Enlightenment - A Herold & Lantern Investments Podcast
Enlightenment - A Herold & Lantern Investments Podcast
Oil, Bonds, and Resilience: Financial Markets Amid Middle East Escalation
June 16, 2025 | Season 7 | Episode 23
Financial markets are navigating a complex landscape of geopolitical tensions, monetary policy uncertainty, and technological disruption with remarkable resilience. Despite Israel's strikes on Iranian nuclear facilities triggering initial volatility, investors have demonstrated measured responses – a significant departure from the panicked selling that characterized previous global crises.
The Israel-Iran conflict represents a potential flashpoint that could dramatically impact energy markets, with worst-case scenarios potentially driving oil prices to $120-130 per barrel if the Straits of Hormuz were compromised. Yet markets appear to be pricing in a contained conflict, with the VIX "fear gauge" elevated but nowhere near panic levels. As Jim Cramer astutely observed, "Sometimes the hardest thing for a long-term investor to do is to do very little" – advice that captures the disciplined approach many investors are adopting in this uncertain environment.
Meanwhile, the Federal Reserve's upcoming meeting promises to provide critical insights through the updated "dot plot" showing FOMC members' interest rate projections. Previous expectations for two rate cuts in 2025 may be revised downward, especially as inflationary pressures persist and geopolitical tensions add further complexity to the economic outlook.
Perhaps most fascinating is the technological revolution unfolding in search and information discovery, with Google facing unprecedented competition from AI alternatives like ChatGPT and Perplexity. This shift is creating winners and losers across the digital landscape – companies heavily dependent on search traffic (like Tripadvisor and news sites) are experiencing dramatic declines, while those with direct consumer relationships through apps (like Airbnb and Meta) stand to benefit.
For investors seeking shelter from volatility, the fixed income market offers compelling options. Short-term Treasury ETFs yield 4.2-4.3% with minimal risk, while municipal bonds present exceptional value for high-tax-bracket investors, with AAA-rated long-term munis offering taxable-equivalent yields of 8-9%.
What's your investment strategy in this complex environment? Are you making tactical adjustments or maintaining long-term discipline? Share your approach and join the conversation about navigating these unprecedented market conditions.
** 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 16th. Hope everyone had a fantastic weekend. Here we are halfway through the last month of the second quarter as we approach the end of the second quarter of 2025.
Keith Lanton:Obviously, a lot to talk about this morning, with the events at the end of last week in the Middle East and the impact of the financial markets. Of course, that's on top of everything else that's going on in the world, which includes the big, beautiful bill, the continuing conflict between Russia and Ukraine. Over the weekend we had some political violence here in the United States. So a lot to talk about, a lot to focus on. We're going to talk about the equity markets, markets resilience, what investors should more strategic asset managers may want to take with the events unfolding in the Middle East and what it may mean for portfolios in the short term and the long term. And then we'll talk about the financial markets overall trajectory, give Barron's opinion and outlook, and we will talk about two stocks that have gotten a lot of attention over the last 18 months. One of them is Google and the other is Charles Schwab. And then we will talk about the bond market, the municipal bond market. We'll talk about that. We'll also talk about the short-term treasury market as well, two places based down in Vero Beach, florida. Some of their representatives and their clients are joining us today and we welcome them to the Herald and Lantern family. John Weir, john Honan, as well as John Albert and Mark Weir will be joining us today, so I want to extend them a warm welcome and look forward to working with them and all of the clients at Securities Research. So very excited, a great opportunity for us here at Herald-Lantern.
Keith Lanton:So let's take a peek here at what's going on. This morning we are seeing futures rebound oils falling. Right now markets are betting that the Israel-Iran conflict will remain. Limited Markets taking some comfort, let's call it, from the fact that over the weekend Iran either because they couldn't or they chose not to has not taken any action to potentially draw the United States, at least at the moment, into the conflict, and that's therefore giving market participants some belief that perhaps the conflict will remain between Israel and Iran, which certainly still has lots of risks and concerns to it. But at the moment some of the worst fears and the possibility of those worst fears, like mining the Straits of Hormuz or attacking ships through the Persian Gulf, where 20 percent of all oil flows through that. At the moment, markets have taken back some of their worst-case scenario that was being thought about on Friday.
