Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
Financial landscapes are shifting as private markets outpace public ones.
June 9, 2025 | Season 7 | Episode 22
The financial world is undergoing a seismic shift that few everyday investors fully grasp. Private credit and private equity markets have exploded from virtually nothing to controlling trillions in assets and thousands of companies—all while operating largely outside traditional regulatory frameworks.
We take you on a fascinating journey through Wall Street's innovation cycles, connecting today's private market boom to previous financial revolutions like junk bonds in the 1970s and mortgage-backed securities in the 1990s. Understanding these historical patterns reveals how regulatory changes, market conditions, and Wall Street creativity repeatedly transform investment landscapes—sometimes with dramatic consequences.
The numbers are staggering: private equity now controls 11,500 companies (up from just 2,000 in 2000), private credit has ballooned to $1.7 trillion, and venture capital firms manage $1.2 trillion across more than 3,000 firms. Meanwhile, public markets remain comparatively sleepy, with only a handful of significant IPOs this year.
Bank executives like JPMorgan's Jamie Dimon express mounting frustration that this massive shift occurred "without any forethought on the part of regulators," creating competitive disadvantages for traditional banks. As this capital migration continues from regulated to less-regulated spaces, investors must consider both opportunities and potential risks.
For those navigating today's uncertain markets, we explore defensive stock strategies and highlight companies following the Berkshire Hathaway model of combining insurance operations with strategic investments—including Fairfax Financial Holdings, Markel Group, and Loews—that have delivered impressive long-term returns using variations of Warren Buffett's proven approach.
Whether you're concerned about market volatility, curious about alternative investments, or simply trying to understand the forces reshaping finance, this deep dive into private markets provides essential context for making informed investment decisions in an increasingly complex 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. Today is Monday, June 9th. Hope everyone had a relaxing, thoughtful weekend. Anyone out there who's celebrating some good events like graduations, congratulations, special time.
Keith Lanton:This morning we are going to get started and we are going to talk about one of the big drivers in financial markets today, that is, private credit, private equity. Take a look, perhaps, why private credit and private equity are rising to the forefront today and what were the precipitating factors driving this phenomena that we are experiencing today, so that we can think of private credit and private equity more intelligently, more holistically, try and make some decisions on whether or not they are appropriate investments for allocation into individual portfolios. And we will talk comprehensively this morning on crypto, which is something that the current administration is embracing. We had a big IPO last week for Circle, so we'll talk about crypto and its adoption and the changing mindset with respect to crypto. Of course, we'll take a look at where we are with financial markets. The news. We will discuss perhaps an area that may make sense here in markets, and that is some defensive stocks, and Barron's also touched on companies that are seeking to replicate the Berkshire Hathaway model. Some have been replicating it for decades now, and take a look at companies that perhaps could have some success. Obviously, having the success of Berkshire Hathaway is quite a tall order, but with Warren Buffett going to be retiring at the end of this year and Berkshire exceeding $1 trillion in market capitalization, it would be an interesting exercise to see if any other companies have potential moving forward. And recently we've gotten some big luminaries in the financial services world, like Mr Ackman stepping up and purchasing Howard Hughes, and he's seeking to emulate the Berkshire model. We'll see if that's possible and what Barron has to say about that.
Keith Lanton:So I want to talk about private credit, private equity, and I want to do that by looking backwards at some of the financial products that Wall Street has adapted and integrated into what's now the common investing theme and the common asset allocation, and when new products enter the marketplace, they are often viewed skeptically, some of them perhaps rightfully so. Then what happens is that they start getting some increased regulatory scrutiny. Perhaps we're seeing that a little bit now with private credit, private equity Regulatory scrutiny. Perhaps we're seeing that a little bit now with private credit private equity. Crypto has always been subject to pretty heavy regulatory scrutiny, especially in the previous administrations, and then sometimes there's a blow up in those markets and they get regulated, and then they sometimes then become part of the common investment landscape. So let's take a look at the history since the 1970s of some of these products, and we'll use this as a backdrop of what may or may not take place when it comes to private credit and private equity.
