Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
Thinking Clearly: How to Make Investment Decisions When Everyone Else is Distracted
March 24, 2025 | Season 7 | Episode 11
Clarity of mind is your most valuable asset in today's complex financial landscape. Keith Lanton opens with powerful insights from James Clear's philosophy on understanding others by watching what they reward and understanding yourself by observing what you envy. These principles form the foundation of the objective thinking necessary for navigating markets filled with noise and competing narratives.
As we mark the 25th anniversary of the dot-com bubble burst, Lenton draws important parallels and distinctions to our current market environment. While today's AI-driven rally carries echoes of that era, the magnitude doesn't yet match the extreme appreciation witnessed between 1995-2000 when the NASDAQ soared over 700% before losing 80% of its value. This historical perspective provides valuable context for evaluating today's technology valuations.
We're also reflecting on the five-year anniversary of the COVID-19 market bottom, a reminder of the market's resilience through pandemic disruptions, political upheaval, geopolitical conflicts, and aggressive rate hikes. The S&P 500's 173% return since March 2020 reinforces the wisdom that attempting to trade around news cycles is nearly impossible for individual investors.
The podcast delves into the Treasury Secretary's focused campaign to lower 10-year yields, NVIDIA's ambitious AI roadmap unveiled at their GTC conference, and the infrastructure challenges posed by AI's massive electricity demands. Lenton also highlights potential policy changes affecting municipal bond tax exemptions that investors should monitor carefully.
Throughout these diverse topics, one theme remains consistent: the quality of your investment decisions depends on maintaining clear, objective thinking while understanding both your own psychology and broader market sentiment. What single habit, if implemented consistently for the rest of this year, would transform your investing approach and results?
** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice.
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And now introducing Mr Keith Lanton.
Keith Lanton:Good morning Hope. Everyone had a fantastic weekend, an opportunity to hopefully watch some basketball and pay less attention to all the news flow that's taking place in the world, whether it has to do with financial markets or conflicts out there. Hopefully there's a little bit of a respite this weekend. So we're almost done with the first quarter of 2025. Certainly a lot to digest so far this year.
Keith Lanton:We need to keep thinking clearly and keep our eye on the prize, which varies for each of us, but which is some iteration of how we want to allocate our investment dollars to reach our goals. Of course, every situation is unique, so every piece of advice is something to factor into each individual's personal considerations and their personal financial goals and objectives. But in order to think clearly, which is something that's becoming increasingly important it's always important, of course, but increasingly important because there's so much noise out there we need to think intelligently about anything. We need to get clarity of mind and we need clear and objective Emphasis, objective. Many of us think we're being objective, but we are in our own echo chambers and we may not be as objective as we think we are. So we need clear thinking, we need objective thinking and in order to be objective. You need to not only be aware of your own mindset. You may have wonderful, clear thinking within your own mindset and you may even have objective thinking within your own mindset, but you also have to be able to read the room, and the room in this case is the overall market and all the other market participants. You must be able to have a realistic view of what their fears are, what their level of exuberance is, in order for you to make intelligent determinations about where you stand and how your portfolio should be constructed. So always backing all the way up to that clear mind, quality of thought. So I'm going to start out today and give you some thoughts that hopefully will help this week in terms of thinking more precisely from James Clear, author of Atomic Habits, and start out with some thoughts here.
Keith Lanton:To understand others, watch what they reward. To understand yourself, watch what you envy, and I think this makes a lot of sense, whether we're talking about, if you're thinking about, the parent-child relationship, what is it that parents reward, if it's a situation at the job, what is it that your person who oversees you, your boss, your superior, what is it that they reward? And keep in mind about yourself, again, that objective thinking. What is it that you are envious about that's taken place in that workspace to know yourself better? This certainly could apply to what's taken place in politics with the current presidential administration. What is it that they are rewarding and what is it that you are frustrated about that's taking place? Perhaps it'll give you greater insights. Also, think about what it is that you are reading, and are you being objective? Are you being clear of mind? Because the quality of your thoughts is determined by what you are reading and the quality of what you're reading. So spend some more time thinking about what the inputs are going into your brain as you go about your day each day.
