And the other major commodity, oil, is down 25 cents a barrel. So it's just a very modest pullback in oil. One of the other commodities that has gotten lots and lots of attention, as it has gone up tremendously, is cocoa, also known as the main ingredient in chocolate, and cocoa is down about 2% this morning. But that is just a small dent in the tremendous rise in cocoa prices over the past few months to one year.

Keith Lanton: 14:11

All right, so what else do we have going on this morning? S&p futures are up about 28 points, nasdaq futures are up about 100 points and Dow futures are up about 190 points. We sold off, especially the NASDAQ. Going into the close, nasdaq had its fourth consecutive week of declines. As mentioned earlier, the Dow and the S&P three straight weeks of declines and at least the initial buying this morning reflects an inclination to buy the weakness, perhaps also some relief that the situation in the Middle East didn't get worse over the weekend. I think a lot of Friday selling for the past several weeks has been on anticipation that perhaps we've got a couple of extra days of something to happen and something bad happening in the Middle East. And Monday morning we come in. If all is still okay in the world, then we get a little bit of a bid up. But, as I said earlier, we have been experiencing this bid higher and then the markets have been giving a bid up. But, as I said earlier, we have been experiencing this bid higher and then the markets have been giving back the gains. So we'll watch carefully to see if we're able to hold on to gains today, especially with some rise in interest rates.

Keith Lanton: 15:26

This morning In corporate news, verizon stock is up about 1.5% or $0.60, beating earnings by $0.03,. Up about 1.5% or $0.60, beating earnings by $0.03,. Reporting revenues in line. Guiding earnings per share in line. Subscriber churn a little better than expected. They were expected to lose about 100,000 subscribers. They lost 68,000, so that was viewed as a positive. Truist this morning, a big regional bank symbol, tfc. They beat on earnings by $0.12, but markets not impressed with their net interest margins and the stock is down about 4% or $1.39 this morning.

Keith Lanton: 16:02

Tesla continues to weaken Stocks trading down below $142, down about 3.5%. Elon Musk has been cutting the workforce. This morning reports that he is lowering the cost of full self-driving software by 33 percent, also lowering the price of some models by $2,000. This is indicative of the fact that some are suggesting that Tesla cars are not selling at the rate that was anticipated, having to introduce price cuts in order to clear out inventory, leading to questions on what consumers are doing about electric vehicles and what the adoption is. And perhaps Tesla overly optimistic in their projections for the marketplace.

Keith Lanton: 16:46

Salesforce this morning up about 3%. Reports last week we talked about that they might buy Informatica symbol. Infaa Reports that that hit a roadblock in the markets, viewing that as a positive. And Salesforce is higher. Johnson, johnson and Kenview both slightly higher this morning despite being ordered to pay $45 million to an Illinois family regarding talc litigation causing ovarian cancer. And Apple this morning up slightly, about half of 1%. Bank of America named the stock a top pick for 2024, reiterated a buy and a $2.25 target. And I'll talk a little bit about Apple, as it pertains to an article in Barron's.

Keith Lanton: 17:29

Over the weekend In the Asia-Pacific region began on a mostly higher note. One exception was China's Shanghai Composite, which was down 0.7% of a percent. Other markets up 1% to 1.5%. European markets also in the green, up about 0.4% of 1%. The one standout is the FTSE, which is the UK market, up about 1.6%, and the one weaker market is France, where the cac 40 is up one tenth of one percent.

Keith Lanton: 17:57

Other news this morning margie taylor green called on house speaker mike johnson to resign or face a motion to vacate. Democrats have expressed a willingness to save mr johnson from losing his job as speaker. According to cnn, reuters is reporting that some rockets were fired from iraq towards a uS military base in Syria. Times is talking about the House passing a $95 billion bill to send aid to Ukraine, israel and Taiwan. The Senate is expected to pass the bill tomorrow. The House also passed a bill that will give ByteDance 365 days to divest TikTok or face a US ban. The Senate is expected to vote on Tuesday on this measure. According to the Washington Post, the House has passed new sanctions on Iran. According to Bloomberg, and Bloomberg talking about the Bitcoin halving and that that will lower the amount of new Bitcoins available in the marketplace. With the halving on Friday, bitcoin this morning is roughly unchanged Last I looked, but Bitcoin does move quickly.

