Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
Disrupting the Norm: China's AI Breakthrough, US Market Reactions, and Financial Forecasts
January 27, 2025 | Season 7, Episode 4
Is expensive hardware truly essential for cutting-edge AI development, or has a groundbreaking revelation from China's AI sector turned that belief on its head? We unravel the unexpected ascent of DeepSeek and its revolutionary AI model, R1, which is challenging U.S. tech giants by defying the odds and thriving despite export controls. This episode examines the ripple effects on U.S. tech stocks, particularly the "magnificent seven," and questions whether the market's reactions are a fleeting response or herald a more profound shift in the tech landscape. With expert insights from Brad, we ponder the potential for cost reductions in AI development and the readiness of companies to adapt to these rapid advancements.
Current financial trends take center stage as we navigate significant downturns in major indices and commodities, including Bitcoin, oil, and gold. We explore the safe haven that is the Treasury market and its implications for Federal Reserve policies amidst geopolitical tensions. Key updates on AT&T’s earnings and tech stock performances provide a snapshot of the broader market environment, while recent U.S. policy moves regarding immigration and wildfire management policies round out our discussion. The anticipation surrounding the Federal Reserve's upcoming interest rate decision adds another layer of complexity to an already volatile market, offering insights into potential policy shifts.
As we gear up for a bustling week in the financial world, attention shifts to the impending economic data releases and earnings reports from heavyweights like Meta, Microsoft, and Tesla. We delve into the implications of potential Federal Reserve policy shifts and their impact on the bond market, particularly in light of rising yields and inflation concerns. The episode also uncovers the dynamic nature of Bitcoin and the introduction of new Bitcoin ETFs by Calamos. Additionally, insights from Barron's roundtable discussion illuminate OI Glass's strategic developments, while a critical reminder emphasizes the importance of personal risk assessment in investment decisions.
** 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. Today is Monday, january 27th last Monday of the first month of the year already almost one twelfth of the way through 2025. This morning we certainly have a downside volatile start to the Monday morning, as we had some news overnight which we're going to talk a lot about out of China and some of their AI developments, and then we will talk about the Barons over the weekend their take on financial markets, what to look forward to with respect to the two driving forces in financial markets. Number one is the Federal Reserve. Number two is technology and the future path of technology and, to a large extent, the magnificent seven stocks here in the United States and, of course, the backdrop for all that is what's going on with the new administration in Washington in the United States and their policies. Brad's going to join us to give us some insights into fixed income markets. We woke up today to a surprise, I would say, with respect to what's taken place in the markets and the news out of China, and that's rolling right into the bond market. We're seeing a rally in the bond market and Brad's going to give us some more thoughts and insights that he's seeing there. But first I'll start off this morning here, where we're seeing futures significantly to the downside because of a new AI application out of China. And I will point out one of the quotes from former Secretary of Defense Donald Rumsfeld, who said it's not what I fear, it's not what I don't know, it's what I don't know, that I don't know.
Keith Lanton:And here in the US, most major market participants, all of the pundits were super focused on. What they were worried about was the incoming President Trump and his administration. What effect that was going to have on financial markets both stocks, bonds, cryptocurrencies. Effect that was going to have on financial markets both stocks, bonds, cryptocurrencies, currency fluctuations, all those traditional metrics. That was what we were focused on. New administration, both good and bad. But the uncertainty. You could even argue that President Trump himself didn't necessarily know ultimately what policies he was going to implement. So we were worried about the tariffs and deficits and interest rate and taxes and immigration. And could we argue that a lot of that was already priced into the financial markets? A lot of that uncertainty was baked in Didn't mean that if we got some exogenous shock on one of those, that was beyond the norm of the fear gauge, of what the range was of expectations, that it wouldn't move markets, but we were very focused on those factors.
