Enlightenment - A Herold & Lantern Investments Podcast

Are You Really Diversified? The Hidden Truth Behind Index Investing

• Keith Lanton • Season 7 • Episode 31

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August 18, 2025 | Season 7 | Episode 31

The financial landscape is undergoing a remarkable transformation that demands our attention. Tech stocks have quietly reshaped the S&P 500, creating a concentration that challenges traditional notions of diversification. What many investors don't realize is that technology now represents a staggering 45% of the index when accounting for companies like Meta, Alphabet, and Amazon—despite their classification in other sectors.

This concentration creates striking imbalances. Nvidia alone, with its $4.5 trillion market cap, nearly equals the entire healthcare sector and triples the influence of all energy stocks combined. For those seeking true diversification, deliberate allocation to underweighted sectors may be essential. Healthcare stocks are trading at 30-year relative lows according to Goldman Sachs, while energy giants offer attractive valuations at approximately 15 times earnings with dividend yields around 4%.

Significant tax changes for charitable giving in 2026 create planning opportunities now. Non-itemizers will gain access to new deductions for cash donations, while itemizers will face new floors on charitable deductions. Consider front-loading donations to donor-advised funds this year to maximize benefits before these changes take effect.

The historical perspective remains instructive. Warren Buffett's Berkshire Hathaway demonstrates the extraordinary power of compound returns—even if the stock hypothetically dropped 99%, long-term investors would still outperform index funds by 40%. Meanwhile, Kodak's failure to successfully transition despite pioneering digital imaging technology serves as a cautionary tale for today's tech giants.

For retirees, the sustainable withdrawal question has new answers. Bill Bengen now suggests safe withdrawal rates between 4.7-5.25% for balanced portfolios, higher than the traditional 4% rule, offering potentially greater sustainable income in today's interest rate environment.

How diversified is your portfolio really? Are you positioned to navigate upcoming tax changes? These questions deserve careful consideration as we adapt to an evolving financial landscape.

** For informational and educational purposes only, not intended as investment advice. Views and opinions are subject to change without notice.

For full disclosures, ADVs, and CRS Forms, please visit https://heroldlantern.com/disclosure **

To learn about becoming a Herold & Lantern Investments valued client, please visit https://heroldlantern.com/wealth-advisory-contact-form

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Alan Eppers:

And now introducing Mr Keith Lanton.

Keith Lanton:

Good morning. Today is Monday, August 18th, just about halfway through the third quarter of 2025. Certainly, this has not been a quiet summer. The first six weeks of the third quarter have certainly been filled with lots of financial and geopolitical news, having outsized effects on your investments, in your portfolio, and we will talk about where we've been and possibly where we're going this morning. Try and create some perspective on the financial markets. Certainly a lot going on in the world with geopolitics, with tariffs, situation between Russia and Ukraine, president Trump meeting with Putin and today meeting with Zelensky and European leaders, the White House, to what's taking place in financial markets, what's taking place geopolitically, how to position your portfolio, whether or not we're in a situation where we have a lot of optimism, perhaps built into expectations, and what that means for financial assets and financial asset prices Starting to see.

Keith Lanton:

Some well-respected strategists suggest that asset prices have reached levels that are too high for too long and perhaps warrant some diversification. We've heard those predictions before and so far this year they haven't been accurate. Despite the tariff liberation day sell-off, we saw a very big bounce in recovery, but we're hearing, in my opinion, louder and more vocal discussions about valuations and concerns. Discussions about valuations and concerns Goldman Sachs last week out suggesting that we may see a 10% or 20% pullback in financial markets over the next several months or before year-end. Not predicting that will happen, but seeing the odds of that happening have increased.

Keith Lanton:

So I'm going to take us through what was in the Wall Street Journal and talking about the stock market and some of the expectations and notions that we may have, and give you a couple of items to think about. This one we've touched on a little bit before in previous discussions, and that is if you were to go back to 1925 and you were to invest $1,000 into the market, what stock would have given you the greatest returns? Would it have been Coca-Cola? Would it have been Nvidia, altria or Apple? And the number one performer since 1925, by a wide margin, is Altria.