Keith Lanton:Now I will say that a lot of these products and services that do enter the marketplace are the result of Wall Street being creative. Just like any business, they are looking to come up with new products and services to sell to their customers. Oftentimes, this is the result of the fact that their existing products are being subject to decreasing margins, and this can be said for the May Day event in 1975, when commissions were deregulated. Then, after that, we saw a compression in the fees for things like bonds and fixed income markets. We saw mutual fund commissions come down, and then we saw the advent of no-load mutual funds. So Wall Street, just like other companies and other industries, are thinking of new ways to come up with new products to satisfy consumer demand as well as to potentially earn higher fees, and you need to keep that in mind when you're thinking about making investments in these products, and private credit and private equity are products that right now have amongst the highest fees. That doesn't necessarily make them bad, doesn't necessarily make them good. But if we go back, we can take a look at the 1970s, 1980s, and we saw the rise of a new product, and this product was what today we call high-yield bonds or junk bonds.
Keith Lanton:And why did high-yield bonds or junk bonds see the light of day at this period in time?
Keith Lanton:Well, what happened is in 1974, we had some action and we had some new rules and regulations and laws passed, and we had the Employee Retirement Income Security Act, also known as ERISA, passed in 1974.
Keith Lanton:Many of us know that as the start of the 401k, but it also allowed pension funds to invest in a broader range of assets, including riskier ones, as long as the portfolio was adequately diversified, and this had opened up a new pool of institutional capital for what became known as junk bonds.
Keith Lanton:A little lesser known law that was passed was the Garn-St Germain Act of 1982. And that allowed savings and loans which were also called thrift operations institutions to invest in corporate bonds, further increasing the base there for high yield bonds. So what happened is these laws came into effect and we had at the same time, confluence of events we had low interest rate environment, so we had lots of folks seeking out higher rates of return. And then we had a visionary in the sense of Michael Milken appear and he saw an opportunity to bring these products, which previously there was no easy way to market and distribute high yield bonds. Well, taking into account these new changes in legislation, this low interest rate environment, we had the right environment for this product to first marinate and then for this product to grow and that then became the high yielder junk bond market.
Keith Lanton:For those of us who are old enough to remember, perhaps in our youth Well, we had a day of reckoning in the high-yield or junk bond market, michael Milken, who was the father of these products. He got convicted and there was lots of regulation that was put into effect and into place for the high-yield market. Many thought the high-yield or junk market would never come back, but now it is a staple of the fixed-income universe. And within the fixed-income universe, another product that came out because of perhaps thirst for yield or lower interest rates, were products tied to mortgages. Now, originally we did have products tied to mortgages which were traditional pass-through mortgage-backed securities. They were called Ginnie Mae's, fannie Mae's and Freddie Mac securities and these were traditional mortgage securities that amortized just like your loan. They were just packaged into one big vehicle. But then Wall Street came up and said hey, we can slice and dice these securities in a whole host of different ways. Hey, we can slice and dice these securities in a whole host of different ways. And this was somewhat the result of the advent of the computer, meeting at the same time its moment with, again, regulatory change. So what happened that enabled us to create this big market for mortgage-backed securities?
Keith Lanton:Well, you may remember, in 1999, we had what was known as a law that was in place for a long, long time, and this was the Glass-Steagall Act. And the Glass-Steagall Act, which was enacted in 1933, separated commercial banking from investment banking, so deposit-taking and lending was separated from underwriting and dealing in securities. And this Glass-Steagall Act was repealed in 1999, and it allowed commercial banks to merge with or acquire investment banks, insurance companies and other financial institutions. This led to the formation of a massive financial conglomerate, and these newly integrated institutions could now originate mortgages, package them into mortgage-backed securities, underwrite the securities and even trade them on their own books. And this created a larger, more interconnected institutions that had a greater appetite for capacity to create and distribute mortgage-backed securities. So we had these laws changed. We had these laws changed. This enabled the banks to more intensively enter this business and they took the opportunity and they seeking to invest in something that they deemed is safer. That item turned out to be real estate. So we had this again this confluence of events, tremendous demand for real estate from individuals, just like individuals today are clamoring for things like crypto and private credit and private equity. Just like we had institutions clamoring for high-yield bonds in the 80s, well, here we see, leading up to the great financial crisis, individuals clamoring for mortgages so that they could purchase these properties. Lots of folks getting involved who didn't have a lot of experience. Wall Street was happy to accommodate them because of the changes in the laws. And here we are and we see that we had the housing and financial crisis and, as a result of that, we had the great financial crisis and then the great financial crisis arguably is what has led us to where we are today, with private equity and private credit. So the cycle you can see is building upon past iterations.