Keith Lanton:And then this morning we woke up to something that was unexpected, came out of left field, and that is the development of a new artificial intelligence technology or development, I guess is a better way of saying it coming out of China, and it's a product, coming out from a company called DeepSeek. And we'll talk a little bit about DeepSeek this morning, because I think it's important for us to understand why we have this and then to move into the markets and then to evaluate whether or not this is a knee-jerk reaction or if something has fundamentally changed and I don't think we have enough information yet to determine that. And yet to determine that, I think what we do have is a knee-jerk reaction out of fear, out of something that we're not pricing in that's suddenly getting priced in, and whether or not the pricing in that's happening at the moment is correct, we won't know that for several months, if not even longer. So what is DeepSeek and why is it rattling tech stocks? Deepseek is a Chinese artificial intelligence company whose models, such as the recently introduced R1 for complex problem solving, have notched high performance ratings. Deepseek app has moved into the number one spot for free downloads. On the iPhone download rankings, it has surpassed the chat GBT this morning as the number one free download.
Keith Lanton:Why are advisors worried about DeepSeq? Well, the conventional thinking was that artificial intelligence companies needed expensive, leading edge computer chips to train the best systems. That justified huge spending by the biggest US tech companies like Microsoft, alphabet, openai which is not publicly traded MetaPlatforms. These companies in the US are known as hyperscalers, but DeepSeek, based in China, did not have that financial power. And yet its models are arguably and we don't have all the data, so I warn to jumping to conclusions but the initial take is that these models are close to the US rivals and DeepSeek says that it has used less advanced chips combined with innovative model training techniques. It's hard for DeepSeek to buy cutting-edge chips because of the export controls that the Biden administration put in place. The Trump administration has certainly indicated they intend to not only hold that but perhaps increase those restrictions. These were intended to hinder Chinese organizations from developing innovative AI for military and industrial purposes.
Keith Lanton:Yet this morning we get this quite impressive, by most accounts, generative AI coming out of DeepSeek. Who is behind DeepSeek? It's a Chinese hedge fund manager, liang Wenfang. His company has a $8 billion hedge fund and he has been developing AI in order to help him and his firm trade better. Now the real question this morning, and this is what the markets are still evaluating, we're seeing NASDAQ futures down right now about 760 points. At one point they were down almost 1,000 points, so perhaps some reassessing already taking place.
Keith Lanton:So how much of a threat is DeepSeek to AI stocks here in the United States? And, as I said before, the jury is still out. Not everyone thinks DeepSeek is upended. The AI infrastructure industry. Well, deepseek may have found a way to cut AI trading costs. Ai demands keep surging. And tech what? Maybe? Artificial intelligence can be done, not quite as expensively as we thought. Maybe the building of these models is not quite as cost prohibitive as we thought. But the users of artificial intelligence if we're driving down those costs, well, the companies that are the adopters and we need to think of who could be the quickest adopter, who could have the most leverage to adoption. That may become the new focus, if, in fact, this paradigm shift is real which we don't know yet where the markets rotate and say what are the companies that are going to be able to use AI now that AI is not quite as expensive as previously thought. It may even change the thinking on Apple Again, all maybes. But Apple, which was perceived as being behind in artificial intelligence, apple which was perceived as perhaps a user of artificial intelligence as opposed to a company that was generating large language models. Perhaps all of a sudden the thought process becomes that Apple being where they were in the AI race is not quite as negative as we thought. In fact, it might even be a positive.
Keith Lanton:So we have this rocking this morning of the financial markets. Give you an idea where the Dow is at the moment. Right now, it's down about 290 points at the moment. Right now, it's down about 290 points. Was down over 400 a little while ago. S&p futures are down about 120. So the emergence of deep sea calls into question the underpinnings of the rally that has added $15 trillion to the value of the Nasdaq since the end of 2022. It is perhaps a jury still out, as I said before, another lesson in the risks of paying high valuations for emerging technologies in the hopes of reaping life-changing investment gains.