Keith Lanton:

Let's talk about Berkshire Hathaway. Let's talk about Warren Buffett and let's talk about the returns that he has generated since taking over Berkshire Hathaway in 1965, so just about 60 years ago. And speaking of Berkshire Hathaway, despite the fact that Warren Buffett is retiring, barron's just past weekend spoke favorably about Berkshire Hathaway. But let's just talk about these numbers and these metrics. So you may remember, there was a little bit of a flash crash in Berkshire Hathaway stock last June. If you're watching the share price, momentarily it dipped 99%. No, you couldn't have bought it down 99% because all the trades that took place at that price were not honored, but the stock did plunge 99% due to a computer glitch. Now what if that really happened? Would, instead of crushing the stock market returns since he took over as CEO at Berkshire Hathaway, if the stock had sold off 99% a year ago or even tomorrow, how would your returns in Berkshire Hathaway have looked relative to the financial markets? Would you have been down 90% instead of 99%? Would you perhaps have 50% less wealth even though the stock's down 99%? Would you be down only 50%? Well, the answer is that if Berkshire stock were to drop 99%, or had dropped 99% last June, you would still be 40% above an index fund investor. Just to give you a magnitude of the returns that Berkshire Hathaway has delivered on a compound basis, and just to say that, again, the stock dropped 99%, you would still have outperformed an index fund by 40%. To give some perspective on the importance not of individual stock selection but of picking the right asset allocation, to pick the best place to put your money not necessarily the best stocks to put your money in.

Keith Lanton:

And here is a fascinating thought process If, each year, starting in 1900, you started out with $1. So in 1900, someone gives you $1, and they say invest that $1 in the best performing asset class that's out there. It could be US stocks, could be British bonds. Every year you take that dollar, you invest it in the best performing. You take that $1 that you started with, you put it in the best performing asset class, perhaps at the end of 1900, maybe you've got $2, maybe $2.50, maybe $1.50. You take that total at the end of 1900 and 1901, you invested in what turns out in 1901 to be the best performing asset class. Now you've done that successfully for 100 years. It's the year 2000. Is that $1, $10 billion? Is that $1, $100 billion? Is that $1, $100 trillion? Well, again, asset allocation, asset selection most important, more so than individual stocks. You would have $10 quintillion, which is actually more money than actually exists in the entire world, in all currencies, in all investments, in all markets. But this is a thought exercise, once again demonstrating the importance of picking the right allocation to the right sectors, whether it's currency, whether it's fixed income bonds, whether it's equities, whether it's commodities, whether it's cryptocurrencies. Picking the right place for your assets to be deployed, not necessarily picking the best individual stock at the one moment in time.

Keith Lanton:

And here's a fascinating story about picking names for companies and one company that is ubiquitous. We see it everywhere. We think about it all the time. We probably shop there all the time. And that company is Amazon. And originally, according to this story in the Wall Street Journal, jeff Bezos' first choice was not to name the company Amazon. He wanted to call the company Cadabra, like Abra Cadabra, but a lawyer misheard it and heard it as Cadaver, not Cadabra, and therefore he chose to change course and said perhaps, if he made that mistake, perhaps someone else will make that mistake. Different name Pepsi, the original name for Pepsi Cola. In the 1900s it was called Brad's Drink. Nike was called Blue Ribbon Sports before taking on the name Nike.

Keith Lanton:

And one of the big nifty 50 technology companies in the 1960s that was the darling of its day, like the artificial intelligence stocks of today, is a company that became a verb, like Google. And that company is Xerox. But before Xerox was Xerox and before people said can you Xerox this? For me it's not much said anymore. The name of the company Xerox was originally the Halloyd Company. And finally, I just mentioned Google. Google was originally intended to have the name Google, so G-O-O-G-O-L, but it became Google because of the way people pronounced the name of the company.

Keith Lanton:

All right, let's transition, let's move to a whole different topic. Let's talk about something that many of us most of us engage in and that is charitable giving. And charitable giving is going to be influenced by the benefits that individuals receive from making donations and receiving tax benefits. And, starting Next year, there are going to be significant changes to the tax code when it comes to charitable giving, and this is important for you to recognize now because you might make some changes in your behavior here in 2025 based on what's going to happen in 2026.

Keith Lanton:

Deductions, which is about 90% of taxpayers.

Keith Lanton:

Now that the itemized deduction is over $30,000 for married couples, they will be able to deduct up to $2,000 for joint filers, $1,000 for single filers Not a large amount, but no amount can currently be taken by non-itemizers today.

Keith Lanton:

So if you're not someone who's itemizing your taxes, this is a meaningful win for you, and what that means is that, if you're thinking about making a charitable donation, important here important fact is this donation, in order to get this deduction starting next year, is it must be a cash deduction to a qualified charity, so it's not donating your household items, your clothing, to a cause that will not qualify, so this needs to be a cash contribution, cash gift to a qualified charity in order to start doing this. This is something perhaps that young people who currently do not receive any meaningful benefits, who probably don't itemize any meaningful benefits, who probably don't itemize Now they'll be able to receive benefit from giving to charity perhaps get them to be more charitably inclined at a younger age. So if you're thinking about making a cash donation to charity and you are an itemizer, a non-itemizer you're not itemizing your taxes.