Keith Lanton:Social media consultant Charles Miller from James Clear with some insightful advice. Spend a handful of hours a day going fast. Crush a gym session. Knock out your to-do list with some very clear, concise thinking you know. Factor out, get rid of those distractions. Do deep work on a project you care about and, at the same time, other parts of the day, spend the day going slow. Take walks, read books. Focus on those inputs. Have an enjoyable dinner with friends or your spouse. Either way.
Keith Lanton:What you want to avoid, charles Miller says, is that anxious middle where you never truly relax or truly move forward. And many of us experience these days where it's four, five, six, seven, 8 o'clock at night and you've spent an entire day, 10 hours, doing work and you feel like, hey, I don't know what I got done today. Perhaps you weren't going fast, perhaps you weren't going slow, perhaps you were caught in that middle, thinking about yourself and what it is that you need to do in order to move yourself forward. In order to create, one must first question everything. This is from Eileen Gray, an architect and furniture designer. Never adopt someone else's conclusion without putting it to the test of your own reasoning and imagination. Something to think about for those of us who like to use AI to get lots of things accomplished. You may be adopting someone else's thinking, you may think it's AI's thinking, but AI is just pulling from the rest of the world. So it's someone else's thinking, but you must first question everything. Put it to your own test. Does this make sense for your unique situation? And something to think about. Question for you from James Clear what single habit, if implemented consistently for the rest of this year, would transform your life the most? So, as we think about those things and think about how we can apply them to our lives and our investing lives. We will also reflect backwards Because today, exactly 25 years ago today, it happened today when roughly the five-year dot-com bubble burst.
Keith Lanton:25 years ago. For some of you, that may seem like a lifetime ago. For others of you it may seem like it never happened because you weren't in the investing world 25 years ago. And that led to trillions of dollars of investment losses for those who experienced it. On March 24, 2000, the S&P 500 index posted a record level it wouldn't see again for eight more years, until 2007. And three days later so three days from now, 25 years ago the tech-heavy NASDAQ 100 closed at an all-time high. And that was the last time that the NASDAQ 100 would reach that level the 15 years. So it wouldn't be until 2014. Those peaks marked the end of a electric run from August 1995 to March of 2000. S&p 500 almost tripled. Nasdaq 100 soared over 700% in that five-year period going back to 1995. Yet by October of 2022, more than 80 percent of the NASDAQ's value was gone, s&p 500 down almost 50 percent.
Keith Lanton:So why we discuss the past? Well, because it certainly has relevance potentially for the current environment we're in and echoes of that era are reverberating now. It doesn't mean we're in a situation like that. The technology this time is artificial intelligence. After a rally that sent the S&P 500 soaring 72% from its trough in October 2022 to its peak last month, it added $22 trillion of market value in the process, and now we're starting to see signs that perhaps some cracks are emerging. Stocks are starting to sink, the NASDAQ has lost more than 10% to fall into correction territory, and the S&P 500 was briefly in correction territory and has lifted itself up since then.
Keith Lanton:So many of us are concerned about the symmetry from 25 years ago. One factor to keep in mind is that the runs going back in 2000, the 2000 era, were much more extreme than what we've experienced today. Even though we feel like we've gone up so much so fast. If you look at the two eras, this era still doesn't look anything like. The amount of magnitude of appreciation that was experienced back then Doesn't mean we can't pull back from here, but again study the history and hopefully learn from it.
Keith Lanton:Now, speaking of anniversaries, more recently and this is something that most investors can remember five years ago yesterday, the S&P 500 plunged to its lowest point during the pandemic, closing at 2,237. That was down a third from its record high a month earlier. Covid had been in the public consciousness for several weeks. Again, this is five years ago. Magnitude was just sinking in. If you go back five years pretty much to the day, attorney General Bill Barr warned against hoarding in a news conference, uk Boris Premier. At the time, prime Minister Boris Johnson ordered a nationwide lockdown, which got tremendous attention here in the United States. We forget about that. No one knew how deadly a long run the pandemic would be and certainly no one knew that we would have a vaccine by the end of that year. Many don't even remember that it was President Trump that put together that vaccine program with Operation Warp Speed. Yet stocks started to run up the next day and by August 18th the market was back at a record high.
