Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
How Do Probabilities and Emotions Drive Your Investment Decisions?
November 18, 2024
Season 6 | Episode 40
Unlock the secrets of the financial markets as we navigate the intricate world of investing by examining the powerful interplay between probabilities and psychology. How do year-end strategies and new information affect investor behavior? Discover the art of decision-making in investing, drawing parallels to everyday choices like selecting a mode of transportation. Reflect on the emotional rollercoaster of potential gains and losses, akin to the thrill of gambling, as we discuss these fascinating insights.
Explore the ever-changing dynamics of stock and bond markets with a keen eye on inflation and interest rates. As these economic factors shift, we analyze their impact on investment decisions, highlighting the growing allure of bonds amidst rising interest rates. With a careful look at market reactions to economic indicators and political developments, we draw lessons from historical parallels, underscoring the importance of understanding market psychology to navigate potential downturns.
In the final segment, we turn our focus to the current financial landscape, from the challenges faced by the airline industry to the booming demand for AI data centers. Gain insights into Spirit Airlines' bankruptcy and the opportunities presented by regulatory changes for major airlines. We also spotlight the role of companies like NVIDIA and Oracle in the AI sector and share valuable tax planning strategies to help you optimize your financial outlook for the coming year. Join us for a comprehensive exploration that will equip you with knowledge and strategies to enhance your financial journey.
** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice.
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And now introducing Mr Keith Lanton.
Keith Lanton:Good morning. Hope everyone had a nice fall weekend, wherever you're enjoying this time of year. Today is Monday, november 18th, a little bit halfway past the midpoint of the 11th month of the year, as we steamroll our way into Thanksgiving and Christmas and year-end. We will talk about some year-end strategies Good to always reinforce, as we tend to get very busy this time of year and often forget to take some of the actions we can take that'll save us money come April 15th of the following year. Brad on the morning, so looking forward to his insights as bond yields have been creeping higher Ten-year yield approaching 4.5%, which is something we'll talk a little bit about a level that has proven challenging for the equity markets Last couple of times. The 10-year has creeped up to these levels. So we'll see, given the changes in Washington and the changes that may be coming, what impact these higher rates may or may not have this time around on equity markets and what opportunities it may present in fixed income markets. So we're going to start out today.
Keith Lanton:Talk about last week. We had a downtrend in the markets after significant uptrends Again. Markets have been super strong this year and we had a little bit of a dial back last week, and we'll talk about why. Perhaps that may have occurred last week and just think about it in a much broader context in terms of prices of markets and how markets move and how perhaps we want to think about investing in both stock and bond markets and keeping money in cash. So last week, the drop that we did see could be attributed to new information that the majority of investors factored into their thinking. Clearly, because that's what led to the decline of the markets it's when the majority and the majority is not necessarily the number of people this is not an equal voting machine in financial markets the more money you have, the more weight you have and the more you become part of the majority. So last week, the majority of the market participants viewed as relevant and worthy of changing their probabilities about what's going to happen. The news flow did that for those folks and changed their expectations slightly going forward. We didn't get a massive sell-off, we got a small sell-off and then a magnitude of about 2%. But to think about this in the broader context, what moves markets and why do they move markets? And we can think about this really as we dial back and just look at ourselves as people and people are the folks, despite the fact that machines and AI are becoming more and more relevant in terms of investing. Nevertheless, that AI, those machines, are all being programmed by individuals and individuals as individuals.
Keith Lanton:As people, we are literally working probability machines. We may not realize it, but we are subconsciously calculating probabilities for almost every action we take. We are calculating the probability of each outcome versus the success or failure of that event and we are also factoring what is the price of that outcome? And when we think about the price of an outcome, it's not necessarily just the price and cost of dollars, which is certainly one of the factors, but it's also the price in terms of anxiety or worry about the risk or worry about the outcome. That's a true cost to us. We also may factor in the excitement or rush as an additional positive. That's not necessarily the positive that we're getting from the investment. So we get a rush when we make a gamble or an investment not everyone, but some do and then we also feel the pain or anxiety if something doesn't work out or has the possibility of not working out.
