Navigating Financial Markets: Trump's Return, Stock Market Insights, and NVIDIA's Innovations

January 21, 2025 | Season 7, Episode 3

In our latest episode, we discuss the critical importance of long-term investments amidst unpredictable political landscapes and shifting market dynamics. By analyzing recent financial trends and historical data, we provide insights into successfully navigating current and future investment opportunities.

• Staying invested despite political uncertainty 
• Trends in robotics and AI affecting future investments 
• Historical performance of individual stocks versus the market 
• Significance of letting winning stocks run 
• Active bond management as a strategic alternative 
• Impacts of inflation and interest rate predictions 
• Upcoming earnings reports and market reactions 
• Detailed analysis of notable stocks like Copang and J.M. Smucker 
• Discussing the evolving bond market and investment strategies 

By emphasizing these key points, we encourage our audience to think critically about their investment choices and prepare for potential market volatility ahead.

** 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 **

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Chapters

• 0:00 Market Reaction to President Trump's Inauguration
• 12:12 Stock Market Study and Historical Trends
• 25:12 Nvidia's CES Announcements and Market Trends
• 29:39 Investing in Individual Stocks and Bonds
• 36:54 Bond ETFs vs. Individual Bonds

Transcript

Alan Eppers: 0:00

And now introducing Mr Keith Lanton.

Keith Lanton: 0:03

Good morning, hope everyone had an enjoyable weekend. Certainly yesterday a momentous day Martin Luther King Day and, of course, inauguration Day for Donald Trump, second term as US President, 45th and 47th President Only the second president to serve non-consecutive terms. Last president to do that was Grover Cleveland in the late 1800s. Certainly, financial markets reacting this morning to a lot of the announcements that now President Trump made in the declarations that he signed on Inauguration Day and we will certainly talk about those. And we'll also talk about the importance of staying invested and the returns in the stock market Very fascinating discussion over the long term about returns in the markets and I think it's a good reminder to set us all up.

Keith Lanton: 0:59

When we talk about that we tend to get caught up. Whether we like a presidential administration, we don't like an administration, we start forming views regarding our investments and over the long course of history, who serves as a president, at least traditionally and historically, has not been as relevant as remaining invested throughout the course of the United States and trying to predict what certain administrations will and won't do has been a fruitless endeavor. And we'll talk about staying invested and the importance of staying invested. We'll talk about some of the trends taking place in the market. So we'll talk about robotics, we'll talk about NVIDIA entering the personal computer space, we'll talk about inflation, of course, what the Federal Reserve might be thinking, we'll talk about a few individual stocks and then we'll talk a little bit about the bond market. So let's catch up here this morning, january 21st, the third week of January, and we are here on a Tuesday, as I said, because of the Martin Luther King Day holiday. So let's first take a snapshot what's going on this morning and then we'll get into some of the more thought-provoking aspects of, hopefully, this discussion. But given all that's taken place in the last 24 hours, I think it's important to speak about it and review what's taken place.

Keith Lanton: 2:19

So President Trump now, yesterday in his inaugural address, says the golden age of America begins right now. He wants to be a peacemaker and unifier. He issued an executive order on trade policy saying that the United States trade agreements and sectoral trade agreements, and he recommended revisions. But he did not instill any tariffs on day one. He said he's thinking about tariffs of 25% on Canada and Mexico starting February 1st. So, mark, it's digesting. The fact that he did not impose any tariffs on day one sent the dollar into a volatile session. He also did not mention Bitcoin, which was a big surprise to a lot of participants, and Bitcoin an anticipation of an announcement all the way up to $109,000, all the way down to $104,000. Bitcoin last I looked and it is bouncing around a lot is just under $105,000, up about $750.

Keith Lanton: 3:20

Tiktok, of course. In the news, president Trump issuing an order directing the Attorney General not to take any action to enforce the TikTok ban for a period of 75 days. Tiktok is back online after a breach shutdown on Saturday, although not available in app stores. The app stores are worried about fines if they were to allow TikTok back onto the app stores. It's not clear whether President Trump has the authority to overrule, let's say, an action taken by Congress and the previous President, president Biden, and some concerns that those fines that were part of the previous legislation could still apply, even though President Trump saying that he'd like a 75 day, let's call it moratorium. He'd like a 75-day, let's call it moratorium.

