Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
The Fed's Dilemma: Walking the Tightrope Between Fiscal and Monetary Policy
March 17, 2025 | Season 7 | Episode 10
Markets are navigating turbulent waters as we digest the first 50 days of the Trump administration's second term. The striking contrast between equity volatility and bond market stability raises profound questions about where we're truly headed. While the S&P 500 and tech darlings experience significant drawdowns, the 10-year Treasury yield holds remarkably steady around 4.3% - suggesting that bond investors aren't forecasting economic catastrophe despite the headlines.
What makes this moment particularly fascinating is the extreme bearish sentiment gripping individual investors. A stunning 60% of respondents in the latest AAII survey report feeling bearish - approaching levels not seen since the 2008 financial crisis. Historically, such pessimism has preceded average market gains of 13.6% over the following year, potentially signaling a contrarian buying opportunity for those willing to look beyond the turbulence.
The administration's focus on government reform follows a historical pattern seen throughout American history - from Jefferson's "wise and frugal government" to Reagan's declaration that "government is the problem." While the scale may differ, these efforts to reshape the federal workforce echo similar initiatives from previous administrations, with mixed results historically.
For investors seeking opportunity amid uncertainty, the Magnificent Seven stocks present an intriguing case study. After contributing over half of 2023's market gains, they've declined an average of 15% this year. Yet unlike the fallen tech stars of 2000, these companies maintain dominant market positions with reasonable valuations - particularly Amazon, Alphabet, Meta, and Nvidia according to our analysis. With Amazon trading at a lower multiple than traditional retailers despite superior growth prospects, selective opportunities may exist for patient investors.
As we navigate this complex environment, remember that investment decisions should be based on economic fundamentals rather than political preferences. The Federal Reserve's upcoming policy announcement will provide crucial insights into how monetary policy will adapt to evolving conditions. What's your strategy for positioning portfolios in this challenging but potentially rewarding landscape?
** 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. Happy St Patrick's Day to all those who are celebrating today. It's March 17th, a little past halfway through the month of March, got through the Ides of March on March 15th. There's always a lot to talk about and we've got full discussion this morning here as we move past 50 days of President Trump's time in office and lots of executive actions already taken. Many more to talk about and try and decipher is how much of the market movement to the downside in the last several weeks could be attributed to some of the uncertainty surrounding tariffs and trade and changes on policy that have gone back and forth. Versus how much is these downtrends based on a market that, coming into the new year, was built on lots of optimism? We'll talk about that optimism, perhaps too much optimism, which is a contrarian indicator. At the same time, we had financial markets speaking specifically about equity markets at levels that are certainly very high by historical standards. So is this sell-off that we are experiencing something that is natural, that is organic, or is this something that is more self-inflicted? And while we won't come up with the answers to those questions today, we will certainly address them and give each of us, hopefully, some food for thought as we think about how to position our portfolios going forward. What is the right mix for each of us individually, given our risk tolerance, given our comfort level? This is a moving target. Things change day to day. Our lives change day to day. We are seeing changes in the job market. We're going to talk about that. The job market is softening.
Keith Lanton:Wall Street Journal today had an article talking about the fact that those who are leaving jobs are not seeing wage gains like they used to. In fact, those who are leaving jobs versus those who are staying in jobs are seeing very similar pay gains. For the last several years it's been positive in terms of the delta, the spread between what you could earn if you were to leave your job versus stay at your job. That's no longer the case. The quit rate is down significantly as people feel a lot less confident about their jobs. Certainly, we see the DOGE Department of Government Efficiency laying off government workers, and the concern is that, as these government workers either retire on their own or are, in other instances, being forced into retirement until they can find a new job, hopefully in the private sector, what's the knock-on effect of that? What does that mean for others in the job force who perhaps support these folks. Some have speculated that for every job lost in the government it might be another job lost in the private sector, speculated that for every job lost in the government it might be another job lost in the private sector. We'll see this. Data will come in, but this is certainly leading to nervousness and you're seeing companies getting a little bit more comfortable about laying off workers in the post-COVID world, which is something that has the knock-on effect of perhaps less wage growth and less inflation. Fed's going to have to navigate this very challenging dynamic between what's taken place with fiscal policy and what they should do with monetary policy in a time period of data that is greatly in flux, and the Fed is going to meet this week and come out with some proclamations, so those will be carefully watched as well. This morning we've already gotten some economic data. We'll see what the effects of this are.