Keith Lanton:And all of these things are calculated in our brains every day and we make decisions instantaneously, in many cases without even necessarily thinking about it. So for a simple decision like, should I drive or take the subway or ride my bike to work today, for somebody who's living in a city where they're a few miles out, perhaps, from the place that they work, they're factoring in many different factors when they think about just the simple thing of how should I get to work today. And perhaps, if we're thinking about driving, we factor in the price of gas, the amount of time it'll take us to make that drive, the probability of a bad outcome, what about what if I have an accident on this drive? All of that's going into our thinking when we're thinking about driving. And then when we're thinking about taking the subway and again we may not consciously think about this we think about well, what's the cost of the subway? What's the amount of time it'll take us? Perhaps it'll be quicker? What's the risk of a bad outcome? What about the train gets delayed? Or what about the anxiety? Perhaps you don't like crowds, you don't like the dirt and the grit of the subway, you just don't like the whole environment. And you weigh all of that into your thinking.
Keith Lanton:And then the third choice you might have is to ride your bicycle to work, and there you might factor in more heavily than in the first two cases of driving or taking the subway. You might factor in well, what's the weather? Is it going to be sunny today? Might it rain later? Is it really hot out? Am I going to get really sweaty? If I take my bicycle? Well, what's the cost of it? Maybe I have to store my bicycle, maybe I could just lock it up, and it doesn't cost me anything. What about the exertion? How do I feel today when I ride my bicycle? We factor all these decisions in ride my bike, take the subway, drive, and we make a decision.
Keith Lanton:And the same process is taking place in investing. Now. Investing, therefore, is a calculation of probabilities and therefore, because it's a calculation and an amalgamation of probabilities of different events, one of which is well, what's the return on that? But there are other processes, as we just mentioned the rush of the investment, the rush of the pain, of the failure of the investment, and we can think about this in terms of well, what are the odds of this investment? This sounds like gambling to me when I invest, whether it's the stock market or the bond market, and, after all, gambling is a game of odds. However, let's take an example of gambling and odds into account when we think about things.
Keith Lanton:Yesterday, take a team here in New York. The New York Jets played the Indianapolis Colts. For Jet fans, once again, a very disappointing game. But we're not going to focus on the game, we're just going to focus on what the process is. If you had bet on that game was going to go, and we're going to assume that the odds, whatever the point spread was, we're going to take that out of the equation here. We're going to assume there was an even chance that the Jets were going to win. The Colts were going to win. They were fairly even teams in terms of their record going into the game anyway.
Keith Lanton:But the expected outcome here perhaps different than the investing in the financial markets was that the sum of the winners and losers wasn't going to be 100 because you have an intermediary, you have a bookmaker in between. So even if you win, you're not getting all the funds from the losers, so to speak. And if you lose, what's going to happen if you lose, even though the odds are 50-50? If you lose in this example, your downside is 100%. So in this case your expected value is less than zero because your upside is capped at a certain level, times a certain percent your downside is zero and you've got the bookmaker in between. So the probability if you're betting on a football game, the probability from a pure expected value standpoint, is you are going to lose. You may think you know more than the market. Maybe you do. Maybe that increases your chances. On the other hand, perhaps the pleasure you get from the rush of that bet, from betting on the team that you like, whether it's the Colts or the Jets, and watching that game with that bet on the line, that jolt of energy is worth more to you than the potential pain of getting zero at the end. And you factor that into your expected value and you may say to yourself that investment of that bet is worth it.
Keith Lanton:But now let's back all the way up and let's talk about investing in equity and bond markets. Let's talk about the stock market to start with. Well, equity markets, historically, have gone up two-thirds of the time and when they go up, they go up on average of 10%. So if you think about it, by investing in the market, by choosing that probability, your odds of success are already very positive. And if you look at it versus the alternative, you'll view it potentially as perhaps even more positive than your alternatives. And your alternatives are sitting in cash or investing in the bond market. And investing in the bond market is going to depend a lot on what interest rates are, on whether or not that looks like a viable alternative.
Keith Lanton:But when you think about the stock market, two-thirds of the times it goes up. When it goes up it goes up around 10%. And your cost, so to speak, of the markets in terms of your real returns, you're looking at inflation that runs, on average, about three percent. So by investing in markets two thirds of the time, you're going to outperform the inflation rate. In other words, your money is going to grow. So then the question becomes is how much is the cost going to weigh you down? In other words, how much is the anxiety of the fact that you can lose your money? How much is that going to prevent you from investing your money because you fear the loss?