Keith Lanton:Deepseek is, at least at the moment, showing it's possible to develop powerful AI models that can cost less. This could potentially derail the investment case for the entire AI supply chain, which is why we're seeing NVIDIA down over 10% least last I looked entire AI supply chain, which is why we're seeing NVIDIA down over 10%. At least last I looked ASML, which makes the chips for NVIDIA also down north of 10%, and therefore the thought process is that perhaps some of the high spending from these hyperscalers may be pared back. Now the damage goes beyond big tech. As often happens in a market frenzy, investors loaded up on risk across the spectrum on the way up, and this morning they are dumping broadly on the way down. Interestingly, bitcoin, which is arguably something that should be a more defensive holding, shouldn't be necessarily affected by what takes place in the AI world is getting whacked as well down about $5,000 a Bitcoin. So Bitcoin once again proving it's more correlated to NASDAQ than something that is a store of value. At least, that's what it's looking like this morning, based on how it's reacting.
Keith Lanton:There's plenty of fuel for this sell-off because of speculative. Bets have been ramped up on crypto, ai, quantum computing, which we've talked about before and more types of aggressive equities and investments have skyrocketed since the US election, as traders, increasingly, have gone all in on disruptive trends. Case in point is the Defiance Quantum ETF, which is an exchange-traded fund which tracks stocks of companies tied to quantum computing. It has amassed more than $250 million this year already. That's more than half of its total inflows in all of last year, when quantum was beginning to become the rage.
Keith Lanton:This week, wall Street is looking forward to the beginning of the Magnificent Seven reporting earnings, and Wall Street is already expecting a slowdown in earnings growth when quarterly results come in this week. Profits for the group are projected to increase 22% the smallest increase since the first quarter of 2023, although 22% doesn't sound all that bad, which is why these stocks traded high multiples to begin with. In a bull market, investors would look, right past that slowdown in revenue growth for the Magnificent Seven, to the promise of bigger payoffs down the road from the enormous sums that are being spent on AI projects. But perhaps maybe market psychology at least for the moment, that's for sure, we can say for the moment has shifted and perhaps there is less tolerance for risk.
Keith Lanton:This morning, speaking about DeepSeek, mark Anderson, the Silicon Valley venture capitalist who has been advising President Trump on X, posted that DeepSeek R1 is one of the most amazing and impressive breakthroughs I have ever seen. Deepseek's technology still trails OpenAI and Google, but it is a close rival, despite using fewer advanced chips and, in some cases, stepping steps that US developers considered essential. And this may be back to Elon Musk and his model for success. Elon Musk is a strong believer in not trying to take things to the 100 percent degree, as you can see from SpaceX and Tesla and what he did with X when he cut the staff significantly. Elon Musk is a believer in trying to achieve great things with less, not striving to be perfect. One of the reasons that he has been successful in challenging Boeing and Lockheed Martin and being able to develop technologies to arguably advance and win in the space races is because he is not seeking 100% perfection on every launch. He's willing to live with the risks of perhaps a launch failing, but learning from that failure and then adding back what's necessary, not necessarily following every protocol, and it could be argued that here, with this new technology from the Chinese, that, because of the restrictions that were put in place here in the US, that they had to innovate in a similar way and do more with less. Deepseek's current iteration is R1, and they are currently launching a new version called V3. Both of these versions have performed better than or close to leading Western models Western models. As of Saturday, the two models were ranked in the top 10 on Chatbot Arena, which is hosted by the University of California at Berkeley. Google Gemini was number one, but DeepSeq was ahead of models, for example, like Anthropix, clawed and Grok, which is Elon Musk's XAI model.