Keith Lanton:First off, we got retail sales. Those came in below expectations. Retail sales up two-tenths of one percent. Expectations were for them to be up about six-tenths of one percent Prior month. Revised lower as well. So not voting well for the US consumer, at least based on those metrics. We'll see what effect that has on both the stock and bond market. And February retail sales, ex-auto, were down three-tenths of one percent. The expectation was for that to be up four, not down. That was up three-tenths of a percent, not negative. Positive Expectation was for up four-tenths of one percent, so slightly weaker when you take the autos out of the equation. Also, we got the March Empire State Manufacturing Index. We were looking for that number to come in at 2.0. It came in at minus 20, so that number is typically not supermarket moving but indicative of some weakness as well.
Keith Lanton:This morning. This morning we're fortunate that today we're going to have Brad back on to give us his thoughts and insights into the bond market. We're going to talk about the bond market as well this morning as it relates to the equity markets and as we think about the risk-return ratio in terms of how much to invest in equities at this point in time, how much to invest in fixed income and, of course, to think about international and commodities which have been quietly moving higher. So I'm going to start out talking about what's taken place with the federal government, and one of the initiatives, outside of tariffs, is cutting the size of government. Outside of tariffs is cutting the size of government and while for those of us who are younger perhaps let's say you know, 45 or younger may not have really experienced the period where there was an administration coming in with the thought process of reducing the size of government. But this is not something that hasn't happened before in American history. Something that hasn't happened before in American history If you go all the way back to the 1820s, when Andrew Jackson came into office.
Keith Lanton:He had a phrase that was called sweep the Orgean stable, and what this referred to was King Organs had stables. This goes back to Greek mythology and one of Hercules' five of his 12 labors this was the fifth of his 12 labors. This referenced the Herculean task of cleaning out the stables, and Andrew Jackson paraphrased that and used it as a metaphor to clean out the government when he said to sweep the Augean stable. Perhaps similar to President Trump, his phrase is, or at least was, to drain the swamp. If you go back to more recent history, bill Clinton in the early 1990s he ran on a platform of ending the era of big government. So cleanups are not something that are typically seen in most elections, but not something you don't see every 30 or 40 years, and it's something we're seeing now. The effort we're seeing now is perhaps grander in scale than some of the others in terms of its intentions, and we will see what success the Trump administration has in terms of their efforts to reduce the size of government.
Keith Lanton:Many are suggesting that this effort is perhaps more partisan than usual and therefore it's less fair. But if you go back to some of these cleanups, there was a partisan element to them as well. In fact, if you go back to the founding of our country, thomas Jefferson, when he was elected the third president of this country, he had a belief in smaller government. He had a vision of a wise and frugal government is how he phrased it when he became into office in 1800. And this contrasted with Alexander Hamilton's belief in a strong, activist central power, which was embraced by George Washington and John Adams, who preceded President Jefferson.
Keith Lanton:So when elected the nation's third president in 1800, jefferson moved quickly to tear down the growing government edifice built by those who were known as Federalists at the time. He even bragged that his axe-wielding led to another cherished goal. He even bragged that his axe-wielding led to another cherished goal the suppression, he said, of unnecessary offices, of useless establishments and expenses. This is something that may ring or perhaps your ears may be ringing or you may be hearing some sort of rhyme to what we're hearing today from the current administration calling these useless establishments and expenses. In fact, jefferson was able to discontinue taxes after he reduced the size of government, perhaps something that the current administration certainly may dream of as well as many. On this call, jefferson ended the Haiti whiskey tax and other levies, and this enabled him to dismantle the tax-collecting structure.