Keith Lanton:Now keep in mind when investing in the market, the odds are you are going to experience that loss one-third of the time. And if you do experience a loss different than that example between the Jets and the Indianapolis Colts, whatever side of the equation you're on. If you're on that losing side, you're losing 100%. The probability is that if you're on the losing side in the equity markets, you are not losing 100%, so you've got two-thirds probability of making a gain. On average, that gain is 10%. And when you do suffer a loss, although it will be painful, it will create anxiety, and that anxiety may or may not cause you not to want to participate, but nevertheless, when you do experience a loss, it's painful On average most of the time, not a 100% loss. So therefore, if you think about this from an investing standpoint, investing in the stock market historically, based on what's taken place in the past, is a very logical thing for humans to do. Humans are understanding more of the market and more are participating in financial markets because they are understanding what the expected values are relative to the choices, especially when interest rates are low.
Keith Lanton:As interest rates go up, well then there's another market. That is the fixed income or bond market, when we just talked about. When rates approach 4.5%, you can get a 10-year treasury at 4.5%. Depending on your tax bracket, that might be a 3% to 3.5% after tax return. That, after tax return relative to inflation of 3% means that your investment in a treasury bond in a taxable account might be equal to the inflation rate and you may feel more comfortable when you're getting the inflation rate. That might be enough for you to discourage you from investing in the stock market. And that's what causes the substitution, or switching. That's what causes folks to say you know what, when interest rates reach a certain level relative to inflation, I am more comfortable stepping back more of my money from the stock market and moving it more into the bond market. Now let's just move this thought process to.
Keith Lanton:I said last week markets declined because probabilities and expectations changed last week. Well, what changed last week? What did market participants, who weigh with their dollars, what did they think was important? Well, they thought, number one, that the inflation rate last week showed that the inflation came in hotter than thought. Number one, that the inflation rate last week showed that the inflation came in hotter than expected CPI, showing that inflation is running at 2.6%. Previously it was 2.4% Higher. Inflation is something that concerns markets. It means interest rates may go up. We talked about the substitution effect between stocks and bonds. Number two the knock-on effect of that was that we then got commentary from Federal Reserve Chairman Powell and he talked about the possibility that if inflation is running higher than expected, that we may see interest rates not decline as rapidly as expected. That's the first time he threw that out there to us and the markets reacted and the probability of a reduction of 25 basis points at the next Federal Reserve meeting dropped from 85% a month ago to 58% on Friday.
Keith Lanton:Number three President-elect Trump nominated some controversial candidates to lead various government organizations, and many of those candidates were members of the House of Representatives. So why is this important? It's important for a couple of reasons. One, if they're current members of the House of Representatives, that means that in the near term, until new members can be chosen which could take six months or perhaps even a little longer that the amount of Republican votes in the House is a lot tighter takes only a few defections, and President Trump may not be able to, or future President Trump may not be able to, get some of his tax cuts and tariffs in place as quickly as the markets were previously thinking.
Keith Lanton:Number two associated with that is that it may indicate that President-elect Trump may not be as laser-focused as the market was originally thinking on the economy and the markets and may be more focused on his picks for other reasons, outside of just picks that are associated with choosing the best folks and the most qualified candidates picks that are associated with choosing the best folks and the most qualified candidates and therefore some people were concerned from a market standpoint here we're talking about this, not from a political standpoint with his picks and therefore the president-elect may get bogged down in defending his picks in the long and lengthy process to get his picks either accepted or rejected. And that means that the probability of extending the tax cuts which is something the markets are very focused on and getting done very quickly which are due to expire next year well, that vote could potentially get pushed back as a result of the fact that, a the votes may not be there because some of these nominees are in the House and, b because it may take longer for this process to happen and therefore there may not be as much focus or attention on getting the tax cuts done as quickly as the markets originally thought. Also, the markets got a little bit more clarity about the potential for tariffs and the fear for that tariffs could goose inflation more than expected is something that was more problematic than previously thought. Now, other factors which have been out there not necessarily new information nevertheless continue to weigh on markets and that is that sentiment is frothy. The S&P 500 is trading at 22.2 times forward earnings Only. 1999 and 2021 saw the markets trading at levels on forward earnings basis as high as 22.2. And in both times we had significant down years following those two events and we talked about the 10-year treasury up from about 4.3% to 4.5% Substitution effect. That is something that is continuing to weigh and increasingly weighing on investors' minds.
Keith Lanton:If you're also thinking about interest rates and getting paid to own equities, well, one of the ways you get paid to own equities is in dividends. Dividend yields are at 1.2%. They're lowest in 20 years. Since 1970, the average dividend yield has been 4%. Dividends have been one-third of equity market returns since 1940. If they're only 1.2%, well, if they're a third of returns, well that would be 3.6%. That would not necessarily be a good thing. Also, markets continuing to be concerned about the deficit.