Keith Lanton:The S&P 500 has returned 173% since the March 2020 low, which is equal to a 22% gain annually. So why do we bring this up? Because, if you think about all that's happened since 2020, since March of 20, since that pandemic started, we not only had a pandemic, we had a mob attack the US Capitol trying to overturn the presidential election in 2020. Then, in 2022, russia invaded Ukraine, we had the Federal Reserve significantly ratcheting up interest rates in 2023 and 2024. And now we have concerns about a trade war. And, yes, even as the trade war, fears were starting to permeate into the markets, thinking we were approaching and succeeding in reaching record highs. It's only as this concerns about the tariffs and what they may actually mean that we are starting to see some cracks in the financial markets. But we are getting a little bit of a reprieve. This morning We'll talk a little bit about that. The Trump administration out with some comments regarding tariffs over the weekend and this morning. But this little history lesson serves as a reminder for individual investors that it's almost impossible to trade around news.
Keith Lanton:The standard personal financial advice is that you need to set an asset allocation that helps you sleep well at night, rebalance when it gets out of whack and otherwise leave well enough alone. That strategy has traditionally paid off, but you have to understand what is the right asset allocation for you At each moment in time. This is not something that should be moving in time on a day-to-day basis, but as your life is getting lived, things are changing. There is new news that you have to factor in, and when you do reach that fork in the road or that inflection point, you may need to make a change to your asset allocation and you do need to be able to think clearly. If you cannot think clearly on your own, hopefully you have a financial advisor, trusted accountant, attorney that you could bounce ideas off of so that you can get that clear thinking, that clarity of mindset in order to make intelligent decisions. Because all of the planning in the world will not amount to much if, when you get to that fork in the road, you're not thinking clearly and you are not making the right decisions.
Keith Lanton:All right, we're going to talk a little bit about the bond market now, because this is something that the Treasury Secretary is very focused on. Brad this morning will not be on the call. He's out of the office this morning. So I'm going to talk a little bit about the bond market. But Treasury Secretary is consistently talking about not the levels of the equity markets but about the 10-year bond yields. In speeches and interviews, week after week, he constantly messaged that the administration's plan is to push down 10-year treasury yields. Now, some of this is normal.
Keith Lanton:Keeping government borrowing costs in check has been a longtime part of the job of the treasury secretary, but Besant's fixation on the benchmark US note is so intense that he's forced some on Wall Street to tear up their predictions for 2025. In the past couple of weeks, bloomberg reporting that chief strategists at Barclays, royal Bank of Canada, societe Generale, have all cut their year-end forecast for 10-year Treasury yields, in part because of Besant's campaign to drive them lower. Now it's not just what Besant is saying, but the fact that Besant can follow it up with concrete action, like limiting the size of 10-year debt auctions. If you reduce the supply and the demand stays constant, that would potentially drive down those yields. So what the head of US interest rate strategy at BNP Paribas said, which is what used to be often mentioned in the bond market, is the idea of don't fight the Fed. It's somewhat evolving into don't fight the Treasury. Yields have come down already over the past two months, though it's less about what Besant and his boss, donald Trump, want to accomplish with regard to tariffs and trade wars. That has led to the decline, but we may see some more action, perhaps leading to the decline when the Treasury does take more proactive action, possibly to reduce the yield on the 10-year, and President Trump has also been very vocal about using the 10-year Treasury yield as a benchmark for the success of his administration's policies, and this may have to do with the fact that the 10-year Treasury is the yield that is most closely correlated with interest rates for mortgages, and one of the factors that is frustrating a lot of Americans is that homeownership has become very difficult to achieve. The affordability has reached critical levels, and one of the ways to get homes to become more affordable is to have those interest rates lower, and that is one of the reasons, perhaps, that this administration is so focused on achieving that.