Keith Lanton:So certainly, a history of reformation and change certainly is something that has taken place before. When Andrew Jackson moving now forward to the 1820s, when he came into power, he said that he has been selected by the people as the agent of reformation, similar to President Trump. Perhaps that he, meaning Andrew Jackson, will reward his friends and punish his enemies. And punish Jackson did replacing as much as 10% of the federal workforce with partisans in his first year alone. And back then, senator William Marcy, a Democrat from New York, said to Congress in 1832 that to the victor belongs the spoils of the enemy, and this is something that became known as the spoil system. When new administrations came into power, they brought with them folks who were loyal to them, moving forward in history to 1950s.
Keith Lanton:In the 1950s we had what some would say is perhaps one of our darkest periods of partisanship, and that was an era which is now known as McCarthyism. Senator McCarthy at that time was saying that the communists were infesting the State Department, and McCarthy initiated actions to rid the government of communists. And in the 1950s there were over 2,000 government employees who lost their jobs as a result of them being deemed communists or folks who were not loyal to the US system and the US government. This resulted in pushback. And in the 1970s we got the Civil Service Reform Act which strengthened protections for federal workers against political interference, but it did not necessarily improve what the public thought of the bureaucracy. And just following that, in the early 1980s, then-president Ronald Reagan said in his 1981 inaugural address government is not the solution to our problem, government is the problem. Now President Reagan was advocating for reducing the size of the federal government, but he was not successful in reducing the federal workforce. It actually increased 3% while he was president.
Keith Lanton:I started the conversation by talking about President Clinton and his desire to reduce the size of government. President Clinton had what could be argued modest success. He decreased the size of government by 2% of the federal workforce. Put it in perspective what did the federal workforce look like now, with President Trump coming into office? Well, it's about the same size as it was when President Nixon came into power in the early 1970s. So, if history is any guide, so far presidents have had limited success in the modern era in reducing the size of government, really since Thomas Jefferson was successful in the early 1800s, and we will see what success President Trump and his assistant, elon Musk, have in this era of reducing government and what that'll mean for financial markets, as well as the allocation that we should have in our portfolios. All right, so let's talk about markets, portfolios, and let's move on to where we are, at least as of the end of last week.
Keith Lanton:Barron's, in the trader column last week, suggested that Friday when markets bounced Dow up over 600 points on Friday, said that Friday might have represented a turning point, at least in the sense of markets taking a breather at least and perhaps getting some legs under them. Not necessarily a market that's going to take off, but perhaps it could be a signal that perhaps the selling is overdone. We'll see. But last week, even after the bounce on Friday, the S&P 500 was down 2.5%, nasdaq down 2.9%, dow down 3.4% Earlier in the week. Even good news was not enough to lift the markets. We got a very positive Consumer Price Index report showing that CPI, or the rate of inflation, didn't come in as strongly as expected, meaning that prices weren't moving up as much as feared and that was on Wednesday. But that was still not enough to get the markets back to feeling comfortable and getting some legs under the overall equity markets.
Keith Lanton:At first the market reacted positively. We saw a little bit of an uptick, but then a wave of selling emerged and stocks finished on Wednesday in the red. The narrative at that point was that the tariffs that President Trump was talking about imposing and in fact had imposed, taken some on, some off, but nevertheless some on. The concern was that the Consumer Price index was the rear view mirror and looking forward that tariffs could be inflationary and the markets were not comfortably yet embracing the good news about lower inflation. But perhaps the good news is rooted in the bad news, and the bad news is that investors, based on the American Association of Individual Investors, had turned extremely bearish by the end of last week. 60% of respondents said that they were bearish, which is one of the most pessimistic results in the history of the gathering of this data. It's just 10 points below the record high of about 70% of bearish respondents in the 2008-2009 financial crisis, and this is somewhat of a contrarian not only somewhat. This is a contrarian indicator. Unless the global economy is in for a rare disaster, the market can't get much more pessimistic. History suggests as much.
Keith Lanton:The S&P 500 has traditionally gone on to gain 13.6% over the following 12 months after a reading as low as it is now. Now, in a market as volatile as this one, we could certainly still dip lower. If you're looking for technical indicators, you're looking for support levels. Keith Lerner, chief market strategist at Truist, said the S&P 500 could drop to roughly 5,400, which is a major support level. The S&P 500 right now is about 5,680. So, if you're looking at it, that's only about 4.5% 5% below the current level. So, albeit, there is still some downside to a strong support level. We've already gone down significantly in approaching that level. So perhaps, at least in the near term, closer to a level of stabilization than we are to a more precipitous drop in the near term.