Keith Lanton: 19:02

What's going on this morning? Well, starting tomorrow, tuesday, we start getting our earnings from the Magnificent 7 Tesla which we just discussed in the news reporting results on Tuesday. Tesla shares are down 41% this year, the second worst performing stock in the S&P 500. Meta has earnings on Wednesday, alphabet and Microsoft on Thursday. Also on Thursday, the Bureau of Economic Analysis releases its advanced estimate of first quarter GDP. Consensus estimate is for real GDP to have grown at an annual rate of somewhere in the neighborhood of 2.5%. Some are suggesting 2.2. Depends on which analyst you're following. And then Friday number that the Federal Reserve and Jerome Powell will be carefully watching. The BEA releases the Personal Consumption Expenditure Price Index for March, also known as the PCE. Economists forecast a 2.6% year-over-year increase. That would be one-tenth of a point more than February. Core PCE is expected to rise 2.7% compared to 2.8% previously, and this report will be getting lots and lots of attention.

Keith Lanton: 20:13

Barron's talked about the Federal Reserve and that it's unlikely. They say that the Fed will cut rates anytime soon, that financial conditions remain too loose. And what do they attribute that looseness to? Well, I think they would say it's due to the fact that credit spreads have been tight on corporate bonds and mortgage bonds. There has been a lot of new issuance of debt, which is very indicative of a robust economy, not one where corporate treasurers view interest rates as being too high. Also, we see strength in the dollar and we see strength, of course, as we mentioned, in the stock market, all of that leading to some suggesting that we are seeing looseness, not tightness, in fiscal conditions and therefore we who are hoping for a rate cut out there for those who may have to wait longer than previously anticipated, to wait longer than previously anticipated.

Keith Lanton: 21:19

So, going to move on to a topic that is consistently talked about, many calling it the driver of equity prices over the past year to 18 months and that's artificial intelligence, and Barron's ran a couple of interesting articles on AI. The cover story, front cover of Barron's NVIDIA won AI's first round and they say now competition is heating up, saying that the biggest surprise for investors over the past 18 months if you had anticipated it, you would have done very well has been the performance of NVIDIA, which has come from humble roots to thoroughly dominate the market for artificial intelligence-related chips. For those who have followed the arc of NVIDIA, it was mostly known for building PC add-on graphics cards for gaming, and NVIDIA had then gone on very successfully, to transform themselves from these GPUs into chips that powered the Internet of Things, bitcoin mining, and now to become the beating heart of the artificial intelligence revolution, powering the creation of large language models and running the inference software that leverages them into data centers around the world. Nvidia has been nearly alone in the field, and they have garnered a market share that some say is approaching 90%. But Barron says when you have that much success, what does that lead to? Well, it leads to competition, and they say the competition is coming from both big companies and small companies, and the battle will be fierce and the stakes will be large. Now, nvidia's seeding of some of this ground in this space does not necessarily mean that NVIDIA will not do well. Growing pie can certainly still be a big factor for NVIDIA's continuing success. So the article is not suggesting that NVIDIA will not be successful. What it's suggesting is that NVIDIA is going to have to keep innovating in order to remain successful, and NVIDIA's success has taught others that there's opportunity out there. And, as a result, nvidia's stock price has more than tripled since the H100 trip debuted just about a year and a half ago, and NVIDIA's market capitalization has skyrocketed to $2.1 trillion, making it the third largest stock in the US by market capitalization.

Keith Lanton: 23:47

Now, nvidia is not a GameStop or a Trump media and technology company. It's in fact, some would argue, the anti-meme stock. The company's revenue growth has actually outpaced the stock's gains, but the competition, as I just mentioned, is coming. And who is it coming from? Well, their most obvious challengers are advanced micro devices and Intel. Amd says that they have chips that are out in the marketplace now that will outperform NVIDIA's H100 for many inference workloads while offering parity for model training. And AMD's other asset is that it is not NVIDIA, and many large users want to diversify their user base and don't want to rely on a 90% supply from one supplier, so AMD potentially being just a beneficiary of customers seeking diversification.