Keith Lanton:

Depending on how much you typically give to charity, you might want to give more next year. So, for example, if you're married and you usually donate $1,000 a year in cash to charity, well, if you hold off that $1,000 this year and donate $2,000 next year, you'll get the benefit of a $2,000 deduction in this case if you are married. Now let's talk about those 10% of Americans that do itemize their deductions. Well, there are changes coming here as well. Next year will bring new caps and floors to their charitable deductions, which donors may want to avoid. So, starting next year in 2026, if you are itemizing this is if you're itemizing we just talked about if you weren't. Now, if you are only itemized, charitable deductions that exceed half of 1% of the taxpayer's modified adjusted gross income can be deducted, and that number goes up to 1% if you are a corporate entity. Anything that's below that half of a percent for an individual or below that 1% for a corporation, those donations will not be tax deductible. So, for the sake of example, if you've got a client or if you're an individual investor and you have adjusted gross income of a million dollars and you donate $10,000 to charity, well, in that case, that $10,000 deduction will not be deductible for you because 1% of a million is $10,000. That $10,000 is excluded. If you were to donate $25,000, you would take $10,000 off 1% of a million and you'd be able to deduct $15,000 for your tax benefit. So what you might want to think about perhaps, if you're a wealthy individual and this may impact you here you can donate funds this year to a donor-advised fund. You might front-load three, four, five years' worth of contributions. If you're somebody who's got $500,000 a year in income and you typically donate $5,000 a year to charity, 1% of $500,000 is $5,000. You will not receive the benefit of any deduction. Well, that $25,000 would be deductible in full this year and you could make your $5,000 charitable contributions over the next five years out of that donor-advised fund and take that deduction up front this year for your taxes. So some strategies that are real world may want to think about it. Real change is coming when it comes to charitable contributions and deductions.

Keith Lanton:

All right, let's see what's going on this morning. Let's take a look at the financial markets and then we will transition, talking about different sectors of the market, and then we'll talk about taking some money out of your retirement account. What's a safe withdrawal rate? We'll also talk about some mistakes that individuals make when it comes to their finances. If they're feeling a little bit flush, feeling wealthy, perhaps they are wealthy and some of the mistakes that come along with that potentially. But first let's take a look here. We're looking at the S&P futures down about eight points, modestly lower, about one-tenth of one percent. Dow futures are down about 15. Nasdaq futures down about 50 points.

Keith Lanton:

Last week we saw markets modestly higher, fueled by increasing rate cut expectations. The major averages last week eclipsed record high levels several times throughout the week before closing slightly lower on Friday. This week's action features a batch of economic reports, though the market anticipates the start of the Federal Open Market Committee's Jackson Hole Assembly on Thursday. This is when the Federal Reserve of Kansas City hosts lots of bankers from around the world, other Fed leaders, us Fed leader Powell among the most prominent, and he is expected to speak on Friday. This is often the event that the Fed chair uses to set up any new policy initiatives, any new thoughts on policy. So this event gets a lot of attention in terms of possible inflection points Doesn't mean there will be one, but markets will certainly be very keen to see what Chairman Powell has to say on Friday.

Keith Lanton:

Headline coverage this morning centered around the summit between President Trump and Russian President Vladimir Putin, new York Times reporting that President Trump will now pursue a sweeping peace agreement instead of a temporary ceasefire, which involves Ukraine ceding territory to Russia. What President Trump posted on Truth Social this morning was that Ukraine would need allow an Article 5-type security guarantee from the US to Ukraine. That Title 5 refers to NATO, which is an attack on one, is an attack on all. This Title 5-type agreement doesn't look like it would be within a NATO membership, because clearly we're talking about the Ukraine potentially not being in NATO, but perhaps an outside guarantee of some sort. So we'll see as the policy develops. There's also talk about freezing the front lines where they are now, which would mean that part of the Donbass would also be incorporated into Russia. So we will have more understanding as President Trump meets with European leaders and President Zelensky today, see what the reaction is out of Moscow and see if there's any hope of getting peace in that section of the world.

Keith Lanton:

Tesla in the news this morning. Reports that leases for Tesla vehicles in the UK. Prices are dropping. Reports that leases on Tesla vehicles in the UK are about 50% lower than they were a year ago, so if you're in the UK, prices are dropping. Reports that leases on Tesla vehicles in the UK are about 50% lower than they were a year ago. So if you're in the UK you might want to start looking at Teslas.