Keith Lanton:So what happened in the great financial crisis is, well, we had rules put into place as a result of the great financial crisis to avoid a lot of the problems that took place previously, in 2008 and 2009,. Some of the actions that the banks were taking with respect to lending, and this led to landmark legislation, which was known as the Dodd-Frank laws, as well as the Consumer Protection Act of 2010. And what this did is it instituted something called the Volcker Rule, and this rule restricted proprietary trading by banks, limited their ability to owner-sponsor hedge funds and private equity funds, and the intent was to prevent banks from taking on excessive risk with deposit or money. Now this pushed some of the riskier, higher-yielding lending out of the traditional banking system. At the same time, dodd-frank also increased the capital requirements in conjunction with international accords like Basel III, which imposed stricter capital requirements on banks. So banks were now being required not only to scale back this business, but when they did engage in any sort of aggressive lending, they needed to hold a lot more capital on their books, which made it a lot less attractive for banks to engage in this business, and even in environments when they could engage in this business, opening up the opportunity for smaller companies, for Wall Street, through innovation, to step through this door and to start lending what became private credit and private equity.
Keith Lanton:Now there was another event, some other legislation that passed that accelerated this trend, and that was the JOBS Act, which was passed in 2012. And the JOBS Act made it easier for private companies to raise capital. It lifted the ban on solicitation and advertising for certain private placements. This meant private companies could publicly advertise their fundraising efforts to accredited investors, making it easier to reach a wider pool of investors, investors. Also, it opened up the number of shareholders a private company could have before being forced to register with the SEC and becoming a public company. So this all manifested itself in the proliferation of companies catering to this market space, both private credit and private equity. Deal flows increased and we also saw, once again, pretty low yields, culminating in a super low interest rate environment and lots of desire for these juicy yields at the same time, when the banks weren't able to be a significant player. So we saw these companies, like Blackstone, apollo, carlyle Group and others, slowly take market share from the banks and engage in private credit, private equity businesses. Part of this attraction was the potential for higher fees than they were seeing in their traditional businesses, because the bigger banks, who typically do this stuff in scale, were limited from participating in these businesses.
Keith Lanton:So, fast forward to today. Barron's talking about private markets, and they actually talk about private markets crowding out the public markets and they ask if the SEC, potentially, will step in and regulate these markets. Because if we've seen anything, we've seen that there's a history where these markets grow, where there's eventually some pushback in terms of some investors or the public being hurt, and then we see some regulation. So far private credit markets we haven't seen a big event and we haven't seen the SEC step in. So we did see last week.
Keith Lanton:We saw the new SEC chairman, paul Atkins, give a Senate testimony on Tuesday. He said it's a new day at the SEC. Not only is it a new day, it is a new and brighter day at the SEC, he said. He said that they have two primary goals over at the SEC. Number one is cutting costs. Interestingly, the chairman of the SEC did not request an increase in their budget, which is $2.1 billion, and he said that the current headcount of 4,100 is down about 447 employees. So we're seeing that the SEC isn't looking to increase headcount, which then lends the question will we see increased regulation as a result? And the answer is it might be challenging or difficult if you've got a flat budget and a declining headcount. The other thing that he said was that the SEC would be facilitating the crypto economy.
Keith Lanton:Now, speaking about the private markets, which Mr Adkins did not address, barron points out that when comparing the private markets to the public markets, the public markets so far, in terms of new issuance, have been quite sleepy. As they put it, coreweave has been the only large-scale successful IPO year-to-date, aside from Circle Internet Group's debut this week. Circle went public this week. It's a stable coin and had a successful IPO, and that's what's been taking place in the public markets CoreWeave and then Circle, which is a crypto company, not a traditional investment company. Now let's flip over to the private markets, where we're seeing virtually every day. We're seeing some significant fundraising take place. Thomas Bravo made headlines just this week with a $34 billion fundraise to recent high-profile acquisitions Walgreens and Skechers both done by private equity firms. There are now 11,500 companies controlled by private equity, up from 2,000. In 2000.