Keith Lanton:So, when you think about all of these factors and the weighing machine and the probabilities and the expected value outcomes like we talked about, well, the market's changing or shifting their expected value outcome and slightly weighing in that they are a little bit more concerned than they were the week before and therefore we see a drop in equity markets and we see markets this morning remaining tentative. We see Dow futures down about 87 points, s&p futures down one point. Nasdaq futures are up about 40 points and a lot of that is because Tesla is meaningfully higher this morning after President-elect Trump said that he would like to ease regulations on self-driving cars. Interestingly, alphabet, which owns Waymo, which is perhaps the leading in terms of adoption so far, self-driving cars up just modestly this morning. This morning Spirit Airlines shares of the struggling airline halted after the company filed for bankruptcy protection. The stock is down more than 90% year-to-date. Closed at $1.08 on Friday.
Keith Lanton:Nvidia this morning down about four points, about 3%. There are reports that their latest artificial intelligence chip is hitting a snag, that it is overheating. We'll probably hear some more about that but nevertheless that is something that could weigh on artificial intelligence stocks in general. Super microcomputer SMCI been in the news with some concerns about their accounting and they're delaying their annual report. This morning there's a report that they might avoid a delisting in the stocks, up about 10% on that report. Warner Brothers Discovery symbol, wbd, recently had some good earnings, announcing they settled a breach of their contract lawsuit against the NBA and that stock moving higher. A couple of upgrades this morning Robinhood upgraded, cvs upgraded and Moderna upgraded. All those stocks up modestly.
Keith Lanton:Equity indices in the Asia-Pacific region mixed, japan down, hong Kong up slightly, china down slightly, the China market to Shanghai, european indices trading pretty close to their flat line. Other news this morning having to do with the nomination for Treasury Secretary Elon Musk out publicly pushing for Howard Lutnick who runs Cantor Fitzgerald. Another leading candidate is Scott Besant and now CEO Mark Rowan from Apollo Group saying that. Well, he's not saying, but markets are suggesting that he is being considered for treasury secretary. New York Times reporting that President Biden authorized Ukraine to strike inside Russia with long-range missiles provided by the United States. Bloomberg reporting that House Speaker Johnson says tax cuts must be paid for that would be a novel idea. Fox News saying that incoming Department of Government Efficiency member Vivek Ramaswamy, suggests cuts in funding for federal contractors. We talked about that.
Keith Lanton:Self-driving cars President-elect Trump wants to ease restrictions. President-elect Trump also wants assurances from the incoming Treasury secretary that he will impose sweeping tariffs. That's of course, according to the Financial Times. The Hill is reporting that Republican senators appear open to RFK Jr's nomination. Reporting that Republican senators appear open to RFK Jr's nomination, but NBC News is reporting that most Republicans doubt that Matt Gaetz will be confirmed as attorney general.
Keith Lanton:Thanksgiving right around the corner. American Airlines saying 80 million Americans are expected to travel over the Thanksgiving weekend. That's about one of every five of us, and of those folks traveling over Thanksgiving, 72 million approximately will do it by car, about $6 million by air and about $2 million by other methods. All right, what else we got going on this week? We have earnings season winding down. The big event this week is NVIDIA's earnings, which will be announced after the close on Wednesday.
Keith Lanton:On Tuesday, lowe's and Walmart announced results. Palo Alto, target and TJ Maxx on Wednesday. On Tuesday, lowe's and Walmart announced results. Palo Alto, target and TJ Maxx on Wednesday. Deere and Intuit on Thursday. On Friday we get the S&P Global releasing their manufacturing purchases index for November, looking for that to drop about a half a point to 48 from last month. And then today we get the National Association of Home Builders releasing its housing market index for November.
Keith Lanton:So I mentioned markets last week dropping. S&p fell about 2% last week, its worst week since September. Dow down 1%. Nasdaq was lower by 3% as market weighed in on all those expected values and probabilities. Like we talked about earlier. We'll see what weighs into the weighing machine this week.