Keith Lanton:All right, so let's turn to financial markets. This morning, we are seeing futures higher Dow futures are up 390 points, s&p futures 68 points over fair value. Nasdaq futures the strongest of the group up over 300 points. Nasdaq futures up about 1.5%. Dow and S&P futures up about 1%, and this is after last week when averages broke four-week losing streaks. The reason for the rally, at least at the outset this morning, is that reports that President Trump is expected to narrow the reciprocal tariffs that will be announced on April 2nd to targeted nations, and industry-specific tariffs will be omitted, and that is the catalyst to the follow-up from Friday, in terms of market rise, to what we're seeing this morning. The offset is that there's a risk on trade here which is causing some to take some money out of treasuries, which is where many investors find safety and solace when things are looking a little more concerning. And we're seeing the 10-year treasury yield up to about a 430 from a 425, so up about five basis points this morning. Also seeing oil up about 40 cents a barrel half of 1%. Gold is up about $10 an ounce. Gold is at $3,031 an ounce. Other news this morning we have talks taking place in Riyadh, which is Saudi Arabia, between Ukrainian and US officials as they seek to get a ceasefire in the war between Russia and Ukraine.
Keith Lanton:In Canada, mark Carney began his bid for re-election with a stark warning that President Trump is serious about wanting to annex the country. Other stocks in the news meta platforms In the news stock is up about 3% or about 16 points at the open. News stock is up about 3% or about 16 points at the open. It reports that both Meta and OpenAI are quoting Reliance Industries, which is a large Indian conglomerate based in India, as they seek an alliance with that company for their artificial intelligence ambitions. Their artificial intelligence ambitions Kenview, which was spun off from Johnson Johnson symbol. K-v-u-e has an activist investor, tom's Capital Management, seeking a sale or separation of that company. Stocks up about 1%. Tesla this morning moving higher, biggest percentage gainer of the MAG-7 up about 4%. They are aiming to halt driver assistant trial software in China before that gets approved in, hopefully, in China.
Keith Lanton:In Europe, interestingly, sap, the software IT infrastructure company, has overtaken weight loss drug maker Novo Nordisk as the company in Europe that has the highest market capitalization. Overseas markets Asia-Pacific region began on a mostly higher note. The Nikkei was lower but most of the markets were up In Asia. The Indian market was up about 1.4 percent, china up modestly two-tenths of 1% and the Hang Seng in Hong Kong was up almost 1%. In European markets, mostly in the green, modestly higher pretty much across Europe Announced that the ASEC company is going to be acquired by James Hardy Industries.
Keith Lanton:Asec makes artificial decking stock being bought for about $8.75 billion. That stock's about 20% higher and the company that's doing the acquiring here, james Hardy Industries, is about 20% lower on fears that they are perhaps paying too much for a company that's very exposed to the US housing market as US housing has not yet revived 23andMe said on Sunday it filed for Chapter 11 bankruptcy protection Any of those out there that have used 23andMe. One of the concerns is what's going to happen to their data. So, if you've used it, what's going to happen to your genetic data with this company in bankruptcy and we'll see how things develop.
Keith Lanton:Other news this morning Washington Post reporting that Israel plans to expand its war in Gaza over the coming months and is considering a military occupation of Gaza. Nbc News reporting that Senate Minority Leader Chuck Schumer has rejected calls to step down following his support for the government funding bill. We reported that the Canadian Prime Minister, mark Carney, requested a snap election expected to take place at the end of April. And turmoil continuing in Turkey. Istanbul's mayor has been detained and the Wall Street Journal is reporting that he may remain in jail for weeks or months. He is the greatest threat to the leader of Turkey for almost, or more than, two decades now. Erdogan had him jailed, claiming crimes and corruption, and 200,000 protesters over the weekend, the Turkish lira selling off significantly last week. So some instability there from one of our NATO allies in the Middle East.
Keith Lanton:What's going on this week? Well, today we get the S&P Global releasing the Manufacturing and Services Purchasing Managers Index for March we're looking for a 51.5 reading for manufacturing, 50.9 for services. Both would be down slightly from the previous month. We get readings on consumer confidence, which is something that has been waning and is starting to become a concern that it may leach into actual weakening in terms of retail sales, which is 70% of the US economy. So Tuesday eyes will be on the conference board looking for that Consumer Confidence Index to come in at around 94, which would be four points lower than previously. And previously, which was in February, the index registered its largely monthly decline in over three years. On Wednesday we get durable goods for February, looking for that to decline 1%. And then Friday perhaps the biggest economic news of the week Bureau of Economic Analysis releases the Personal Consumption Expenditure Price Index for February.