Keith Lanton:At a January 20th meeting, deep Seek's CEO told Chinese Premier Li Guang that while Chinese companies were working to catch up with the US, that American innovating, that the US has the capacity to remain number one and perhaps be justified in the tremendous spending that the major US companies have been investing. Of course, we will see how this all plays out. To give you an idea of what DeepSeek did, they tied together a cluster of 2,000 NVIDIA chips. What DeepSeq did? They tied together a cluster of 2,000 NVIDIA chips, and these are older NVIDIA chips, although certainly not the old chips, but not the latest iteration. But that 2,000 compares with tens of thousands of chips that US firms are using in order to create similar models. So you can see why NVIDIA is selling off this morning If you can accomplish almost as good as what you're accomplishing currently using tens of thousands of chips with 80 or 90 percent fewer chips. Well, that means perhaps you don't have to buy as many chips and therefore NVIDIA's share price becomes something that could come under pressure as a result of the ability to do this.
Keith Lanton:Zach Kass, former executive at OpenAI, said DeepSeek's advances, despite American restrictions, underscore a broader lesson Resource constraints often fuel creativity. This morning, ceo Satya Nadella of Microsoft. He posted about what he called Jevons Paradox, which is that increased technological efficiency leads to lower costs, including a rise in demand and overall greater use of a resource. We talked about that people using it more because it's more cost-effective who are going to be the beneficiaries. Nadella's point is that better AI is ultimately good not only for companies using the technology, but for companies that are developing the technology. So let's take a look here and reiterate and emphasize where we are again this morning.
Keith Lanton:S&p futures right now give you another update down 128. Nasdaq futures down 320. I'm sorry, dow futures down 328. Nasdaq futures a little worse than when we spoke earlier down 764 points below fair value Commodities mentioned. Bitcoin down over $5,000 to about 98,000. Oil down 45 cents to $74 a barrel. Natural gas is down about 6.5% this morning. That's because natural gas is a big input into the energy and infrastructure needed to generate artificial intelligence. If you don't need quite as much energy, perhaps you don't need as much natural gas.
Keith Lanton:Gold down this morning about $18 an ounce about six-tenths of 1%. So gold down six-tenths of 1%. Bitcoin down about 5%. So Bitcoin down almost 10 times as much as gold. If you're sort of comparing them as stores of value to give you an idea of the volatility of each in an environment like we are experiencing this morning, one of the big beneficiaries this morning of this uncertainty and this volatility is the Treasury market. The 10-year Treasury is down about nine basis points to a 453, so certainly a flight to safety taking place. Interestingly, it's not only the long end of the curve but also the short end of the curve. The two-year is down seven basis points to a 420. Curve the two-year is down seven basis points to a 4.20. So markets thinking that perhaps this news could even lead to interest rate change policy by the Federal Reserve.
Keith Lanton:Some companies in the news this morning AT&T came out with earnings. They had some prepaid subscriber growth. They beat by five cents. They did miss on revenues and they guided 2024 below consensus but the stock is up about 2% since the streets really focused on that. Subscriber growth this morning. Also in the news this morning, of course, tons of quantum stocks, ai stocks, chip making stocks, and we talked about that and why they are lower this morning.
Keith Lanton:So, geopolitical news this morning Wall Street Journal reporting that President Trump could impose 25 percent tariffs on Mexico and Canada. On Saturday there was a lot of back and forth between the US and Colombia regarding the acceptance of migrants and President Trump, after the US refused to military aircraft with Colombians on board, said that he was going to immediately impose 25 percent tariffs on Colombia. This morning, white House practice secretary saying that Colombia has agreed to all of President Trump's terms, including the unrestricted acceptance of illegal aliens from Colombia. Tariffs will be held in reserve but not signed is the latest there. New York Times reporting that Israel and Hamas are accusing each other of violating ceasefire terms. The Hill reporting the Senate will vote on the confirmation of Treasury Secretary Scott Bennett tonight. Over the weekend the Senate confirmed Pete Hegeseth for Secretary of Defense, who is promising to upend traditional practices at the Pentagon. New York Times reporting that President Trump and California Governor Newsom are promising to work together on wildfires. Washington Post reporting that the Trump administration is increasing arrests of undocumented immigrants to 1,200 to 1,500 per day.