Keith Lanton:One factor that markets will be weighing and continue to evaluate is tariffs and Barron's, with an article saying that tariffs are already changing company behavior and what that means for GDP. Inauguration day is about two months away, but Barron's reporting that many companies are significantly increasing their imports of items that they think may be subject to tariffs front-loading. What that means is it makes the Federal Reserve's job a little bit more difficult because GDP and growth for this quarter could be elevated because of all this front running and therefore things may slow down in the first or second quarters of next year after this front running is over, because inventories will potentially have been built up. So this is something we have to factor into our thinking is something we have to factor into our thinking If we see stronger data. We see stronger CPI, things like that on the inflation score, because companies are doing the logical planning and trying to get ahead of potential tariffs. I was recently at my dad's place in Florida listening to a conversation a couple of tables away and a bunch of people were suggesting that they were going to replace some of their appliances now, rather than wait for them to break, because they're suggesting that the tariffs were coming, so they're already old, so let's get ahead of this. So you may have companies acting, you may have people acting, so something to think about when you're evaluating the economy over the next few months. Behavior all very logical.
Keith Lanton:Barron's also talked about airline stocks, saying that they could see their best gain in years, and a lot of this has to do with the bankruptcy we talked about this morning from Spirit Airlines, as well as the election of soon-to-be President Trump, as well as the election of soon-to-be President Trump, who may be more open to allowing mergers, consolidation within the airline space, biden administration knocking down spirits request to merge with different airlines and now they are filing for bankruptcy. So the airline industry has been one of the biggest beneficiaries of consolidation over the past few decades. Fewer players in the industry will mean the existing airlines have more power to push through higher prices and build market share on lucrative routes. Spirit only accounts for about 4% of US capacity and was undone by regulatory setbacks and business problems, but with four percent they punched above their weight and they were disrupting the industry on the budget side for that customer and if budget airlines can no longer disrupt the industry, that should allow other players to have more control over the direction of capacity and prices. Industry analysts now expect airlines to increase capacity next year by only about 3%, down from prior expectations of 6%. Another positive for the airline industry is that oil prices have been tending downward and airline margins typically rise when fuel prices drop. Despite their recent performances, airline stocks still trade at reasonable valuations. We talked about 22 times forward earnings for the markets in general. Well, delta's at nine times earnings forward, united at seven and a half and American at seven. So Barron's suggesting perhaps these airlines have some more upside potential.
Keith Lanton:Barron's also talked about artificial intelligence. Barron's also talked about artificial intelligence. How could we avoid that subject here? It's the topic of 2024, perhaps 2025 as well.
Keith Lanton:Barron's interviewed more than a dozen senior executives across the world's most important tech companies. They think that artificial intelligence is not something that's going to quickly fly into the night and disappear, and in this article, barron suggests three stocks that remain a buy in the artificial intelligence space. They say that today's data centers that power cloud computing platforms typically need about 50 megawatts of power. Ai data centers will need 500 megawatts of power. Ai data centers will need 500 megawatts of power. The CEO of Vertiv Holdings, which is symbol VTV, which is a leading provider of power and cooling infrastructure equipment for data centers, says his customers are building an increasing number of data centers with capacities of 500 or more megawatts. Vertiv is one of the stocks that Barron thinks has some more life left in its already significantly appreciated stock price.
Keith Lanton:One of the reasons why AI stocks continue to be able to power higher is, for example, elon Musk, and his ex-AI company has already deployed more than 100,000 NVIDIA GPUs Graphics Processing Unit. That bill alone comes to several billion dollars. Of course, all this will be dependent on what's going on with that NVIDIA chip and the issue with overheating. Musk has said that his AI startup plans to double its capacity to 200,000 GPUs in the coming months. That's another several billion dollars of GPUs from NVIDIA, which is another one of the stocks that Barron's feels, despite its tremendous appreciation, still has a little bit left in the tank, although acknowledging that a lot of the fuel has been spent on NVIDIA, as it's already rocketed here in 2024, but suggesting there is still some left despite the significant appreciation, and then the stock that Barron suggests perhaps could have the most remaining upside is Oracle. They recently announced that they would deploy the largest ever GPU cluster, which will be available in the first half of 2025, delivering up to 131,000 NVIDIA GPUs for customers to train and run AI workloads. Also, meta last week announced last month that they are training their Lama 4 on over 100,000 NVIDIA GPUs, and Meta's Lama 3 model, which is the predecessor, was trained on only 16,000. So you can see the arms race accelerating here as companies continue to require more and more computing power in order to more effectively train their artificial intelligence, so that all of us can be the beneficiaries of all this intelligence and hopefully make our lives a little bit easier for each of us.