Keith Lanton:Of course, things can change at any moment. So Barron's saying that the Israel conflict is just a setback on the S&P 500's path to 7,000. They say that Israel's attack on Iran doesn't change the fact that the stock market looks intent on trading at a new high. Yes, the S&P was still on track last week and did eke out a gain for the week, while the Dow was down about half a percent. Nasdaq was down like two-tenths of one percent, and this despite the fact that we had Israel attacking Iran's nuclear facilities in an effort to ensure that Iran, at least in the immediate future, does not have a nuclear bomb to pose an existential threat to the state of Israel and to the rest of the world.
Keith Lanton:Of course, the possibility of escalation still looms. The escalation did send the price of West Texas Intermediate Crude Oil up about 8.5% last week to around $73.80. As I mentioned, we are seeing oil down about $ cents this morning to 72.22. And, as I said, the worst case scenario where Iran closes the Straits of Hormuz and other Middle East producers in the United States get dragged into the conflict. If something like that were to happen, morgan Stanley suggesting that the oil prices could spike up to 120 to 130 dollars a barrel. Obviously that would push inflation higher. That's one of the reasons.
Keith Lanton:What we saw last week was we saw the bond markets sell off despite the fact that we had a risk-off event. Typically, that causes bond markets to rise as investors rush to the safety of US government bonds. But on Friday we saw, with the rise in the price of oil, there was more of a concern about stagflation, meaning a slower economy because of the rising prices of oil, the uncertainty because of the rising prices of oil and, of course, the uncertainty about war in general. And then the effects that the higher oil prices would potentially have on inflation, causing the bond market to actually pull back. The strategist at Morgan Stanley, natasha Knieva, who talked about that price of $120 to $130 in a worst-case scenario I don't know how she comes up with this exact number, but she does and says that there's about a 17% chance of that worst case scenario coming to fruition. Perhaps that percentage changing this morning after some more information over the weekend. And if you're wondering what happens when oil prices spike, well, since 1985, the S&P has averaged a 3.6% gain during the three months after oil rises 5% or more on a single day.
Keith Lanton:So we talked about the fact that we had this uncertainty. Typically it results in a flight to safety, which means the treasuries rise, the dollar rises, but we did not see that to the typical extent, perhaps because of the trade tensions, the tariffs and the uncertainty about the trajectory of the dollar, or perhaps for just the fact that the markets weren't quite as scared as the experts thought that they would be. At the first blush, the dollar index, which represents the dollar's value against a basket of currencies, barely rose from a three-year low on Friday. We mentioned stocks on Friday. We mentioned stocks on Friday did slip. The S&P on Friday was down 1.19%. Perhaps some of that was also because we were going into the weekend. Take some money off the table. You know you got two full days of uncertainty before you. Perhaps this morning, after waking up and seeing what things look like, perhaps some of the money that came onto the sidelines is getting redeployed after things didn't unfold as bad as could have been, at least at the moment.
Keith Lanton:So the inflationary impact of tariffs and possibly the cost of energy costs will figure in to the Federal Open Market Committee's deliberations this week. The Federal Open Market Committee on Wednesday is going to come out with their decision on interest rates, widely expected to hold interest rates unchanged. But what we do get is we do get the dot plot this time, meaning that the Federal Reserve members will tell us each what they think interest rates will look like. We won't hear from each member of the Federal Open Market Committee what they personally think, but we will see an aggregation of what they think in terms of where they see interest rates going forward. They will release what's called a dot plot, which will be little dots indicating where they see future interest rates, and that is something that the market will be acutely focused on. You may remember that the last time that the dot plot was released, it looked like the Federal Reserve at the time was expecting there to be two interest rate cuts here in 2025, with the expectation that interest rates would be somewhere in the 3.9% range. Market participants will be paying extra close attention to that in the wake of recent events. Some, prior to this event in the Middle East, were expecting this dot plot to show that perhaps we'd only get one rate cut here in 2025, not the two. That was priced in by the Fed at the last meeting. So we'll see if there's any change there. Of course, we also had in the interim President Trump quite heatedly suggesting that the Federal Reserve was behind the curve, not lowering interest rates fast enough, and we will see what his take will be on what the Fed has to say and what they're positioning in terms of their mindset going forward, what that may mean for how he's feeling about the financial markets.