Keith Lanton:And the Wall Street Journal talking about banks wanting to sell the ex, or formerly Twitter loans that they took on their books when Elon Musk bought out Twitter and the loans to back that buyout. They are looking to offload them for 90 to 95 cents on the dollar. So willing to take a haircut to take some of that risk off of their books? All right, big event this week is what's going to take place on Wednesday. Federal Reserve is slated to come out with their decision on interest rates at the FOMC's January meeting. President Trump recently weighed in and suggested that the Federal Reserve basically lower interest rates. Widely expected, the Fed will hold rates unchanged, but what they say will get lots of attention.
Keith Lanton:Today at 10 o'clock we have new home sales. This is a huge week for earnings. Wednesday we get earnings from Meta, microsoft and Tesla. After the bell In the morning on Wednesday, earnings from ASML and T-Mobile. Thursday we get initial jobless claims, gross domestic price index, pending home sales. Lots more earnings on Thursday as well. The big names Apple, intel and Visa after the bell on Thursday. Friday we get personal spending and income data. Also earnings from companies like Colgate, palmolive, exxonmobil, eaton, chevron. So busy week for earnings, busy week digesting what the Federal Reserve has to tell us.
Keith Lanton:And although the eyes have fallen off of the bond market for the moment, it is going to continue to be an area of tremendous focus because the deficit and the cost of financing the deficit, so critically important to the future economic health in the United States, in the bond market, in Donald Trump's first week at least, the new incoming administration turned out to be far less destabilizing than feared Traders hope. The same goes for the latest shift from the Fed. If the central bank holds rates steady on Wednesday, it would mark the first pause in the rate-cutting cycle since it started cutting rates in September. But yields have already jumped sharply since late last year as traders aggressively reset expectations for monetary policy. On speculation that Trump's policies will fan inflation pressures pour fuel on a strong economy that may prime the market for more relief. Powell underscores his typical data-dependent approach and leaves the market's now modest rate cut expectations intact.
Keith Lanton:Now I talked a little bit about Bitcoin this morning and Bitcoin falling about $5,000. And Bitcoin is certainly an extremely volatile asset, not appropriate for every investor in their portfolio, but we'll talk about a couple of Bitcoin ETFs that were launched in the last few weeks, these coming from Calamos and these new ETFs offer participation in the upside. Etfs offer participation in the upside and what they do is they can eliminate the downside or limit the downside, depending upon how much upside you are willing to give up. This is all possible because the way these products work is what Calamos does, is they take in investors' funds let's call it 100 cents on the dollar and what they do is they allocate a portion of those funds to call options on Bitcoin. These are one-year products and because A interest rates are a lot higher than they were, they can earn the interest rate over the next one year a little north of 4% on the portion of the portfolio that is invested in the treasury one-year treasury bill. And then what they can do is take the remainder and invest it in call options on Bitcoin.
Keith Lanton:And as a result of this, calamos has come out with three ETFs. One the symbol is CBOJ Charlie Boy, oscar James. This ETF will over the course of one year. If you hold it for the year, if you sell it before, then it will not do this, but what it will do is if you hold it for the term and buy it at the beginning. If you buy it after the beginning, it won't necessarily work like this, but what it will do is it will provide 100% downside protection in Bitcoin over the course of the year. Provide 100% downside protection in Bitcoin over the course of the year and your upside if there is upside would be capped somewhere between 10 and 11.5%. So you invest, day one, 100 cents on the dollar. At the end, if Bitcoin is down, you get back 100 cents on the dollar. Obviously, you lose out on the interest you might have earned had you invested that money in treasury bills or something else, but in return, if Bitcoin is up 20%, 30% or 10% to 11.5%, you will earn that cap of somewhere between 10% and 11.5%.