Keith Lanton:Finally, before I turn things over to Brad Barron's talked about some moves we can make to lower our tax bill. Come April 15th of next year, we can contribute to our 401ks. That must be done by December 31st of this calendar year, if you're thinking about IRAs and Roth IRAs. Well, you have until April 25th of next year, of 2025, to make 2024 contributions, keep in mind, for your 401ks or 403bs, you can contribute $23,000 if you're under age 50 in 2024. $23,000 if you're under age 50 in 2024. And if you're over age 50, you can invest an additional $7,500 in catch-up contributions, so up to $30,500. If you are age 50 or higher. Contributions to tax deferred accounts are subtracted from your taxable income for the year, therefore lowering your tax bill. This is different than a Roth contribution, which is with after-tax money. Also, make sure that you are withholding enough in taxes this year. If you don't pay enough of the taxes that you owe during the year, you could get a surprise bill come tax time, plus an 8% penalty.
Keith Lanton:Consider tax loss harvesting. We've talked about this many times. Many of you may own mutual funds, although ETFs are gaining in popularity for tax-efficient reasons. But many still own mutual funds in their taxable accounts and a lot of those funds are going to declare capital gains and you can offset those gains against losses. You may also have gains in your individual stocks. If you sell a stock that you lost money on by December 31st, you can use that loss against capital gains. You can also claim a deduction of up to $3,000 against your income if there is anything left over after offsetting capital gains, or you can carry the loss forward to use it against future gains.
Keith Lanton:Also, check out your clean energy credits. Those who buy renewable energy products for the home, such as solar panels or battery storage, may qualify for the residential clean energy credit. This offers a dollar-for-dollar reduction of taxes equal to 30% of the cost of new qualified clean energy property. Also, the energy-efficient home improvement credit provides a tax credit up to $3,200 a year for qualifying improvements. Even things like insulation could be available, and you can claim up to 30% of qualified expenses up to the cap through equipment. That must be placed into the service by December 31st.
Keith Lanton:And finally, remember to take your required minimum distribution. Rmds now kick in at age 73. If it's your first time taking your RMD, you're allowed to wait until April 1st of the following year to take it. For everyone else, the deadline is December 31st, starting next year. Irs just gave us clarity on this. Most non-spouses who inherited a traditional IRA will have to take RMDs, provided they inherited an account from someone who had begun taking them. You might want to plan ahead. Many investment professionals recommend taking more than the required amount to avoid a big tax hit because these accounts, these inherited IRAs. In situations where you've inherited an IRA in a non-spousal situation, they must be depleted within 10 years, with a few exceptions and you have to deplete those accounts. So you want to manage the depletion of those accounts from a tax perspective. All right, with that, I will turn things over to Brad. Give us some more insights this morning. Good morning Brad.
Brad Harris:Morning Keith, Morning everyone. Unfortunately, I'm kind of at a loss for words regarding this market. Regardless of who you were voting for, I was hoping that, since we had a clear presidential, Senate and House victory, we would have more settled markets. In years past. Whether you agree or not with policy, a red wave would have meant an effort to cut spending and, after all these years, possibly even taken a knife to cut wasteful spending and attempt to stabilize our country's increasingly bloated budget deficit. At this point, though, it seems to me that the incoming administration is making more of a mockery of some of the potential picks to assist in running our country. Many of these picks will be a battle to even get confirmed, and once again, we are back into the unknown. It is very difficult to make strong commitments when so much is still unknown.
Brad Harris:Many say that, with the tax cuts, tariffs and other promises made by the incoming administration, that bond yields will skyrocket. They say that we can potentially inflate our way out of our deficit. There may be some economists out there that believe this, but it personally scares the hell out of me. This is playing with fire. My hope, as I've said many times in this call, is we wind up with a normal and steep ascending yield curve with relatively low rates, whether that is 3% on the front end to 5% on the long end, or 4% to 6%, I think that would put us, our country, the consumer, in a much better place. If we wind up with 6% to 8%, 7% to 9%, that's another story. All bets are off. I think we're in trouble, considering all the debt we'll have to fund this. All being said, there is no guarantee which way rates are going to go.
Brad Harris:Period as we move into year end. Let's please discuss tax law swaps, especially in municipal bonds. Those of you who have worked with me in the past have a great success, not only realizing losses to offset some of your largest gains without having to make tremendous moves in quality and maturity, but also creating a much better base price in your bond portfolios. Next week, I will get more details about how to tax law swap for bonds for
Brad Harris:those who have not done so in the past. That all being said, have a great week and I'll turn it back to Keith. Thanks,
Keith Lanton:Thanks Brad.
Alan Eppers: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. heraldlantern. com.