Keith Lanton:So what to do? Markets showing lots of resilience. We're trading at 21 to 22 times forward earnings, which historically is fairly high. We're in a very uncertain environment with respect to the geopolitical world. Very uncertain environment with respect to the geopolitical world. Of course, the Russian and Ukrainian conflict even getting arguably pushed to the back burner. We got G7 meeting going on this week where President Trump is going to be meeting with leaders of the other major economies. And of course we've got renewed conflict in the Middle East, iran getting a lot closer to a nuclear bomb than many had thought just a few months ago and Israel taking action to neutralize that. And right now we're looking at a situation where, if you went back a year, two years, three years and you said that there was going to be a war between Israel and Iran. That would have been an extremely frightening prospect. And here we are.
Keith Lanton:So Jim Cramer, to his investing club, did a good piece on Friday and he said sometimes the hardest thing for a long-term investor to do is to do very little. Let's paraphrase With stocks down last week, it's tempting to buy the dip, he said, or bail out before it gets any worse. And he said, in his opinion, neither option makes sense at this time. We saw gold rise. It was up 1.7% on Friday, it was up 4% for the week and it was within striking distance of all-time highs set in April. We saw the dollar, as mentioned, not rise as much as expected but get a little bit of a bump. But perhaps most importantly, what we didn't see is we didn't see the VIX, also known as the fear gauge, rise dramatically. It did get a bump to 20. Rise dramatically, it did get a bump to 20. But, as he points out, jim Cramer, that's still a way off from the 30 plus level when fear truly grips the market.
Keith Lanton:So he says what does this tell us? Well, for starters, averages are still only within single digit percentage points of all times highs. We're not exactly in a panicky market. Rather, the market sell-off on Friday looked very orderly and, for those of us who can just think back to panics pretty recently, what we tend to see during a panic is where correlations go to one, and what he says is that means that assets, even those that are usually inversely correlated, like, let's say, gold, they would all move in the same direction and that would be down as investors rush for the exits. That clearly was not the case on Friday. It's clearly not looking like the case this morning, as we see him move to the upside, at least at the open.
Keith Lanton:So why is this? Well, I think one of the points he makes makes a lot of sense is that investors are learning to be a lot less reactionary. Investors sold more aggressively when Russia and Ukraine conflict started. Investors sold extremely aggressively at the start of COVID. Investors sold aggressively this year on Liberation Day, when President Trump released his tariffs against most countries in the world, and what the market has learned is that knee-jerk reactions typically usually not always, but typically don't work out well for investors, and perhaps investors are being conditioned not to react so vehemently to events, and perhaps this is one of the reasons why we are not seeing such a big reaction Now.
Keith Lanton:He goes on to say that doesn't mean you can't make buys and sells. But what he does say is that if you are investing for the long term, this is not the time to rush in, make sweeping changes for your portfolio. He says we're too early into this conflict to really rush to judgment. As Warren Buffett once said, investing is simple but not easy. The key is to have patience and discipline. The simple path is to keep your focus on sales and earnings. Watch the news flow and ask yourself what it means for the sales and earnings of your investments, both in the near term and long term. He says.
Keith Lanton:As long-term investors, we have the luxury of accepting some immediate pain as long as the future looks bright. At the same time, plan for the worst by having enough cash at the ready to either ride out a prolonged pullback or do some buying as more attractive levels are reached. The not easy part is battling your fear and keeping your cool. He goes on to conclude for now, it's all about patience and discipline. Stay the course, focus on the fundamentals and secular trends, which are currently artificial intelligence, and remain patient as we all await more information. I think that is very good advice. So let's take a look at where we are. This morning I mentioned futures higher Dow futures up about 260 points. S&p futures up 38. Nasdaq futures up about 173 points. Oil right now is at the lowest levels that I've seen this morning, down $1.45. This is Brent oil to 71.5 a barrel and we are seeing the 10-year Treasury yield tick slightly higher, up one basis point to 4.43.
Keith Lanton:The market is likely to remain fixed on the headlines related to the conflict in the Middle East, especially since today's economic data is limited to the release of the Empire State Manufacturing Survey, which came out at 8.30, typically not a market-moving event and I'll just take a look at that here as I'm speaking here and give you just a quick summary of what that number came in at While I'm waiting for that to come up. I will mention that the Asian markets closed higher. The big headline there was that Chinese retail sales were up 6.4%. The market was looking for 4.9%, european markets trading in the green, up anywhere from 4 tenths to 7 tenths of a percent. The June Empire State Manufacturing came in minus 16. Expectations were for that to come in around minus 6.5%, so weaker than expected, although that number doesn't get a whole lot of attention, as Empire State Manufacturing is not a huge component to the US economy.