Keith Lanton:If you've got a slightly greater risk appetite, you might prefer Charlie Boy X-Ray, jack CBXJ. What this product will do is, instead of promising your money back, it will promise you back 90% of your initial investment. So if you invest 10,000, bitcoin's down 10% or more, you'll get back $9,000. Bitcoin's down 5%, you'll get back $9,500. Well, no, if Bitcoin's down, if you have 90% downside protection. So the first 10% is protected. So if Bitcoin is down 10%, you would receive your money back. Anything more than that, you would participate in the downside. But the cap here is 28 to 31% and if you're willing to accept 20% downside risk, then you are looking at the upside of 50% to 55%. So you participate in the first 20% of downside, to be clear, and after that your downside is protected. In return you get 50% to 55% upside. If Bitcoin were to appreciate that much, if it were to only appreciate 20%, you'd be capped at 20%.
Keith Lanton:Let's move on to Barron's. Talk about a few different ideas out of Barron's. Barron's had their roundtable discussion. I will talk about one stock here. There were many mentioned, but one that I thought was most interesting, and it is a boring old school industrial stock. It's called OI Glass. The symbol is OI. The stock right now trades a little over $11 a share.
Keith Lanton:This company was formerly called Owens Illinois. They make glass bottles and containers for beer, wine, hard liquor and non-alcoholic beverages. Old school boring business has plants in the US. Old school boring business has plants in the US and Europe, as well as South America. They have about 154 million shares outstanding, a market cap just over $1.6 billion. They do have a lot of debt $4.8 billion. So she said it is basically a public company. Leveraged buyout.
Keith Lanton:Owens Illinois, she says, became investable when the company obtained freedom from its asbestos liability a few years ago. Legacy Business had the asbestos liability that they were able to negotiate terms for and no longer responsible for, she says. And she said they became even more interested when Gordon Hardy became CEO in 2024, may of 24. He had been a board member since 2015,. Previously been a successful executive at Bungie, another publicly traded company. He has targeted $300 to $500 million of growth and earnings before interest, taxes, depreciation and amortization by 2027. His plan is to Close redundant capacity, transfer the profitable volume into the remaining network, remove layers of management and give more power to local management. He has set a goal of $1.5 million of earnings before interest, taxes, depreciation and amortization in 2027. She puts a little discount on that. To look at the scenario, not quite as rosy. She said, let's assume he accomplishes $1.375 billion of EBITDA by 2027 instead of $1.5 and uses cash flow to pay down debt, which is what he said he's going to do. And in that scenario, she said, owens Illinois, now known as OI, could earn $3.15 a share in 2027, and that could grow to $3.70 in 2013. And therefore she sees the potential for the stock to triple in the next couple of years. Symbol there could stage a comeback.
Keith Lanton:And they talked about some that they thought looked more attractive than others, so saying that the Real Estate Investment Trust may just be getting ready to rally. The sector may have bottomed Valuations, they say seem reasonable. Valley the sector may have bottomed Valuations, they say seem reasonable. And if long-term bond yields continue to hold steady or decline as inflation worries subside, real estate stocks may regain their appeal as bond proxies thanks to their generous dividends.
Keith Lanton:Speaking about some specific companies, they highlighted Morningstar Analysts, who recently identified American Tower, amt, which has a dividend yield of 7%. Same analysts also mentioned AmeriCold, which is a recent IPO. Americold yields about 4% and AmeriCold is a leader in cold storage warehouses for perishables, pharmaceuticals and chemicals. Crown Castle, the analyst noted, should benefit from more spending by big carriers like Verizon and AT&T. Crown Castle is a real estate holder of many of those big cell towers, you see, and very reliant on the major wireless carriers for their revenue. What's taking place is that consumers' mobile data consumption is expanding rapidly and therefore new towers will need to be added and new infrastructure will continue to need to be upgraded, and that American Tower will benefit by being able to pass on some of those costs, plus profit margin when they are working with their telecommunications customers.