Keith Lanton: 4:04

President Trump revoked the Biden administration's executive order entitled Strengthening American Leadership in Clean Cars and Trucks. He said he's considering a visit to China. Amid tariff threats. Presidents of China, xi and Vladimir Putin of Russia held a video call in which President Putin proposed further developing their strategic partnership.

Keith Lanton: 4:31

Hours after Trump was sworn into the presidency here in the United States, president Trump ordered federal employees to return to offices no more remote work. He withdrew the US from the World Health Organization. He withdrew a Biden administration executive order regarding the safe, secure and trustworthy development and use of artificial intelligence. He declared that any commitments made by the prior administration on behalf of the United States with respect to the global tax deal have no force or effect within the United States. He issued several orders increasing US oil and gas production, approving drilling on federal lands, withdrawing from the Parrot Climate Accord. He issued an order declaring the temporary withdrawal of all areas of the outer continental shelf from offshore wind leasing and a review of the federal government's leasing and permitting practices for wind projects. He also announced the establishment of what some are calling DOGI, the Department of Government Efficiency. Elon Musk will lead this. Vivek Ramaswamy has left to run for governor of Ohio. There are also reports that Vivek Ramaswamy and Elon Musk weren't getting along so swimmingly and that Vivek Ramaswamy had made some comments that President Trump also was not thrilled with, so perhaps that's one of the factors behind that decision.

Keith Lanton: 5:51

President Trump is planning on sweeping a deregulatory agenda coming out over the next few weeks. That's according to the Wall Street Journal. President Trump did launch his own cryptocurrency, which also went on a wild ride, as crypto has had lots of volatility again regarding whether or not President Trump will make some broader announcements regarding crypto. And President Trump planned to and pledged to, send US astronauts to Mars long been a goal of Elon Musk, and perhaps he has had some influence on President-elect Trump.

Keith Lanton: 6:28

President Trump pardoned nearly all the people with criminal charges relating to the January 6th attack on the Capitol. He shut down the CBP1, which is an app used by migrants to cross the border, and asked for asylum. He also moved to end birthright citizenship and mobilize troops to boost the enforcement at our borders. Many are saying it won't be easy to implement these plans, especially with regards to changing birthright citizenship and some of the other immigration policies. Birthright citizenship's already been challenged in several courts, including in New Hampshire. Citizenship's already been challenged in several courts, including in New Hampshire, saying that it violates some tenets of the law and especially the Constitution.

Keith Lanton: 7:16

Now, in reaction to all of these flurry of actions and activity, which was expected on day one, we just didn't know exactly what it would be. Many financial institutions and banks are running what they are calling Trump war rooms as they try to analyze and dissect all of the different announcements that President Trump is making and what impact they will have, both on the banking sector's business, from both a regulatory standpoint as well as a global trade standpoint as well. So lots of institutions still interpreting all this information just like you are trying to figure out what impact it will have both on the near term and the long term. And again going back to the long term, I want to emphasize the importance of sifting through all these different things that seem so important today. Some of them may be, but most of them probably will, in the end, be more noise when it comes to your portfolio not necessarily your lives, but your investments and your portfolio. So what's going on this morning?

Keith Lanton: 8:19

This morning, markets are at the moment moving to the upside. Dow futures are up about 170 points. S&p futures up 22. Nasdaq futures up just over 100. Interestingly, oil is slipping this morning down over $2 a barrel. Bond market also moving this morning. We are seeing oil down almost $2 a barrel, gold down about $12 an ounce. Currency markets are relatively flat, certainly have been on a bumpy ride this morning. Some companies in the news this morning 3M they beat by 2 cents and they announced that their earnings for next year would be in line and their revenues would be in line. Although the market is liking that report, stock's up over 4% or 6 points. On the downside, the biggest loser so far is Apple, which is down about 3 points. Jefferies downgrading Apple to underperform from hold Apple saying that the holiday period iPhone sales in China actually Bloomberg saying this declined 18% this morning.