Keith Lanton:Some other factors, some geopolitical news. Over the weekend President Trump said in an interview it is possible quote-unquote the US could get involved in Israel's military operations. President Trump says Iran and Israel should make a deal and, he said, will make a deal. He said if the US is attacked in any way, shape or form by Iran, the full strength and might of the US armed forces will come down on you at levels never seen before. New York Times talking about Israel targeting oil and gas installations in Iran. Reports over the weekend that President Trump privately rejected a proposal from Israel to kill Iran's supreme leader, ayatollah Ali Khamenei. Reports that Israel had his location and possibly could have had him killed, but reports that President Trump said that they should not do that.
Keith Lanton:German newspapers saying that the European Union is ready to accept a 10% tariff rate from the US under the right conditions. Bloomberg talking about the G7, which has taken place this week in Canada, and saying that Japan and the US will try to reach a trade agreement at this event. If you're looking at the broad picture on President Trump's approval rating, it remains unchanged to 45 percent. The majority of Americans approve his immigration policies, amid nationwide protests over those policies, and 40 percent approve of his tariffs. So a big difference between approval on immigration and approval on tariffs. Over the weekend we had a killing of Minnesota State Representative, melissa Hortman, and that suspect is now in custody. Senate Majority Leader John Thunen in an interview said he believes the House and Senate will reach a compromised figure on state and local tax deduction and says the Senate will work through the July 4th recess to make sure a reconciliation bill can pass. That's according to Fox News.
Keith Lanton:And then reports about the Iranian nuclear facilities. The International Atomic Energy Agency says, based on all available information, four critical buildings at the Ashfahan nuclear site were damaged yesterday, including the uranium conversion facility and the fuel plate fabrication plant. At another site at Natanz. No increase in off-site radiation has been detected at this time. Bloomberg talking about the crackdown on illegal immigrants in the United States, mentioning that one of the big knock-on effects is that there is a growing shortage in the home, health care and personal aid market. Lots of these folks are undocumented immigrants and this is leading to some long-term care facilities to be struggling to find employees or people willing to work there. Up to 40% of home health aides, 30% of personal care employment is amongst foreign-born folks. Initial reports from some locations that they are not taking in new residents due to shortages of help. Shortages of help Stoxyrepta, srpt is down this morning after a second patient died from their gene therapy treatment. That's having to do with a form of muscular dystrophy. This patient died of acute liver failure for their gene therapy and this stock had risen significantly on hopes of success of this product, although there were known concerns about liver toxicity. Nevertheless, this is having a significant effect on the stock price of SRPT.
Keith Lanton:This week we get the Census Bureau on Tuesday releasing retail and food services. For May we're expecting a six-tenths of one percent month-over-month decline. And then, as I mentioned, on Wednesday, federal Open Market Committee, announcing its monetary policy decision, talked about the fact that we are looking for no change in the interest rates. But Fed will tell us what they think. That's what the market thinks On the markets. We'll be looking at the commentary from Fed Chair Powell very closely. We are seeing some cracks, some slight pickup in weekly unemployment claims. See if that potentially will affect Chairman Powell and the Fed's thinking Changing tracks here to Barron's and the two companies in the news.
Keith Lanton:One is Google, the other one I mentioned Charles Schwab. I'm going to talk a little bit about Google because of the influence of artificial intelligence and competing ways that folks are searching for information. Obviously Google under lots of competition, let's call it for the first time for folks when they start a search, many are now starting at ChatGBT or starting at Perplexity or Anthropic, or at Facebook's large language model, meta. So lots of new ways to do search and Barron's has an interesting take. And Barron's has an interesting take. Google certainly has a foot in the door, so to speak, when it comes to artificial intelligence. Google's product is Gemini. Based on its current valuation, will certainly suffer from increased competition. They feel that a good chunk of that no one knows for sure is priced into the stock. But what they think is that the effects of Google's Loss of being the let's call it the primary source of search perhaps is not priced into some of the companies that benefit from advertising on Google.
Keith Lanton:So roughly one in five visits to the world's top Internet sites begins on search engines. Wikipedia, for example, generates 63 percent of their global visits from search, tripadvisor 58 percent, yelp 51 percent. Internet traffic at search has been falling for much of the past year due to competition from artificial intelligence apps like ChatGBT and Perplexity. So so far, referrals from AI search and this is an important fact, so searches from AI search have replaced 10% of the loss from searches on traditional search, which typically is Google. So the fact that these websites are losing traffic because people aren't using Google search as much. They are not capturing that back because people are doing search on artificial intelligence websites and therefore they are losing traffic. Now Google itself has been pushing back by adding AI-powered summaries to the top of its search results.