Keith Lanton:What should investors be doing now? Precipitous drop in the near term. What should investors be doing now. Well, perhaps keeping some powder dry in case the selling accelerates, while at the same time perhaps putting some funds to work. We'll talk about where to possibly put funds to work if you're thinking about putting your toes back into the water in this market.
Keith Lanton:Now, speaking about this market, brad's going to talk more about the bond market, but one interesting development is that, as the equity market has been selling off the last few weeks, the bond market has actually been a picture of relative calm. We've been looking at a 30-year treasury which certainly came down about 50 basis points from about a 475, 480 to 430. But in the last couple of weeks all this tariff on, tariff off discussion has been taking place, all the geopolitical events taking place between the US and Russia and Ukraine and Canada and Europe and Mexico, the 10-year Treasury has been holding roughly in at a 4.3. So this may give you some pause to suggest that the bond market is not experiencing the panic or the uncertainty, perhaps, that the stock market is expressing, and some suggest that the bond market is the market that has their PhD in economics. So perhaps it's the bond market that's telling us that perhaps some of this overwrought fear is overdone and the bond market is basically telling us, at least at the moment, that the bond market is saying, hey, we think that perhaps things are slowing down. We saw the 10-year Treasury come down from a 4.75 to about a 4.30. But we do not see US economy at the moment going into recession because we are seeing levels stable. We're seeing things calm. We're not seeing volatile trading. Perhaps the bond market's telling us that things will be slower, which is what we're hearing from some of the chief economists at Goldman Sachs, morgan Stanley, truist all suggesting things will be slower but not necessarily that we will be heading into a recession. So, moving on to the news of this morning, we are looking right now, markets recovering off the worst levels of the morning Looks like.
Keith Lanton:At the moment the S&P is almost flat. It's down about one point. Now it's plus about a quarter of a point. So S&P basically unchanged. Dow pretty close to unchanged, down about 85 points. Nasdaq up about 30 points. This is on the heels of that retail sales report, sales report Also seeing that 10-year Treasury yielding about 4.32%. That's up about 1.5 basis points from where we were on Friday. So a slight uptick in the yield on the 10-year Treasury, two-year holding in at around 4.02%.
Keith Lanton:We are seeing continued strength in commodities, continued strength in commodities, especially the metals. Gold now solidly above $3,000 an ounce at $3,009, up $8 an ounce Gold. I wouldn't say it's quietly moving higher, but steadily moving higher. Natural gas also has been moving up fairly strongly. Natural gas is up 10 cents over 2% today to 4.20. Silver relatively unchanged but silver is all the way up to $34 an ounce. Copper is also continuing to march higher up to almost $5 for copper.
Keith Lanton:And oil up this morning about 90 cents, 86 cents right now at $68.04 a barrel for oil. And this is on some concerns about the oil supply, with the action against the Houthis over the weekend in the Middle East by the United States, as well as some pro-growth policies coming out of China, some suggesting that the market put, maybe on the Chinese market, that President Xi may be the one putting a put below the Chinese market. Here we were expecting a Trump put and perhaps now we're getting a Xi put in the Chinese markets and confidence returning to the Chinese markets where it was very much lacking just a few months ago Over the weekend, giving the markets perhaps some pause. Going into today were comments by Treasury Secretary Scott Besant saying that he is not worried about the stock market and reiterating there are no guarantees that a recession will be avoided. Some are suggesting that the Trump administration perhaps has a thought process, maybe you could even say a plan that's different than the first go-around in the Trump administration where they were very anxious to get the economy very strong going out of the gate and then things kind of petered out. Perhaps this Trump administration is more comfortable with some weakness in the beginning and perhaps two years out, when we've got midterm elections, they'd like to see some of the strength. At that point they have to take in some of the medicine currently. We will see if in fact that is a strategy and if in fact it is a strategy if it is successful. But some suggesting the old playbook may not be the new playbook.