Keith Lanton: 9:25

We got earnings from Charles Schwab. They beat by 10 cents. They beat by revenues. The stock's up about four and a half points or 6%. We also got earnings from DHI, which is DR Horton. They beat by 26 cents. They reaffirmed guidance. They raised revenue guidance. Stock's up almost six points, almost 4%. Fifth Third Bank missed by three cents but markets are still reacting positively to some of the commentary that stock. Fitb is up about 1%. Moderna, which is a stock that sold off significantly after several earnings warnings this morning rising on reports that they were awarded a contract for $590 million to develop messenger RNA pandemic influenza vaccines. That's an award from the Department of Health and Human Services.

Keith Lanton: 10:13

Overseas markets Asia-Pacific region mixed Shanghai down one-tenth of one percent. Hang Seng up nine-tenths of one percent, japan up slightly. Europe relatively flat this morning. This week is largely going to be dictated on the economic side by a lack of economic reports, just getting a few that typically aren't market moving. Thursday we get initial jobless claims. Friday we get existing home sales. But we do get a slew of earnings. I mentioned Charles Schwab, dr Horton, fifth Third Bank, already out this morning After the close today, netflix, capital One Bank, united Airlines. Tomorrow we get Abbott Labs, procter Gamble, johnson Johnson, ge Renova, which has gone up significantly so far last year and has been relatively volatile like the rest of the market this year. On Thursday, ge Aerospace, american Airlines, texas Instruments, intuitive Surgical and Friday names like Verizon, american Express and NextEra, all reporting earnings, and earnings after all, at the end of the day, are the name of the game. It's the long-term earnings and the long-term revenues and the business strategies that truly affect financial markets and, long-term, affect your investments and stocks.

Keith Lanton: 11:31

And Barron's last week ran a fascinating article discussing returns from stocks and I think this is truly an interesting lesson for all of us, lessons from a century of stock returns. And this is regardless of the administration. This is regardless of if you're in a bull market or bear market. The thesis is stay invested. But, most importantly, this article says to let your winners run, which may be somewhat counterintuitive to some of the thinking about rebalancing, which may be somewhat counterintuitive to some of the thinking about rebalancing making sure your accounts are in a proper alignment.

Keith Lanton: 12:12

So something else to factor into your thinking and to think about is some of this academic study that was done by an Arizona State professor, hendrick Bestminder, and what he says is that just a few stocks, just a few, drive all of the returns of the equity market, while the vast majority of stocks matter little. Now, the issue is that most of the time, we don't know what those stocks are going to be in advance. And even if we are living in the moment and think we know what those stocks are going to be, we think it's going to be Nvidia or Microsoft or Google or Tesla. A lot of times we're wrong and we'll talk about that soft of Google or Tesla. A lot of times we're wrong and we'll talk about that. So this isn't just about the Magnificent Seven stocks which have accounted for the lion's share of equity returns over the last two years, but again, that's two years not 100 years.

Keith Lanton: 12:55

A study of US stock returns over a century finds that the median stock lost money since 1926. Even while a dollar invested across all stocks on average grew from $1 to $229, and that's by the end of 2023. So $1 invested in the market basket of stocks grew to $229, up thousands of percent, but yet the median stock declined. Examining the results from 29,000 stocks going back to December of 2025, this professor Besseminder found that most stocks lost money. A few big winners generated huge returns over time. His research noted that 96% of stocks 96% matched the return of one month treasury bills from 1926 through 2019. So it's not unusual when you're looking at your portfolio that you've got a few stocks that are doing tremendous and a lot of stocks that aren't doing tremendous. That's what history has shown us has been the case for the last 100 years. Looking back at the database, he found most stocks 51.6% more than half lost money. Median negative return over 98 years 7.4%. But the average or mean return across all stocks over that period was 22,840%. So again, $1 grew to $229, owing to the outsized contribution of just a few winners. Owing to the outsized contribution of just a few winners. So over that 98 years, inflation amounted to 1,614%. Market was up 22,000, significant outpace of inflation. Inflation, in case you're curious, ran over that 98 years at an average of 2.94%. So I know the Fed's trying to get inflation down to 2%, but if you look historically, 3% over the last 98 years has been roughly where it is. Interesting takeaway Didn't focus on that in this article so that 98 years included the crash of 29,. The financial crisis in 2008. It included the nifty 50 period in the 1960s, the death of equities in the late 1970s, early 1980s. So we went through all these periods, all these things that were taking place which were truly going to change the markets for good, new paradigm, new shifts and yet at the end of 98 years, all those things turned out to be in the end, at least so far noise. So, while the majority of stocks lost money from 1926 through 2023, 17 stocks returned over 5 million percent. 17 stocks 5 million percent, turning a dollar invested in that group into $50,000.