Keith Lanton:Last month, search referrals to top US travel and tourism sites tumbled 20% year over year. E-commerce companies saw their referrals fall 9%. For news and media sites, search traffic dropped 17%. Last month, business Insider, a leading digital news publication, cut 21% of its staff signing drops that were outside of its control. Chegg, a homework help company which gets a good chunk of its referrals from search, is having an existential crisis. They are also under siege because lots of students are able to get the answers to their homework through artificial intelligence, less people coming to them through search and less people needing to even use their services because what they provide can be found for free using artificial intelligence. Now Google itself they've basically gone into countermeasures.
Keith Lanton:Barron says it is diversified into a cloud computing giant. It is one of the winners in the early category of autonomous driving, and Google is no slouch in the generative AI world, with massive resources to build and improve its Gemini large language models. So Barron's concluding as search fades in importance, it's more the rest of the internet that will suffer. In May, monthly US search traffic to Schwabcom fell for the first time in two years. A year ago, search referrals to Schwab were up 179 percent. Tripadvisor search tumbled 34 percent in a month, starbucks saw a 41 percent decline in its website, and even Netflix said that their traffic from search was down 23 percent. So executives are trying to make deals with open AI, chat, gbt, perplexity and other AI-driven search tools, and are building new experiences to connect with travelers outside of their ecosystem. So then the question becomes which companies are best able to withstand getting less traffic from search, which companies get the least referrals from search? And what the article concludes is companies like Airbnb and companies like Meta and the applications within the Meta universe. Those are the companies that derive a lot of their traffic directly from their own apps and aren't as reliant on search, perhaps one of the reasons that Meta stock has held up so well in the face of competition.
Keith Lanton:Some are even suggesting that Meta is a big beneficiary of artificial intelligence, because not only do a lot of their folks come to them directly without using search, the other factor here is that Meta can also use artificial intelligence to more effectively target you in ads, getting all this information very rapidly, and therefore benefit not only from the fact that people come directly and the fact that advertisers know that Meta's got such targeted information that they can use that information even more precisely to pinpoint you so directly. And what's ironic here is you may remember that Google was no longer sharing information on folks who came to their website with other third-party providers like Meta. That led to a significant drop in the stock price of Meta, all the way down to about $90 a share, maybe two years ago. And here we have such a fast turnover, such a fast change. And here we are two years later and the search is a lot less relevant that data sharing less relevant, in fact, the countermeasures that Meta took to offset some of the concerns and fears having to do with not getting information for folks who were doing searches coming to Meta's website. Now that's working to Meta's favor and advantage and Meta's viewed as the big beneficiary of the new world and search engines like Google seem like they're more under siege. So within two years we've had a complete reversal. Just shows you how fast things change in the tech world and you need to be mindful of how fast things can change and what the impacts can be and try and see around those corners.
Keith Lanton:All right, real quick going to talk about change gears to Charles Schwab. Barron's out favorably on Schwab stock SCHB saying they've recovered much of its losses from its cash sweep issue and the shares could reach a new time high soon. If you were to back up, a year ago the interest expense of Charles Schwab was about $1.7 billion. In the second quarter this year that interest expense is down to $1.05 billion, so Schwab significantly lowering their interest costs. Also, schwab, which was having a big concern about the fact that folks were staying away from Schwab's low-interest cash sweep and were moving funds to a higher-yielding money market, something you have to do manually at Charles Schwab. The default cash sweep is a very low interest product. We were seeing lots of money moving out of these low interest rate products, where Schwab makes a significant margin, to money markets that pay a higher rate and Schwab makes a lot less of a margin. We have seen the movement of those funds. Most of the folks who are going to do that have already done it, so we're not seeing a trajectory where things are getting worse in terms of the cash sorting that was taking place at Charles Schwab. The stock is expected to grow sales 8% through 2030, trades at about 19 times forward earnings in line with its five-year average, and Barron's concluding that there is room for expansion both in earnings and sales, and potential PE expansion, which could lead to more upside in the months ahead.