Keith Lanton:So news out of China better than expected growth figures for January and February, although home prices remain weak, giving some strength to the markets overseas. The China State Council announced a special action plan aimed at increasing domestic demand Markets in Asia pretty much up across the board. Japan up almost 1 percent. Hong Kong almost 1 percent. The Shanghai up two-tenths. Much up across the board. Japan up almost 1%. Hong Kong almost 1%. Shanghai up two-tenths, india up half a percent, south Korea up 1.7%, australia up 1%. If you're looking at the European markets, they also started on a higher note. In the Cs they're up anywhere between one-tenth and one-half of one percent.
Keith Lanton:Some other news over the weekend Trump saying that he will speak with Russian President Vladimir Putin tomorrow as the US presses for an end to fighting in Ukraine and European nations are rushing to bolster their support for Kiev. The Economic Development Conference saying that President Trump's aggressive trade policies have set the world onto a path of slower growth and perhaps more inflation than markets were previously anticipating. President Xi also saying that he is going to meet with global CEOs. Washington Post reporting that foreigners are canceling their plans to travel here into the United States. And what else do we have to look forward to this week? We already talked about today's data retail sales. On Wednesday, we mentioned the Federal Open Market Committee announcing their monetary policy decision, widely expected to keep rates unchanged. Markets will be carefully watching the release of the Summary of Economic Projections, which is the projections of the Fed governors of what they expect interest rates to be in the future. Thursday, we get earnings from Federal Express, micron Technology and Nike. We also get the National Association of Realtors reporting existing home sales for February, looking for an annual adjusted rate of 3.9 million homes. That would be down 200,000 from January and therefore existing home sales would be sitting near 15-year lows.
Keith Lanton:I'm talking about trade. Some interesting statistics. If you're looking at arms exports, looking at arms exports, us market share of global arms exports are about 43%. That's up 23% of that's up from 23% five years ago. So one big export industry we've got here is arm shipments. Some other interesting statistics here this morning If you're looking at the amount of shipbuilding, which is something that the Trump administration has been talking about, that the US is a negligible player. But to put in perspective how negligible we are, the Chinese last year built 33 million gross tons of ships in 2023, which is about half of global production. So the Chinese were 50 percent. Our share US share of building ships 0.1 percent. Also talk about bringing back fossil fuels, but of note and we talked a little bit about this last week is that solar power in 2024 represented 66 percent of all new US power installed in the United States 66% two-thirds was solar.
Keith Lanton:All right, before I turn things over to Brad and talk about some individual stocks and perhaps some of you who are listening out there, some of your favorite stocks. The Magnificent Seven Barron's front page story talked about the Magnificent Seven. Barron's front page story talked about the Magnificent Seven. They have sold off significantly and they talk about four of the Magnificent Seven that they think are worth considering, either adding to your portfolio or building on within your existing portfolio. So Magnificent 7, again are Apple, microsoft, nvidia, amazon, alphabet, meta and Tesla. Those stocks contributed more than half of the S&P 500's gain of 23% last year. They rose an average of 60% in 2024. These stocks are down an average of 15% so far this year and they make up 90% of the S&P 500's decline in 2025.
Keith Lanton:But Barron says don't write off these markets' former leaders, just yet. While their declines may conjure up bad memories, for those old enough to remember, of the tech bubbles former giants Cisco Systems, worldcom and AOL for those remembering all the way back to 2000 and some of the leading stocks there that got decimated, barron suggesting the Magnificent Seven at least most of them aren't destined to fail or fade into insignificance. They remain too dominant, accounting for a third of the current market value of the S&P 500, and they say they are too reasonably priced, with six of the seven trading between 18 and 30 times 2025 earnings. One outlier is Tesla at 85 times earnings, and Barron's not very positive on Tesla I don't know if we'll have time to get into that, but expressing the greatest concern for Tesla. But this group the MAG-7, trades at their lowest valuation premium relative to the S&P 500 since 2017. That's according to Goldman strategist David Koston, and that's despite consensus earnings expectations that the group will collectively continue to grow earnings at a faster rate than the S&P 493. So it's this earnings growth, not bubbly sentiment, that will potentially drive this group's outperformance going forward. If you look at earnings, nvidia's earnings are up tenfold since 2018, amazon's earnings up fivefold and Alphabet's fourfold since 2018.