Keith Lanton: 15:35

Now I said it's not easy to spot these stocks, it's not easy to know what they are in advance and unless you read this article, it'll probably be really hard to come up with what the number one and number two stocks were over this time period. The biggest return came from if you guessed it very good Altria, formerly Philip Morris. Number one returner was Altria, philip Morris, since 1925. That stock turned $1.00. Into $2.65 million. Number two stock, vulcan Materials, turned $1 into $393,000. Altria returned 16.29% over 98 years. So again, the power of compounding 16 plus percent a year over 98 years takes $1 and turns it into $2.65 million, while Vulcan, which sells crushed stone, sand and gravel not very exciting sounding returned 14% a year. So those returns demonstrate that consistent but relatively modest returns from seemingly staid businesses can generate fortunes over decades.

Keith Lanton: 16:45

So of course, if we move to modern times, a lot of the big gains recently have come from the mega tech stocks and they've been tremendous performers and we'll talk about that. But if you go to the modern era and you talk about the stock that's been the best performer over the last, let's say, 40 plus years, it was not a technology stock, it was Home Depot, which grew $1 to $16,627 from its initial public offering on September 22nd 1981. 25.87% annual returns compounded over 42 years. Now, of course, the megatech stocks the jury's still out on them if they are going to be stocks as terrific as the stocks we've just mentioned. Over long periods of time, we've certainly seen a lot of accumulation or growth. Nvidia tops the standings growth of 33.38% from 1999 through 2023. $1,001 over that time period of about 24 years has grown to $1,300. And that doesn't even include NVIDIA's Fantastic 2024. Other world beaters Netflix, which returned 32% a year from 2002 through 2032, followed by Amazon, which returned 31.87% from 1997 through 2023.

Keith Lanton: 18:03

Stocks that generated cumulative returns of more than 5 million percent over 98 years did so with relatively modest average annualized returns of 13.5 percent. So again, power of compounding. A lot of us say to ourselves 13.5 percent, that's good, that's nice, that's certainly solid. I would be very happy with those sort of returns, but you wouldn't have been happy with them last year perhaps if you were an aggressive investor and looking for returns of the S&P 500 of 23%, if that was your goal. So, by contrast, companies with the highest absolute returns, the stocks that tend to be the rocket ships. They tend to fizzle. So if you go back and take a look at the late 1990s, what was one of the highest flying stocks? Well, stocks like Lucent.

Keith Lanton: 18:45

So the lesson from this study would seem to be stay invested in the market. Let the winners run, which results in their having an outsized weight in an unmanaged index. Rebalancing to reduce the winner's outsized presence has been famously likened by the legendary Fidelity Magellan manager, peter Lynch, to pulling out the flowers and watering the weeds. This also means accepting extended periods of lackluster returns, such as the periods following 1929 and 1973. In fact, goldman Sachs is forecasting we might be going into one of those paltry periods, recently saying they expect returns over the next 10 years from equity markets to be 3% no less a long-term bull than Warren Buffett seems to agree. His cash hoard is north of $300 billion.

Keith Lanton: 19:29

But nevertheless, trying to time, trying to be proactive, has proven to be a strategy that is not successful, and so, therefore, sticking with stocks over the long term, that seems to be the answer, and trying to outsmart yourself tends to lead to returns that are below average.