Keith Lanton: 24:41

And then there is Intel coming from behind the market, expressing lots of doubts on whether or not Intel can possibly catch NVIDIA, or at least approach catching NVIDIA. The stock has struggled for years, but the company did open some eyes when it opened its mouth this month and launched the Gaudi 3, its third generation AI accelerator chip for training and inference. Intel is contending that the Gaudi 3 is faster than NVIDIA's H100 for both AI tasks while using less power, and that the Gaudi 3 will even be competitive with the Blackwell, which is NVIDIA's newest chip. Market is very skeptical because Intel had previously made some boasts regarding their previous AI chip and that chip didn't live up to the hype. So the announcement about the Gaudi 3 was met with lots of skepticism and Intel stocks sold off. So the proof will ultimately be in the pudding and markets will be watching to see if the Gaudi 3 is in fact as powerful as Intel says.

Keith Lanton: 25:42

But there's other competition coming as well. Qualcomm, another long-term leader in the semiconductor industry, the mobile chip company, has taken technologies originally designed for smartphones and applied them to the cloud in an AI-influenced chip it calls the Cloud AI-100. Competition also coming from less visible but no less serious about competing in AI chips. The internal teams at cloud computing companies like Amazon, alphabet, meta and Microsoft are designing proprietary chips for their own internal needs and to serve cloud customers. The competitive story a little less direct. None of the cloud leaders sell chips directly to third parties. Nevertheless, they are still a threat to NVIDIA. And then, of course, perhaps the biggest threat is the unknown.

Keith Lanton: 26:30

This is startup companies, ones many of us have never heard of that are being backed by joint venture firms to come out with the latest and greatest and newest technologies, and these startups are hoping to sell chips and systems to server and cloud providers. They're trying to disrupt the market by offering cloud-based services directly to customers. Barron says the most intriguing of the group is a company called Cerebras Systems, which is reportedly planning a 2024 IPO. In March, cerebras unveiled its largest chip to date, the Wafer Scale Engine 3, or WSE3. It is 72 square inches, that's six feet. It's the largest commercial chip ever made. The H100, by contrast, is roughly one square inch. Rather than trying to network lots of chips together an engineering challenge Cerebras is packing all of the power into one gigantic semiconductor. Cerebras' chip has four trillion transistors 50 times the computing power of the H100. 50 times the computing power of the H100. Cerebras is bundling the chips into a computing platform called CS3, which it says can train a large language model like Meta's Lama in one day, versus one month for NVIDIA's based platforms. So Cerebras has some customers, like the Mayo Clinic, glaxosmithkline, the Lawrence Livermore National Laboratory. Of course, we will see if Cerebras is able to effectively compete, but, as you can see, technology moves fast, competition jumps in quickly and NVIDIA certainly is going to have to keep innovating to justify its growing market capitalization.

Keith Lanton: 28:17

Finally, before I turn things over to Brad, I'll mention one other company that hasn't got a lot of AI credit, at least at the moment, but Apple is the company that Barron says might one day still be a big winner in artificial intelligence. Now they start off by talking about Meta, which was written off the dead not that long ago, and Meta has transformed itself and in fact, last week, on Thursday, meta released Metaai, which is an artificial intelligence chatbot that's being incorporated into Instagram and Facebook. I'm sure many of you who are users have seen this pop up on your screens. You can also access Metaai on the Internet just by Googling it, and this is a new AI chatbot that competes, for example, with ChatGPT or Google Bard. That competes, for example, with ChatGPT or Google Bard, and Meta now competing very aggressively against some of the AI startups, but Meta making the leap and making some changes. And now Barron suggesting that Apple may have a card up its sleeve in order to compete similarly to Meta, not necessarily projecting that Apple will go on quite the performance gains that Meta did, from $100 to almost $500 per share, but perhaps one of the biggest beneficiaries of AI may be Apple and using all that data that we are all those of us who have iPhones are carrying around in our pockets and Barron's had an interview with a doctor at the Mayo Clinic, dr Peter Noseworthy, professor of cardiology and medical director for business development, and he talked about the life-saving implications of AI products and clinical trials that the Mayo Clinic is working on, and some of the interesting things that they are utilizing AI for is to find disease markers with commonly performed electrocardiograms, and the Mayo Clinic has found it's actually a really powerful marker of all kinds of diseases that even people who read ECGs for a living don't rely on an ECG for Now.