Keith Lanton:The booming private credit market has soared from $0 to $1.7 trillion. This private credit market has been causing the high-yield or junk market which we just talked about, which is the market that was the innovative market of the 70s and 80s, is being made less relevant today by the private credit market. We're seeing less issuance in high-yielder junk because that issuance is going straight to private credit. Apollo Management Group, which says that they see a $40 trillion opportunity in lending, making loans which would traditionally be high-yield or junk bond loans, and they made a deal with JB Morgan and Goldman Sachs to form a private credit trading platform. Let's take a look at venture capital. Today, 3,111 firms look after $1.2 trillion in assets. That's up from 940 firms running $224 billion in 2007.
Keith Lanton:Let's look at some recent deals Anthropic raised $1 billion recently. Elon Musk, his Neuralink, raised $500 million. Again, this is private equity. And if we're looking at private debt, elon Musk's XAI is looking to sell $5 billion in debt securities, as well as some equity in XAI, which now has a private market valuation of $113 billion. So these sums what we're seeing in the private market is just staggering compared to what was in existence just a few years ago. And then we have SoftBank making a $40 billion investment in OpenAI, and OpenAI, which is a private company, has a valuation estimate of $300 billion. So what this boils down to is a massive migration from capital activity regulated by the SEC into an ecosystem with much less oversight. You could argue that this reflects an abdication of some responsibility by the SEC. Time will tell. Perhaps the SEC will regulate this business more, perhaps there'll be an event, or perhaps this business will stay largely outside of the preview of the SEC.
Keith Lanton:Now, speaking on this count, one company that certainly is subject to regulation by the SEC is JP Morgan, and recently, just last week, ceo Jamie Dimon said this is a great frustration of mine when he was speaking at the Reagan National Economic Forum. Pretty much all of that was all done without any forethought on the part of our regulators. What he's saying is that the private credit and private equity markets have been created and are running without any forethought from regulators, and this is something that he sees as a competitive disadvantage to his company, which is under lots of regulation. He said like zero, nada, not one conversation about the effect of requirements, capital liquidity or what it's going to do in these markets. And he goes on to say in my view, healthy public markets are probably better than having moved all into private markets. Speaking about all the businesses going into the private markets outside of the public markets, he's sort of warning us all that there could be potential ramifications of all this and he says we're going to find out if in fact this is something that is problematic. And then Barron said that they asked CEO Brian Moynihan of Bank of America if private credit lenders were taking away business from the bank and he said it's a competitor. There's no question. There are deals that would be hard to do through the bank balance sheet in a regulated environment with capital requirements and the stress testing we have. It's the first time we have to take them as a serious competitor. So we see the emergence private capital, private credit and we see that this is happening pretty much without a lot of as Jamie Dimon said forethought and we see that there's not a lot of regulation for these markets. We see that the investing public is going from institutional, it's working its way down to retail and we will see if in fact there are any Consequences as this market grows, as it takes market share from public markets, whether or not we will see any effects from all of this Transformation.
Keith Lanton:So let's take a look at the financial markets this morning. If you're looking at markets, we are at some critical levels both in the stock and bond market. We are roughly bumping up slightly higher last look, but roughly at about the 5000 level for the S&P 500, which is certainly a psychologically important level, and we are at about 450 right now, at about 451 on the 10-year. So these are two key levels that the markets are looking at to see if the stock market can break higher. Of course, if the bond market is breaking higher, it's breaking higher in yield, which means prices declining, yields are going up, but both those markets right now at points that have been resistance, let's call it so far. Last week we had S&P up 1.4 percent, dow up 1 percent, nasdaq up 2.2%.