Keith Lanton: 19:50

Just to put things in perspective here, with technology stocks today and I'm making no predictions about technology stocks today they certainly could go on and continue and we could be in a different paradigm than in the past, and certainly with the scale of the internet and the necessity of scale for business, making no predictions, just like this article says just stay invested, don't try and outsmart it. But it is interesting to note that no technology stocks are on the list over the long, long periods of time. And if you go back and take a look at the stocks that you would have thought would have been the leaders today, from the 1960s or the nifty 60s, you would have seen stocks which were called the nifty 50, stocks that were truly revolutionary with all sorts of incredible technologies like Eastman, kodak with pictures and color film, xerox with printers and copiers. Truly revolutionary technologies Polaroid, cray Computer, which was making supercomputers back in the 60s, 70s and 80s, digital Equipment, which was leading the revolution in minicomputers None of those stocks on the list of the great performers.

Keith Lanton: 20:56

If you go back to the period of the 1920s, I know most of us can't think that far back, but in the 1920s, rca, which was a company that had this revolutionary new technology which was taking over the world, called radio, went up 200-fold back in the 1920s. Now RCA is part of NBC, which is part of Peacock and Paramount just a small part of their business today. In the 1920s, the first company to reach $1 billion, we recently had the first company, and now many other companies, to reach $1 trillion. Several years ago that was Apple. In the 1920s, the first company to reach a billion dollars in market capitalization, which was just as headline worthy, was US Steel, and US Steel back then was a $1 billion company. Today US Steel hasa market capitalization of $7 billion. If it had just kept up with inflation, just at that 2.94% compounding, it would be a $19 billion company today, so significantly trailing inflation, even though it was the first company and truly a market leader in the 1920s. And yet $1 billion is not even inflation, $19 billion, not even T-bills, but $7 billion today. So as we think about that, we're going to talk about a few different individual stocks.

Keith Lanton: 22:23

Barron's talking about perhaps one of the next revolutions, and that is potentially a revolution in robots, and Japan is the Silicon Valley of the robot revolution, and the argument could be made that Japan is the leader, because necessity is the mother of invention. Japan's population is shrinking dramatically. They are going to need more and more replacements for humans to do things, and perhaps that's one of the reasons leading to their investment in robotics. Robotics is coming. His company is going to ramp up software tools enabling the jump from today's mechanical line arms to tomorrow's intelligent humanoids. He promised that at the show. Japan has companies like Fanuc, yaskawa Electric and Nachi Fujikoshi. Hopefully I'm pronouncing those close to right. Those companies churn out nearly half of the global supply of robots. Right now. The US barely is in the statistics. The road, though, going forward for robotics is hardly smooth. Industrial robotics right now is growing just about 5% a year, so we're not seeing a tremendous takeoff yet, and the Japanese are not investing in what some are speculating could be the real exciting part of robotics of the future, which are humanoid robotics. In Japan, they think that that's too speculative. And the money for humanoid robots, robots that act and look like people the real investors there are in the US and China. Elon Musk has promised that his anthropic Optimus robot will fundamentally transform civilization whenever it is ready. Some others suggest that things like mobile manipulators, traditional robots mounted on wheels so that they can do things like stalking robots, unload goods in warehouses, as well as robots that can assist patients with walking. Those, potentially, are the robotics of the near future and the humanoid robotics. Some are suggesting it could be further out. Of course we will see, but something worth thinking about is the companies that are investing in robotics. If that revolution is coming, now is the time to become aware of the companies and the products that they're being developed. Do your research now so that, if this day and age does arrive, perhaps you will be ready with your investments. Next up, talking about the future. Next up, talking about the future.

Keith Lanton: 25:12

Nvidia at the Consumer Electronics Show not only talked about robots, but they talked about conquering the personal computer market. This didn't get as much attention if you think about going into the Consumer Electronics Show. There was a lot of speculation driving NVIDIA's stock price about coming out with some new AI data center processors at the Consumer Electronics Show. But this is a consumer electronics show. Nvidia usually comes out with any new chips having to do with their processors at their developers conference, which is in March. But CEO Wang did announce NVIDIA's new line of RTX 50 gaming graphics cards based on the Blackwell chip architecture and perhaps some are saying, most transformatively.