Keith Lanton:Of course, there are risks. Nothing is a foregone conclusion. All seven of these stocks are exposed to a slowing economy, all exposed to a trade war which could ding profits. They are also a slowing economy, all exposed to a trade war which could ding profits. They are also a huge company, so size certainly could potentially be an impediment to their growth, although they do serve a large, addressable market. And investors are certainly concerned about all the spending going on with artificial intelligence and therefore producing less free cash flow than had been anticipated previously. Therefore, they say, because of these concerns, it pays to be choosy. And what do they say? The most attractive of the Mag 7? Well, alphabet, amazon, meta and Nvidia, they say Apple and Microsoft, not quite as tempting.
Keith Lanton:Tesla special case deserves its own treatment, I would say, most bearish. When it comes to Tesla, what do they like the most? Well, they say that Amazon may be the best of the bunch. It's now trading at around 25 times 2026 earnings, and that includes earnings even including stock-based compensation. They recently launched an enhanced version of Alexa, their digital assistant, and they are in the process of launching a satellite internet service similar to Elon Musk's Starlink, called Project Cuper, which is due out by the end of the year. And it's important to note that Cuper is part of Amazon Starlink, part of SpaceX, not part of Tesla. Amazon also investing heavily in reaping large cost savings from automation as it adds robots to its fulfillment centers. Of course, amazon leading businesses their web services business now $100 billion in annual revenue. Amazon's margins are expanding and their revenues may pass Walmart this year. Additionally, they have a high margin advertising business that now boasts $70 billion in annualized revenue.
Keith Lanton:Of course, not everything's perfect Big capital spending going on. Walmart's certainly not resting on their laurels and waiting for Amazon to surpass them. They are competing vigorously and, of course, higher tariffs could be a headwind for all retailers. What's interesting is, if you look at Amazon and you compare it to Walmart and Costco, it's trading at a lower multiple. If you look at Walmart, it's trading at 32 times forward earnings, costco at 50 times forward earnings. Amazon, trading at a lower multiple, has $100 billion in cash versus $50 billion in debt.
Keith Lanton:If Amazon investors have concerns, alphabet's investors have worries. Barron's, next up on the list, suggests Alphabet Stocks at around 163, 18 times this year's earnings lowest multiple among the Magnificent Seven. Certainly has some headwinds, especially with the government antitrust case as well as artificial intelligence, potentially, potentially uh, a threat to amazon search business, uh, but if you're looking at uh the business here for uh, for google, perhaps uh baron saying perhaps there is too much fear built into the current price. Recent surveys show that their search engine business still commands 80 share, particularly strong in commercial search, which matters for advertising. Also hopes that the Trump administration will be easier on the antitrust case than the Biden administration. Alphabet also has a better handle on costs than many investors may appreciate. Billionaire investor Bill Ackman recently noted that Alphabet's operating margins rose 4% in 2024, margins rose 4% in 2024, and the new CFO is committed to accelerating efficiency initiatives.
Keith Lanton:Investors get valuable tech beyond search. Alphabet's businesses include YouTube, cloud computing business, does $50 billion in annual sales, android mobile system, Waymo one of the two leaders in autonomous driving, along with Tesla. Next up on the list is Meta, which may have the least warts of the big seven, but the stock has tripled in price over the past year. So, even though Meta has pulled back, lots of good news, still priced into the stock, but nevertheless there's still a lot to like 40% operating margins versus 32% at Alphabet, and there are monetization opportunities in the relatively untapped meta products like WhatsApp Threads and Facebook Marketplace.
Keith Lanton:Finally, perhaps no stock's fall from grace has been more surprising than NVIDIA. Barron says the stock has slumped to 115 from 150, 23% decline. Now trades are 25 times 2025 earnings. Growth concerns, tariffs and regulatory risks have caused the drop, but Barron's suggesting that NVIDIA, which has a big conference coming up in the next several days, has strong quarters ahead, with the launch of Blackwell and the growing demand for AI driven by innovations such as agents, reasoning capabilities, videos and audio. Nvidia's PE ratio is now at a 10-year low. Investors historically have done well to buy NVIDIA when it's trading at 25 times earnings or less, which is where it is now.