Keith Lanton:Finally, I'm going to turn to the bond market. I'm going to talk about opportunities on the short end of the bond market and opportunities on the long end of the bond market. So I'm going to start with the short end. Then I'm going to talk a little bit about the long-term opportunity and longer-term municipal bonds Brad here at Herald and Lantern, our fixed income director over the weekend talking about some of those opportunities as well. So let's talk about the short end first and the short end opportunities in government treasury bills, which are government bonds maturing in less than a year, which are for security and yields. Depending on, which is one of the widest gaps that we've seen between the inflation rate and the rate that you're earning in Treasury bills, therefore making Treasury bills look attractive relative to historic norms over the last 20 years. Berkshire Hathaway CEO Warren Buffett has long stashed the bulk of his company's cash reserves in Treasury bills, holding over $300 billion of bills, or about 5% of the entire $6 trillion T-bill market.
Keith Lanton:Most individual investors have a good chunk of their money in money market funds, but we're seeing some of those money market assets move into the treasury bill space, and Barron's talking about the emerging trend to not necessarily buy individual treasury bills but to own ETFs of treasury bills. Now the ETFs of treasury bills right now represent about $100 billion in assets. Again, compared to the $7 trillion in money market funds, that is a relatively small amount. And Barron's talks about three different ETFs. On the short side of the T-bill market there is the zero to three-month treasury bond ETF that is issued by iShares the symbol is SGOV. Then there is the SPDR Bloomberg one to three month T-bill ETF and then finally they talk about the Vanguard Ultra Short Treasury ETF that symbol VGUS. The SPDR Bloomberg, one to three month T-bill the symbol is BIL there, so pretty easy to remember and the zero to three month offering from the iShare is S-G-O-V. The iShare is the largest of the three at $48 billion in assets, the Spider Bloomberg's about $44 billion in assets and the Vanguard, which is just getting launched, is under $1 billion in assets. All three of them yield anywhere between 4.2% and 4.3%. So that's the short term.
Keith Lanton:Let's talk a little bit about the. You have an opportunity in the municipal bond market to get historically higher interest rates than we've seen in a long time, and Brad said over the weekend that he believes that we need to get through our national budget negotiations, weakening dollar, inflationary concerns, geopolitical tensions as well as domestic tensions, before we can move forward with more confidence and breathe easy. At the same time, because of this, bonds, he said, have not been getting the flight to quality bid that one would have expected to see rush to bonds, highlighting this fact. But perhaps that mentality could shift over the next few months. But if you're speaking specifically about municipal bonds, brad, pointing to Barron's article that says munis are cheap, here's what to buy.
Keith Lanton:Munis have seen a flood of new issues this year, overwhelming otherwise healthy demand for tax-free bonds and leading to stagnant returns. Quoting Brian Barney, who is an institutional bond portfolio manager at Parametric Portfolios, that it's been raining bonds for weeks. One week in early June, muni issuance reached a record of $20 billion. Reached a record of $20 billion. That flood of supply is a big reason that muni yields have remained at lofty levels, even as virtually every other asset class has more than recovered from its April losses. So municipal bonds have stabilized. They're not selling off at the moment but they have not bounced back since Liberation Day as much as other assets.
Keith Lanton:So if you're saying well, how attractive are municipals relative to historic measures, long-term munis and that's really where the opportunity is outside of 10 years, inside of 10 years, not as much of an opportunity, at least relative to taxable investments. The long-term munis, the article says are especially attractive in an average yield of 4.6% for AAA assets, compared with a 30-year treasury yielding 4.8. So if you're earning 4.65 and you're in a high-tax state, well, that's like getting 8% to 9% on a taxable investment and that's in a super high-quality bond. That's AA or AAA rated, aa or AAA rated. So article points out that the yield curve in the municipal space is very steep and that the opportunities are there and they begin to really manifest themselves when you start going out beyond 10 years and the opportunities ratchet up proportionately if you go out 15, 20 or 25 years.
Keith Lanton:Of course, as you go out, the bonds are significantly more attractive in the municipal space than other fixed income debt, but that doesn't mean that they do not carry interest rate risk. They do, just like all those other alternative bonds. So while they are relatively attractive and the word is relatively to other fixed income investments, you do have to be mindful of the fact that when you are extending maturities, you are taking on interest rate risk. What does that mean? You did not hold the bonds to maturity and had to sell them before maturity in an interest rate environment where rates were higher, because higher rates lead to lower bond prices. On the flip side, if interest rates were to become more tame and inflation was to be corralled, well then you could see significant price appreciation on longer-term bonds if and this is a big if if they are not callable in the near term.
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. The material does not constitute research, investment advice or trade recommendations.