Keith Lanton: 26:00

The NVIDIA announced their first desktop computer, which will be available in May. It will start at $3,000 and will place an AI supercomputer on the desk of every data scientist desk of every data scientist, ai researcher and student that wishes to fork over the $3,000 to engage and help shape the age of AI. Now, these computers will run on Linux and they are more intended for developers and scientists than they are for everyday users, at least for now. But some are saying that digits will turn out to be the most consequential announcement at the CES. Their new computer will use a scaled-down version of NVIDIA's Grace AI server central processing unit. It's packaged in a Mac mini-sized form factor with the help of Taiwan-based MediaTek, which the CEO of NVIDIA Wang commended for its expertise in building low-power chips. Mediatek for those who don't know it is Qualcomm's rival in making mobile processors for smartphones. Over time, the logical move for NVIDIA is to scale down the CPU further for consumer Windows laptops. By integrating its graphics expertise MediaTek's power-saving capabilities, the efficiency of ARM-based GPU technology, power-saving capabilities, the efficiency of ARM-based GPU technology it is possible that NVIDIA could create a processor that offers leading graphics for gaming and high performance for productivity, along with long battery life. Nvidia's top-notch software engineering put it all together and it could be a true competitor to today's PCs. So something to think about if you're thinking about the next iterative step in the PC market. Well, it may be a world where NVIDIA is coming out with their own PCs. We will see.

Keith Lanton: 27:45

All right, let's talk about the markets. Last week, lots of attention got focused on the inflation reports. If you remember, just two weeks ago we had a very hot jobs report, caused the bond market yields to perk up significantly and equity markets to head down. Last week, we got some good inflation reports, numbers that were not as hot as feared, and what we got was we got the producer price index and the consumer price index both coming in relatively in lines PPI, even modestly lower, and that drove markets higher last week. Ironic that President Biden's administration closed out his best week of 2025, the new year with his final week being his best week of this year. So President Biden oversaw a period where economic growth increased at about 15.5 percent, or at about 3.7 percent annually during the Biden administration. Of course, the biggest issue during the Biden administration was the uptick in inflation. That was experienced over that time as well. So, speaking about inflation, looking forward with interest rates, after those more benign reports, markets feeling a little bit better about the interest rate trajectory and what the Federal Reserve might do. But what's interesting is that about 60% probability right now being priced into the market that the Federal Reserve will not cut interest rates in 2025. About a 20% chance that there will be one interest rate cut and there is about a 20% chance some are speculating there'll be an interest rate increase, interestingly, in 2025.

Keith Lanton: 29:39

Okay, a few individual stocks to discuss these. Coming from the Barron's Roundtable, I will mention a couple that I thought were most interesting. Most interesting Number one is Copang. Symbol is C-P-N-G. Copang is a company that is the only e-commerce company in Korea with a fully integrated first-party model. First-party means that they own their inventory, like when you buy at Amazon, and it's something that they have in stock. They also offer third-party owned inventory, like Amazon, where they have sellers on their products, and Mr Ellenbogen, suggesting that Copang CPNG could have business models that are similar to Amazon and MercadoLibre, thinks that they are starting to reach escape velocity or breakout speed, and once that happens, he feels that they have durable and long runway for growth at Copang. Why is that the case? Well, about 70% of the Korean population lives within seven miles of Copang Logistics Center, seoul, which is densely settled here. Company drivers for Copang often visit an apartment building five to six times a day. This allows 99% of orders to be filled same day or next day.

Keith Lanton: 30:57

There is some worry that the Chinese will be entering this market, but Copang's network gives it a service level that no other e-commerce vendor, not even, let's say, amazon, can match. Copang is also entering higher margin businesses after they started with low margin segments like consumables. It's advertising business that's growing. It's expanding its third-party fulfillment service offerings. These factors, along with its loyalty program, are driving customers to spend more on the platform, says Mr Ellenbogen. Growth in all customer cohorts is compounding at double digits. New cohorts are compounding faster than older ones. This has resulted in Copang winning over 50% incremental market share. He goes on to say he believes that Copang could generate $3.3 billion of free cash flow in 2027. He believes that a multiple of 20 to 24 on that would have a stock that's currently trading in 22 double over the next few years. Of course, the stock has been under pressure given the volatility in the Korean political process, but he is confident that that will also settle down as well.