Keith Lanton:This is known as the PCE. This is an inflation gauge. Federal Reserve is known for favoring this index the most in terms of how they view inflation in the US economy. So it will be carefully watched. Lots of concerns on whether or not the talk of tariffs and implementation of tariffs is causing inflation. So our economists forecast a 2.5% year-over-year increase, matching the January figure, looking for that number to be up 0.3% for the month. Core PCE index is expected to rise 2.7% of a point, which would be a little bit more than previously.
Keith Lanton:So when we look backwards here, s&p 500 last week snapped its losing streak, barron saying, despite that sell-off there, don't let your guard down, be cautious, things are changing very rapidly. We started the conversation today. Last week the S&P was up a half a percent, nasdaq inched up two-tenths of a percent, dow rising a little bit more than one percent. The S&P may have snapped a four-week losing streak, barron says, but the big worries dogging the market haven't gone away. Tariffs may be the biggest concern, as consumers, businesses and investors remain on tender hooks about how policy will shake up as President Trump's April deadline approaches. And this morning we got perhaps we'll see if anything changes, because we are used to having that swivel neck as things change quickly. But this morning we got some news that the market liked about tariffs not being quite as robust as feared. But again, see if this latest thought holds.
Keith Lanton:Last week, federal Reserve Chair Jerome Powell at their meeting did soothe some nerves, but only soothe some nerves to an extent. Did soothe some nerves, but only soothed some nerves to an extent pointing out that the Fed, too, is struggling to provide forward guidance without clear policy direction from the new administration. That's a comment from Capital Economics' Thomas Ryan, sort of summarizing what Chairman Powell was saying at his news conference. The lack of clarity with respect to tariffs and policy going forward has weighed not only on the markets but even the Magnificent Seven, which were still down last week, despite the markets being higher up about seven-tenths of one percent. Some are suggesting that some market participants, especially some overseas investors, are starting to question the American exceptionalism trade, where these stocks are considered exceptional kind of regardless of the environment. One upside is that the Magnificent Seven are cheaper than they've been for years. The premium of the group compared with the S&P 500 is at its lowest since 2017.
Keith Lanton:Now I did mention don't let your guard down. If you look at the financial markets last week, despite being an up week, and modestly so, the previous four weeks had declines of 2% or more. We have had four consecutive declines of 2% or more only eight times before in recorded market history, and history suggests that, based on that data, point that it is not time to go bargain hunting. According to Bespoke Investment Group, in the past, after such a drop 2% for four straight weeks, 2% each week for four straight weeks the index was still negative in the following one, three and six-month periods. Doesn't mean it'll happen this time, but noteworthy that it has happened every time in the past.
Keith Lanton:So another event that we had to do with the Federal Reserve last week, and the Federal Reserve did make a significant announcement when they announced they were going to keep interest rates unchanged, which was expected. But they opted to slow their balance sheet runoff further at the March policy meeting. Now investors shouldn't assume this move could notably ease upward pressure on Treasury yields, but the Fed did announce at the conclusion of the March 18-19 meeting that they will, beginning in April, the Fed will reduce the monthly redemption limit on treasury securities to $5 billion from $25 billion, and the Fed will keep its cap on agency debt and mortgage securities at $35 billion. So what does this mean? What this means is that when $25 billion in securities that the Treasury is holding in their reserves so the Treasury is holding Treasury securities that they have accumulated in the past when the Fed was doing what was known as quantitative easing and that was buying Treasury securities it will replace of the $25 billion in treasuries each month that are coming due. When $25 billion comes due, it will replace them with another $20 billion, thus adding $20 billion of monthly demand to the treasury market.