Keith Lanton:We got the jobs report last month which, while coming in better than expected at least on the headline numbers we'll do a little diving into that report was not enough to propel the indexes to break out through that 6,000 level, as market participants are cautious after we've made up almost all of the losses or we've actually made up all the losses from Liberation Day, the day that President Trump announced most of the tariffs that were implemented. 137,000 jobs were added last month, according to the report on Friday, and that's less than 147,000 in April and way down from multi-year peaks that we saw last year. Some strategists are saying that there are cracks forming in the employment data. Nevertheless, the report we got last week was strong enough to change the probability that the Federal Reserve will cut interest rates in July. That probability went down 12%, so markets viewing the employment data as strong enough to keep the Fed on hold.
Keith Lanton:I already mentioned that markets hesitant to bid stocks much higher after markets covering all of the losses from the concerns about the tariffs from the concerns about the tariffs. But some are saying, here we are, we've recovered all of the losses from the announcement of the tariffs but nevertheless, while we don't have as much in tariffs on the table as we did on Liberation Day, we still have lots of tariffs on the table yet we've recovered all the losses. So even if we've got 30% or 40% of the tariffs still in place, we've recovered 100%. That's giving some market folks pause. We also have some concern that we will see rising prices. Perhaps that's why we're seeing this 10-year yield on the higher end of its historical range in the last few years, walmart saying that they might raise prices further later this year to fully offset costs from tariffs. Lower demand could be the result and that could weigh on earnings, which certainly impact profitability and therefore impact share prices.
Keith Lanton:So let's talk a little bit about the other part of the report last month, which was the average hourly earnings, and those came in better than expected. This is also something that could be arguably inflationary. They came in up four-tenths of 1% in May and we're looking at wages on an annual basis being up about 6% year over year, which is something that concerns the Fed with respect to inflation and market strategists suggesting that the strong pay figures we're seeing, even in a weaker job market, is indicative of the fact that we have folks leaving the workplace because of the immigration policy and therefore some of the folks who are in the workplace being deported. There is the prospects for 1.3 deportations over the next year. If that were to take place, well, we'd only need to see 50,000 monthly hires next year to keep the unemployment rate, which is 4.2 percent, at 4.2 percent because we have folks coming out of the job market. In fact, the unemployment rate held at 4.2 percent last month and that was with the household survey showing a decline of 625,000 in the labor force. So it's not so much new jobs being created, it's not the numerator, it's the denominator. The number of jobs out there is. The number of people that are in the labor force is declining. The workplace potentially because they're not here legally, and this is creating an environment where, even though things might be slowing down, we're not seeing job losses.
Keith Lanton:Perhaps as a result of this, president Trump is strongly suggesting that Chairman Powell I don't know if suggesting is the right word saying that Chairman Powell must lower interest rates. He did post on Truth, central Truth. Social America is hot. Six months ago it was as cold as ice. Border is closed, prices are down, wages are up. He is telling Chairman Powell that he should be reducing interest rates by 1% as soon as possible. All right.
Keith Lanton:So against this backdrop, let's see what's going on this morning. Stock market is poised for a modestly higher open. Currently the S&P futures are up about 10 points above fair value, nasdaq futures about 20 points above fair value. Dow is up about 45 points, seeing a little bit of carryover momentum from Friday. Market is also waiting, hopefully, for headlines out of today's US-China trade talks in London, which are expected to produce some agreements on relaxing export controls. Reports this morning Thomson Reuters reporting that US auto companies are in a near panic about their inability to get some of these essential minerals from China, these rare earth minerals, and may start creating a serious backup in production for American car manufacturers. Perhaps that's one of the catalysts behind some of these talks. Us, in response, putting pressure on the Chinese by withholding some nuclear reactor parts that are made here in the United States. Also, lots of attention with respect to the reconciliation bill which is making its way through the Senate. There is speculation that the Senate could release its own version of the bill with the aim of passing a modified bill by July 4th.
Keith Lanton:Apple is holding its Worldwide Developers Conference today. This event will go on through Friday. It will draw plenty of interest and coverage. Reports that Apple will introduce iOS 26. Also talk that Apple could introduce pricing for an iPhone 7, which will reflect tariffs and be higher than historically. They've raised prices. Apple stock up modestly in anticipation. Meta this morning up slightly. It's in discussions to invest $10 billion in a company called Scale AI. Qualcomm up acquiring AlphaWave Semi with an enterprise value of $2.4 billion. Unitedhealthcare is aiming to exit the Latin American market in a $1 billion deal. Warner Brothers Discovery announcing plans to separate the company into two publicly traded companies. That stock's up about 10% or almost a point.