Keith Lanton:As for AmeriCold, analysts at Morningstar are saying they stand to gain as food manufacturers continue to ramp up production and supply chain issues and labor shortages start to die down. They do warn that investors should tread cautiously in other parts of the real estate sector. Investors should tread cautiously in other parts of the real estate sector, especially office REITs, as many individuals have not come back full time to the office and companies have dialed back their expectations on exactly how much commercial real estate they in fact need. Also, treasury yields will certainly be a driving force behind the Real Estate Investment Trust's performance, so if inflation fears reignite, it's possible that we could see a pause in the rally in Real Estate Investment Trust stocks. The good news is that a lot of worries are already priced into the stocks. Reits are trading at around 18 times earnings for 2025, below the historical average, and they're also trading at a discount to the S&P 500's 22 times earnings, when they typically trade in line with the S&P 500.
Keith Lanton:Before I turn it over to Brad, I'll just share one interesting statistic with you regarding long-term treasuries posted a negative return minus one half of 1% for the last 10 years. That is for the first time since the 1930s when long-term Treasuries over a 10-year period have had a negative return In comparison, over the last 10 years, us stocks have returned about 13% on average per year and short-term Treasury bills have returned about 1.8% over that same time period. With that, I will turn things over to Brad to give us some more thoughts and insights into markets. Good morning, brad.
Brad Harris:Good morning Keith. Good morning. I hope everyone had a great weekend. The bond market stabilized this past week, with the 10-year coming off a high yield of almost 4.8 percent a couple of weeks ago and ending this past week close to the 4.6 level. There is no question that the stop to the freefall of bond prices and rising yields calm the other markets. As everything seemed to stabilize and calm down this morning, bonds are doing what they're supposed to. They're supposed to give you some protection when the bleep is hitting the fan everywhere else, and it actually as a bond person. It's comforting to see that bonds are doing what they're supposed to do. This morning. There is also no question, at least from my seat retail buyers have not been breaking down any doors to buy bonds here either.
Brad Harris:President Trump is going to keep us and the markets on their toes this year and truly anything can happen. I've never seen a bomb market with this less conviction, not necessarily that rates are going up or down from here, but mostly, in my opinion, a lot of guesswork. On one hand, we have all the inflationary potential of these potential Trump policies being enacted. On the other hand, with Republicans controlling DC, maybe it's now time that the deficit hawks truly come in and cut spending, who knows? So what does one do? I'm doing a few things. One, as I've mentioned many times, I'm going to be proactive this year about look for tax loss swaps and bonds, especially municipals. I think there's going to be so this year.
Brad Harris:About look for tax loss swaps and bonds, especially municipals. I think there's going to be so much volatility that's important to keep current. Also, you create those losses so that if you wind up wanting to take gains on something later in the year, the losses are already in place to offset those gains without having to scramble to see if you can make losses appear out of nowhere On these swaps. Additionally, maybe you improve your coupon income, call protection or credit quality. My opinion is pay up a little bit to do that and don't extend maturity until you think that we've hit rock bottom or absolute high in yields. If you don't use the loss this year, you can always carry them forward.
Brad Harris:Last, I'm still keeping some money in treasury bills and money markets just in case there's an absolute bond or stock market correction, like we're having a mini one this morning and those will be the funds that will be easy to deploy if something crazy happens and you want to get money to work quick, because we are getting at or near 4% on that money, that's a win. This year will be volatile and interesting. We need to remember that we are in the business of investing. Because of this, we need to pay attention to politics, but do not let personal political opinions get in the way of trying to make the best possible decisions for your portfolio. If the president says jump, your response should be how high, at least for now? With that, I wish everyone a great week and I'll hand it back to Keith. Thanks.
Keith Lanton:Thank you, Brad.
Keith Lanton:That's everything I've got.
Alan Epperss:Thank you for listening to Mr Keith Lanton. This podcast is available on most platforms, including Apple Podcasts, Spotify and Pandora. For more information, please visit our website at www. heraldlantern. com.
Sophie Cohen: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.