Keith Lanton:So what the Fed was doing was letting $25 billion a month of treasury securities roll off, meaning that when the next treasury auction took place, $25 billion of new treasuries that were previously being bought by the Fed were now having to be bought by foreign investors, us investors. There had to be outside money purchasing these securities because the Fed was no longer going to hold them on its balance sheet. Now that figure is only $5 billion, so the market now must find a home or cash must come out of the system to the tune of $5 billion instead of $25 billion, which means that the Federal Reserve will now, relative to last month, be purchasing $20 billion more in securities than it did before. This is something that you could argue is a easier monetary policy, although still the Fed is letting $5 billion roll off, but easier than we were before. Now, fed Chairman Powell characterized the move as a common sense adjustment that the Fed was undertaking as its balance sheet gets closer to what they would consider appropriate levels, and he said that this consider appropriate levels, and he said that this policy shift is not a signal in any hidden way. He said that the decision to slow had no implication for monetary policy nor the ultimate size of the Fed's balance sheet, but nevertheless noteworthy because it does prevent money from coming out of the system at the rate that it was coming out before, which is $25 billion. So this policy does have a meaningful impact and we'll see what impact it has on treasury rates, if at all, because, again, with interest rates, there's so many moving pieces, this just being one of them, although a significant piece, all right. So I'm going to talk about a few more things.
Keith Lanton:Brad's, as I mentioned earlier, not on the call, let's call it NVIDIA an improving business. Yet the stock has gotten cheaper. So last week, at the GTC Annual Developers Conference, which is NVIDIA's biggest conference of the year, ceo Jensen Wang laid out a compelling vision Barron saying for the artificial intelligence industry, while presenting an aggressive roadmap of coming products for his company. The announcements could leave rivals racing to catch up for years to come. Now I mentioned there's a disconnect because, despite the enthusiasm for the future of AI and how NVIDIA semiconductors are central to it all, nvidia shares have treaded water. This year they now traded 26 times forward earnings, which, it could be argued, is a reasonable valuation for a company projected to boost revenue this year by 57%. Now there are three reasons that markets may be fearful about NVIDIA, and the PE is being held in check. One is that AI demand could soften after the release of Chinese startup DeepSeek's efficient models. There could be rising chip competition from companies like Broadcom and uncertainty over tariffs on chip imports, but at this conference, ceo Wang confidently addressed all three issues Barron's pointing out, arguing that none of them would impede NVIDIA's bright prospects.
Keith Lanton:With respect to DeepSeq, wang was particularly defiant, pushing back on the notion that DeepSeq would hurt demand for processing units. He's saying the market got it pretty much entirely wrong. The amount of computation we need as a result of reasoning, which is what DeepSeq achieved their results utilizing, as opposed to brawn or pure power in terms of speed. Nevertheless, he said that, if you're going to be using this reasoning in conjunction with the brawn of speed, that this, based on his calculations, will lead to significantly more demand over the long term for AI chips. In fact, he came up with a figure that was perhaps 100 times more demand than he was expecting just a year ago. He also said that tariffs are not expected to have a significant impact on the company's financials or outlooks, making the point that the demand for these chips is so great that the tariffs will not have a significant impact. He made the case that the overall market opportunities for AI and AI data center infrastructure are expanding rapidly. He pointed out that the so-called superclusters that utilize the chips from NVIDIA have grown from 16,000 chips to 100,000 chips last year and he said that he thinks that by 2027, you will see a cluster being built with 1 million chips.
Keith Lanton:Nvidia also extremely optimistic about the use of their chips in robotics. The company saying that we are just at the beginning of an exponential ramp up in the development of AI robotics. And perhaps the biggest development at the GTC conference was NVIDIA's aggressive product roadmap. So right now this year they have the Blackwell AI server. Now that server, which has gotten lots of attention, is about 50 percent faster than the previous chip at NVIDIA. He said that the Vera Rubin AI server, which is scheduled for the second half of 2026, will be 3.3 times faster than this chip, which is 50% faster than the chip that was out there last year. But the showstopper was the unveiling of the Rubin Ultra AI server, set for late 2027, which will be 14 times faster than the current Blackwell Ultra AI server, which is in the marketplace today. In fact, that figure drew guests from the audience, but Nvidia stock barely moved on. All this news and Barron's is suggesting perhaps investors, for the first time in a long time, are not optimistic enough.