Keith Lanton:Apple, microsoft Barron's out, suggesting that these are great companies, valuable franchises, but more headwinds than these other four, perhaps relatively fully priced, and suggest considering the four stocks that were mentioned here before thinking about investing in or adding to Apple or Microsoft. Certainly not suggesting investors sell or reduce their exposure unless it's unique to their personal situation. So that's the view on those. And then Tesla Barron, suggesting that Tesla doesn't deserve to be in the MAG-7, and that it's really a stock that's based on Elon Musk and really it depends on your view of Elon Musk and whether or not he's going to choose to focus on Tesla. And that stock, they say, is a stock that is more for those who have all sorts of agreement with Elon Musk in the sense of where he's going and his vision, and if you're in alignment, perhaps it makes sense, but it's more based on dream. That it is based on current fundamentals is Barron's opinion of the last of the Mag7, and that is Tesla.
Keith Lanton:With that, I'm going to turn it over to Brad. Glad to have him back with us this morning. Good morning Brad. Good morning Keith. Good morning.
Brad Harris :Brad Morning Keith, good morning all. Happy St Paddy's Day to everybody and I'm not going to say those who celebrate it, because I know this is a holiday that we all celebrate, just definitely a fun, good-spirited holiday, which we need right now. I've had so much to say over the past few weeks but I've been very reluctant to say it publicly. But giving an opinion in these markets needs to be qualified as an opinion only. Even with over 35 years of experience, I and I believe most of us continue to be human. We find it difficult to take our emotions and pride out of our investment decisions. First thing I have to say is do not make an investment decision based on your love or hate of a political climate, person or persons. Make your decisions based on the economic policy of that particular regime. If they are onto something and things are working, join the party. Don't be stubborn. Don't miss it. If you think that the policies are potentially damaging, get out of the way. This opinion is for new money investments only because if you have a long-term plan, you must stay with it through thick and thin. If you find yourself uncomfortable with your long-term plan, you're certainly allowed to change it, but my opinion is that if you change it, you probably need to stick with it for a little while. If you bounce back and forth with what your investment goals are, it will not work.
Brad Harris :I say this from personal experience and personal investing mistakes. The last couple of weeks I found myself over-trading the market, primarily in equities. As I thought about it this weekend, I thought back to how much money I lost over-trading in 1999 and 2000 during the dot-com bust. It seemed like he couldn't lose. I'm finding that I'm living these deadly sins again Fear, greed, envy. It is not a good way to invest, even if you think you're a professional trader. It's dangerous. Unfortunately, human nature is human nature and I probably will continue to trade some of this volatility. Here's what I'm doing. That is smart. I'm building my tax losses in municipal bonds for myself and my clients. These losses do carry over, I believe, forever. There have been too many years when I find myself and others at year-end scrambling to find losses. Do not make that mistake. You can sell, so to speak, an apple and buy an orange, a pear or a banana.
Brad Harris :So many of the credits in municipals are dependent on the health of the state or locality you're investing in and many move in relative tandem, but you only potentially improve your position and have the advantage of having a loss. Many institutions only trade for tax loss because if they're holding a good yield, that's their goal, they'll stick with it. Additionally, at the moment, municipals have been slammed with a glut of supply. This happens at least one or two times a year. So at the moment, municipals have become very attractive relative to treasuries or almost anything else I can think of. For that matter, I have pounded the table to get in during these periods.
Brad Harris :The problem is because of potential economic policies note, I didn't say political policies. I can't say where we are going with certainty. I assume, as we have historically, we'll get a dead cat bounce rally in municipals. But whether we do or don't, tax law swapping will not hurt. You can maintain your position in this asset class and potentially improve your credit call protection coupon and your cost basis. The last thing I have to say is something that has been handed down to me from many elders, whether they're family members or people I've worked with or friends Never bet against America. But I just want to add at this point just be mindful and smart how you are betting with America. But I just want to add at this point just be mindful and smart how you are betting with America, so please be patient. I hope everyone has a great St Paddy's Day and a great week, and I'll send it back to Keith. Thanks.
Keith Lanton:Thank you, Brad. Well said. That's everything I've got.
Alan Eppers: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.
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