Keith Lanton:This morning In the financial services world. Moellis symbol MC Ken Moellis will step down as CEO. Moellis symbol MC Ken Moellis will step down as CEO. According to the Wall Street Journal. That's stocked down modestly.
Keith Lanton:Overseas equity markets in Asia Pacific started the week on a higher note on optimism with respect to the meeting in London today between the US and China. Major European markets mostly lower, although the losses are modest in scope. Taking a look at commodities oil up modestly about 30 cents a barrel, natural gas down slightly. Gold and silver, both relatively flat. Silver a little to the upside, gold a little to the downside.
Keith Lanton:Us News President Trump deploying 2,000 National Guardsmen to California amid immigration protests and protests there, with respect to Governor Newsom saying that he didn't ask for those troops. So the dialogue between President Trump and Governor Newsom continuing to be acrimonious. Governor Newsom continuing to be acrimonious. Republicans rallied behind President Trump amid his feud with Elon Musk. President Trump, in a phone interview, says he has no desire to repair his relationship with Tesla CEO Elon Musk and warned him of consequences if he supports Democrats. Mr Musk deleted a social post that alleged links between President Trump and Jeffrey Epstein. According to NBC News, japan is mulling, pulling back some of their longer dated government bond issues and Bloomberg reporting that Russian sanctions legislation is on hold, amid President Trump's continued hopes for a peace deal.
Keith Lanton:What's going on this week? We have the Worldwide Developers Conference that we talked about going on, with Apple, oracle and Adobe releasing earnings. This week, perhaps the biggest economic event of the week is the Consumer Price Index for May, which is being released Wednesday, looking for that to increase 2.5% year over year, two-tenths of a percent more than in April. If you're looking at core CPI, we're looking at to be up 2.9, so core 2.9, headline number 2.5. Friday we get the University of Michigan releasing consumer sentiment for June, looking for that to be roughly even with May, which would be 52.4.
Keith Lanton:So where to look in the equity markets, barron suggesting considering defensive stocks. Why they have this conclusion? Well, the S&P is up about 18% from its April low. It's banging against that 6,000 level, which is psychologically important. As we talked about the industrial sector, spdr ETF is up 23%. Consumer discretionary is up 22%. Consumer staples is up just about 8.5%. Utilities are up about 12%. And if we take a look at valuations, well, the consumer staples sector, which owns things like Coca-Cola, walmart and Procter Gamble, is trading at around 19.9 times earnings estimates for the next 12 months, with the S&P trading at about 21.4. This defensive group is trading at a discount to the overall benchmark. What's more, staples traded with a PE ratio of nearly four points more than the S&P 500 when we had a pullback in 2022. So that suggests there could be some upside for this group if we were to experience a pullback in this environment as again, we bump up against the 6,000. We'll see if markets have the oomph to push through.
Keith Lanton:All right, I will conclude here by talking a little bit about Berkshire Hathaway and companies that are sizing themselves up to be contenders, or perhaps stepping into just a little tiny piece of the shoes of Berkshire Hathaway and Warren Buffett. Obviously, stepping into Warren Buffett's shoes is something that I don't think anybody would be bold enough to think that they could do. So, as Buffett seeks to retire as CEO of Berkshire, we're putting a spotlight on a group of companies that plan to use the Oracle of Omaha strategy of combining insurance and investments. Of course, it sounds a lot easier than it is.
Keith Lanton:Buffett's secret to success and returns was combining investments with insurance. He bought a property in casualty insurer soon after taking control of Berkshire in 1965. Insurance premiums don't need to be paid out until the claims, which are usually years in the future. In the interim, buffett had this idea that he would take those insurance premiums and he would buy stocks like Coca-Cola, burlington Northern, recently Apple, and this created a virtuous cycle as profits were generated and retained and used to make even more investments. Certainly, they had to pay out some of those insurance claims, but it wasn't for quite some time time value of money and Berkshire was able to generate very nice returns for investors despite having to pay out those insurance premiums. Berkshire stock returned 20% annually over the past 60 years versus the S&P 500, which was at about 10%. So this approach now seeking copycats being used by alternative asset managers like Apollo and KKR, as well as billionaire investor Bill Ackman, who recently turned his investment into Howard Hughes Holdings, seeking approval to turn that real estate company into a mini Berkshire with an insurance business Also.