Keith Lanton: 32:04

And I'll share with you one other stock here. This is from John Rogers. This is a consumer goods name JM Smucker symbol, sjm, known for its tagline. It has to be good. Stock's yielding about 4.2%, but that's literally the jelly on top of the bread, so to speak. Smucker, strong, recognizable brand. They make spreadable products in jelly and years ago they bought Jif to bring peanut butter together with the jelly. They also make uncrustable sandwiches. They sell Folgers and Dunkin's coffee and pet products such as Milk, bone and Meow Mix. Recently they acquired Hostess in 2023. Stock's currently trading about $111. He says that's about a 30% discount to what he thinks the private market value is and about 10.5 times the next 12 months earnings, which he thinks that this is priced into the stock. He thinks that the company is going to come out with some new and innovative brand extensions and they will double down on their incrustable brand, which is growing at about 20% a year. They're also paying down debt from their hostess acquisition and they therefore are improving their balance sheet.

Keith Lanton: 33:36

All right, I'm going to finish off with some commentary about investing in bonds. Barron's talking about bond funds and comparing them to stock funds, and those who follow markets know that most stock fund managers struggle to beat the benchmark. In fact, very few of them do. But what many of investors may not know is that most bond managers outperform the benchmark and, despite that fact, more money is piling into passive bond ETFs than going into active bond funds. So some are even calling investing in passive bond funds not the smartest trade you can make relative to picking the right active bond funds. So most years, a vast majority of active fixed income fund managers beat passive indexes. In 2024, last year, 84% of active bond ETFs outperformed their benchmarks listed in their prospectus. On a 10-year basis, 55% of active funds outperformed passive. Over the last five years, 62%. Obviously, we talked about it.

Keith Lanton: 34:46

Opposite happens in the equity world where, over one or 10 years or something in between, whatever the period you're looking at over one or 10 years or something in between, whatever the period you're looking at, you're looking at a success rate somewhere between depending on what study you're looking at 10, 20, or 30% of equity market managers beating the index. So the world of bonds is different. An active manager has far more inefficiencies to exploit in the bond market, as the flow of information is limited and the cost of accessing it can be high. Opportunity comes in many different forms. Keep in mind, stocks are homogeneous. What that means is a share of Apple is a share of Apple, doesn't matter what exchange you buy it on. A bond is a different animal. If you're talking about an Apple bond, well, it may be very different from another Apple bond. It might have a different maturity, it might have a different maturity, it might have a different interest payment, it might have different seniority, it might have different call features. So there's lots of opportunity for experts to swoop in and take advantage of what could be potentially a mispriced asset.

Keith Lanton: 35:47

Lots of confusion, lots of lack of homogeneity. Homogeneous product bond market. Lots of individual, unique products. Also, when you're thinking about bond ETFs and indexes, what are ETF managers need? Well, etf managers need lots of liquidity. And what types of bonds have lots of liquidity? Well, it's the exact opposite of stocks. And stocks what has lots of liquidity?

Keith Lanton: 36:11

Big market capitalization stocks Apple, tesla, google easy to buy and sell. They have lots of shares outstanding, lots of market capitalization. Well, what are the bonds that have big outstanding issues? Lots of liquidity, debt. That's why they have the most bonds. So the fact that they have the most debt, in many cases not all cases, many cases may mean they're the most leveraged.

Keith Lanton: 36:41

So buying the bond ETF that has the most liquidity is, in a sense, buying the companies that have lots of debt, lots of leverage, lots of risk, and therefore it is more counterintuitive to be investing in a bond fund or ETF than it is to go with a professional manager. Of course, circumstances differ. It depends on the product. If you're talking about things like treasury securities and it's a plain vanilla fund, there there's lots of homogeneity, there there's lots of liquidity, and the ETFs there are more akin to the equity market. So you got to really do your homework and know the differences between the different products. But interesting, when you're getting into the bond world and you're looking at products that are not the same, that the managers are, on average, not always adding value. That's everything I've got.

Alan Eppers: 37:24

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

Sophie Cohen: 37:42

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.