Keith Lanton: 30:36

Ultimately, those ECG tools can be used with devices like an Apple Watch, and then the consumer carries that on their wrist and they can deploy artificial intelligence to read that ECG that they have on their wrist and then be able to develop better understanding and insights into their health, perhaps catch a health problem before it exists and talk about that with an actual doctor, not an AI doctor. So these phones are omnipresent and not only can they tackle things like ECGs, but they also can be used for all kinds of signals for health and disease in a patient's voice. For example, he said, particularly when it's trending over time, Signals could come from a phone's step counter and by measuring changes in a user's gait. Dr Noseworthy compared AI and phones to a mother who quickly spots illnesses on a child's face. That's clinical gestalt, he says it comes from an astute observer, is probably replicable with AI and we are making dozens, if not hundreds, of recordings of our faces every day and there may be tremendous opportunity to leverage things like that. He says the closest we have come to a patient-doctor interaction is probably a generative AI solution in the form of a medical chatbot. He said if you asked him six months ago if he thought that that was something that could be trusted, he would have said no, but now he thinks that that is something that will potentially be useful and in the marketplace sometime within the next year.

Keith Lanton: 32:11

In the short term, dr Noseworthy says a chatbot could help patients adjust medications, ask questions about drug interactions. The most mature version of that technology will allow patients to converse in natural language with a chatbot to discuss their symptoms or concerns, to get high-quality, vetted medical information presented in easily understood and natural feeling kind of conversation and that kind of personalized tool takes AI to another level. There's a company we talked about several months ago called Rewindai which uses character and audio recognition to record everything that comes through a Mac screen and speaker, including calls, texts and emails. Then it uses a large language model and the app can answer questions about our lives. For example, you can say tell me about my last conversation with my mom, tell me what time mom and I said we were going to have lunch. And Rewind AI has a newer product called Limitless, which offers apps for the Mac, windows and the web.

Keith Lanton: 33:13

This past week it launched a wearable pendant something we did discuss several months ago with a microphone that users can attach to their clothing to record real-life conversations that don't go through a device. So you take these conversations wearing this pendant. The pendant is $99. These conversations wearing this pendant pendant's $99. You combine that with every text, every phone call, the measurements of your gait, your ECG, your speech, and you can see that Apple has lots of tools to be able to potentially leverage and utilize AI and make that AI a part of our everyday lives.

Keith Lanton: 33:50

And perhaps the marketplace is not factoring in all that information. When they factor in, what is the appropriate future for Apple, and how well will Apple compete in AI? Of course, none of us know the answer to this question, but Apple may have the last laugh and they may give us some more insights in June when they have their annual developers conference. Until then, we'll just have to wait and see what AI brings us for the next couple of months. With that, I'm going to turn it over to Brad. Give us his thoughts and let us know what's happening in the markets this morning. Good morning, Brad.

Brad Harris: 34:26

Good morning everyone. I was personally thrilled to see the $95 billion aid package pass this weekend. I was happy to see our government functioning and, though I respect those who disagree, it made me feel good and comfortable that we did do this. However, the bond trader and investor in me was not quite as thrilled. I knew that we would be walking into a bond market this morning. That would be under pressure. Where is all this money coming from? The answer is without tax hikes. It is all about printing dollars and treasury borrowing. The only silver lining here is that, since long treasuries are down almost 10% in price this year, we may see investors still rotating into these bonds at these better yields. Also, with the Fed not as eager to cut with the strong economic numbers, the market seems to be pricing in one to two rate cuts, which is much more reasonable than the six that it had been earlier in the year.

Brad Harris: 35:21

As a trader that occasionally dabbles in the Treasury market, at this particular point I'm much more comfortable buying the dips for a trade as opposed to selling the rips for a short trade. Short positions in the treasury market at this point have certainly grown over the last couple of months and at any point. With everything going on in our country and the world, those short trades could turn sour. Municipals at the moment seem to be on the fuller side of fairly priced with relationship to their percentage of treasuries. However, at least we have meaningful rates of return, which we didn't have for many years Long. 4% municipals are in constant demand and now 3% is available in the shorter range. For municipals that are being called maturing, I have no problem seeing one rollover into a new municipal bond.

Brad Harris: 36:15

The municipal market has had a sell-off, not only in sympathy with the move in treasuries, but additionally because of a record amount of supply as well as strategic profit or loss selling to pay taxes over the last month. Speaking of tax loss selling, I can't believe how quickly the bond market round-tripped, but many of you who did tax loss selling last year fared very well. It's never too early to tax plan. Many institutional and funds harbor losses and immunities all year long when available. There's no reason that we shouldn't be thinking about the same. I hope everyone has a great week and, for those of you who celebrate, have a healthy and happy Passover.

Alan Eppers: 37:30

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

Sophie Cohen: 37:48

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