Keith Lanton:Now, one of the knock-on effects of NVIDIA and their potential success, and as well as the success of some of NVIDIA's competitors in the AI space and the chip space and we've heard this before, but give some metrics around it is that all of this artificial intelligence is going to guzzle lots of electricity, and the question is will the US have enough power? So there's growing evidence that there will not be enough electricity to power all of the United States' artificial intelligence streams, and what's happening is the virtual world is starting to hit a physical limit. And this all starts with the fact that the gas turbines, which are the machines that transform natural gas the largest source of electricity in the United States into electric power in the United States, into electric power Power companies saying they're building more big turbines, but they are hesitant to boost capacity, despite the fact that they see so much demand, because they are fearful of overbuilding. So what this has resulted in is the wait for new turbines now is three years and the price of purchasing them is increasing significantly. So the next thought is well, who are the major producers of these turbines? Well, it's GE, vernova, mitsubishi Power and Siemens Energy. These stocks have also boomed over the past year along with the demands due to AI Vernova stock. Ge Vernova is up 160% in the past year. Mitsubishi Heavy Industries is up 60%. Siemens Energy is up almost 300%. Barron's is saying there is more growth ahead. At the end of 2024, companies and utilities were planning 363 new natural gas plants in the United States, with planned output jumping 70% in just two years. We mentioned that the ability to get these turbines online. There's a backlog of three years and it could take up to two years to actually get them online from there. So Barron's suggesting that not only an opportunity in gas and turbines, which is arguably somewhat reflected in their share prices, but the opportunity remains still in some of the renewable stocks which have really gotten hit because renewable energy can be put online much more quickly. So potentially still opportunities in solar and solar-related stocks here in the United States, as well as some of the players that make smaller turbines, which, arguably, are not as efficient as the big turbines, but you've got to make do with what you've got Caterpillar and Bloom Energy so we will see energy folks who are needing that energy get creative in how they seek to meet that energy need and something to be mindful of as you go about creating that investment portfolio.
Keith Lanton:Finally, I will conclude with one article here about bonds, and we're going to talk specifically about municipal bonds. So buried in one of President Trump's policy proposals that you should be aware of is a line item with the potential for municipal bonds to potentially be subject to taxation. So the elimination, exclusion of interest on state and local bonds, which has been the case for over a century due to a Supreme Court decision, potentially could be challenged again. Now, this is something that has come up under previous presidential administrations. Anytime the government's looking for revenue, this is something that does come up, but it has come up again, so important to keep your eye on it.
Keith Lanton:Page 9 of a 50-page House Budget Committee document prepared in January lists 200 ways the government could raise extra funds to offset the impact of extending the 2017 Trump tax cuts. Now, this doesn't mean it's going to happen, or it's even likely to happen, but it does create some uncertainty, and uncertainty is something that can dent the muni market and worry investors. Muni fund managers say members of Congress understand the value of the tax exemption when it comes to funding projects in their districts, making removal of the exemption unlikely. While the White House document estimates that eliminating the exemption would add $250 billion to federal coffers over 10 years, the public finance network says it would cost cities and states $824 billion in borrowing costs, meaning that cities and states would have to raise taxes to offset the lower taxes that investors and market participants are experiencing from the federal government.
Keith Lanton:So, while this may not make sense because of the amount it would ultimately cost, which is greater than the benefits, sometimes things that don't make sense do happen in Congress. I know that's shocking, so it's something to keep an eye on. One thing to also keep an eye on is if they were to implement this change, how would they do it? Perhaps the least likely approach would be to do it retroactively, which would make existing bonds taxable. That would be obviously something that existing holders would suffer in that situation where tax-free bonds would become taxable, some even questioning the legality of a retroactive implementation, and even though it's still highly unlikely that any of this happens. If it were to happen, the more likely scenario is that tax exempt status would be grandfathered for existing munis and in that case scarcity value could lead to a rise in demand for existing municipals, as new municipals in that scenario would become taxable.
Keith Lanton: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.
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.