Keith Lanton:Other companies that use a similar strategy that have been at it for quite some time are Markel Group, fairfax Financial Holdings and Lowe's, and I will focus on the ones that have been doing it for a while, that have an impressive track record and perhaps aren't seeing this as a way to achieve juicy returns for themselves. Obviously, they'd still like to return juicy returns for you, their investors, but some of these folks who are entering this space today arguably could be using it opportunistically. So let's take a look at some of the companies that have been doing it for quite some time. One of those is Fairfax Financial Holdings. The symbol is Frank Roger, frank Hotel, frank that last F there because Fairfax is a Canadian company. The founder and CEO. His name is Watsa. W-a-t-s-a has been labeled in the past as a Canadian Buffett. Fairfax has generated phenomenal long-term returns, compounded annual rate here, of 19.2% since 1985. Not that far off from Buffett's 20%. Founder, chairman and controlling shareholder, watsa has assembled an impressive group of property and casualty insurers with $30 billion in annual premiums that's about a third of Berkshire Hathaway's numbers and he has made some shrewd, diverse investments within his company. In fact, fairfax has a Berkshire connection with David Sokol, who once led Berkshire Hathaway Energy. Sokol now heads Poseidon, the world leader in container ships, and Fairfax holds a 43% stake in that private company. Fairfax aims to boost book value by 15% annually, which it has achieved over the past six years. If you're thinking about Berkshire, it'd be tough for them to grow their book value meaningfully higher than the S&P 500. They've targeted 10% year over year book value growth.
Keith Lanton:Over at Berkshire Markel M-A-R-K-E-L stock symbol there is, m-k-l has done more than any company positioned itself as a mini Buffett. They operate a property in casualty units and they have a $12 billion equity portfolio and their largest holding in their equity portfolio is Berkshire Hathaway. Markel has piggybacked on Berkshire for 34 years by holding a popular Sunday brunch in Omaha when Berkshire's annual meeting is taking place. Their CEO, mr Gaynor he does a folksy newsletter in the Buffett vein. Markel has a superb long-term track record. The stock is $1,950. They went public in 1986 at $8.33. So they've experienced a 15% compound annual rate against about 11.7% for the S&P 500.
Keith Lanton:And finally, I will conclude with talking about Lowe's L-O-E-W-S, not L-O-W-E-S. The home improvement company Lowe's is run by Ben Tisch, third generation Tisch to run Lowe's, and what he has been doing at Lowe's is he has been growing the numerator and shrinking the denominator. What that means is he's been growing earnings and he's been shrinking the share count because he's been buying back stock because he thinks it's his best investment, something Buffett has done at times. He's cut the share count by a third since 2018. Ben Tish is 43 years old and Lowe's has three main assets Boardwalk Pipelines, lowe's Hotels, whose flagship is the Regency, and they own a 91% stake in property and casualty insurer CNA Financial Group. Cna is solidly profitable. Boardwalk is benefiting from rising demand for gas and Lowe's Hotels does offer a play on the new Epic Universal attraction in Orlando, florida. They own and operate 50% of the hotels there. They partner with Comcast.
Keith Lanton:Lowe's has a strong balance sheet $2 billion in cash and investments at the Lowe's parent company. The company highlights what it calls the Lowe's discount, which is the stock trading below what management views as intrinsic value. Stock trading below what management views as intrinsic value. Boyer Research put the company's intrinsic value at 121 versus the current share price of 89. Lowe's trades at about 10 times earnings and they continue to buy back stock. They bought about 2% of the outstanding back just in the first quarter. No Wall Street coverage for Lowe's, perhaps the biggest company on Wall Street. About an $18 billion market cap with no formal coverage, perhaps creating an opportunity for individual investors to consider the stock without getting lots of attention from other institutional investors. 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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