Keith Lanton:

Novo Nordisk, a company that makes GLP-1 weight loss drug higher after the FDA expanded the use of the company's weight loss drug Wagovi for the treatment of liver disease. Dayforce symbol D-A-Y, is trading sharply higher in the pre-market after reports that Thomas Bravo, which is a private equity firm, is in advanced talks to acquire the company. Taking a look at Asia-Pacific margins Japan up almost 1%. Record high in Japan automakers and bank stocks propelling that index higher. The Shanghai in China was up nine-tenths of one percent. Interestingly, the Hang Seng was down about four-tenths of one percent. Korea also lowered down about one and a half percent.

Keith Lanton:

European markets are trading tentatively ahead of the discussions here in the United States. The stocks European indices down about two-tenths of one percent. Oil trading modestly higher this morning. Now it's only up about 10 cents. Gold is up about $10 an ounce. Silver is up 19 cents and cryptocurrencies down significantly this morning after being weak. Last week at least. At the end of last week, bitcoin, which had topped out at around $124,000, is down around $2,500 to about $115,000. Ether down percentage-wise more. Bitcoin's down a little over 2%. Ether down almost 4%. Solana down about 5%. And this is after comments from Treasury Secretary Besant that the US wouldn't necessarily be buying more cryptocurrencies but would be holding on to cryptocurrencies that have been confiscated. That's been discussed before and then kind of rebutted, but some more clarification potentially there with respect to US policy towards investing in cryptocurrency.

Keith Lanton:

At the government level. Reports that Ukraine is considering President Trump's offer for security guarantees. Bloomberg reporting that President Trump will hold off on increasing China's tariffs because of purchases of Russian oil. That's in contrast to the tariffs imposed on India for purchasing Russian oil. California is going to vote on a new congressional map this week that potentially could help Democrats gain five House seats to offset Republican gains in Texas. If that vote succeeds, there will be a special election this November, according to the New York Times. New York Post is reporting that President Trump is moving closer to a decision that would reclassify marijuana as a less dangerous drug and CNBC is reporting that OpenAI CEO, sam Altman, believes that AI could be in a bubble.

Keith Lanton:

All right, let's take a look at the news this week. We are going to get lots of clarity on what's going on with the consumer. About 70% of US economy is consumer spending, so this is clearly significant. We're going to get earnings reports from some of the major merchants Home Depot on Tuesday, lowe's Target, tj Maxx TJX on Wednesday, target TJ Maxx TJX on Wednesday, walmart on Thursday and Thursday. Also Ross Stores. We are going to get, on Wednesday as well, the minutes from the Federal Open Market Committee from its late July monetary policy meeting, where they kept rates unchanged but had two dissenting votes. So there'll be lots of attention to pay to some of the details there.

Keith Lanton:

There will be lots of attention paid to some of the details there. Thursday, s&p is releasing the Manufacturing and Servicing Purchases Managers Index for August, looking for 49.9 for manufacturing and 53.4 for services. If you look at it in direction, manufacturing would be just a tick higher, but services would have ticked down almost two points if in fact the numbers come in as expected. And then we mentioned, friday, jerome Powell speaking at the Federal Reserve Bank of Kansas City's Economic Policy Symposium in Jackson Hole, wyoming the theme of this year's get-together, which runs from Thursday to Saturday is Labor Markets in Transition, demographics, productivity and Macroeconomic Policy. See, if you can remember that, a couple of statistics for this morning $1.1 trillion Trillion that is the forecast for US stock buybacks in 2025. That would be the highest number ever. $11 billion is how much SoftBank CEO Masahashi Son added to his fortune in August's first two weeks because of SoftBank's AI investments. And 54% is the share of Americans who told Gallup they consume alcohol a 90-year low. And if you are a Republican GOP drinker, it's only 46%. So it seems like the Democrats out there are drinking more than the Republicans, if the data is correct.

Keith Lanton:

All right, let's take a look at the financial markets. Let's take a look at what's taking place in the S&P 500. Barron said an interesting story where they broke down the composition of the S&P 500. And many of us have allocations to the S&P 500, perhaps in our everyday investments or even more likely, in retirement accounts 401Ks, 403bs and if we have those investments generally we're very pleased. The S&P 500 has moved up significantly, not just this year, but historically.

Keith Lanton:

But you got to keep in mind that there is a transition going on in the S&P 500 index. Barron's pointing out it is arguably turning into the S&P technology index. So if you're looking for diversification, you may think, well, investing in the S&P 500 is the way to achieve diversification. After all, it's the 500 companies. What could be better at diversifying my investments than 500 companies. How many more do I need? But you have to look at the composition and the weighting and Barron's suggesting that. If you do do that, look and we'll talk a little bit more about that you might want to think about adding to health care and energy stocks at this time, according to Barron's.

Keith Lanton:

So the S&P 500 rallied last week up 1.2%, hovering right near an all-time high at around $6,460. The index is up more than 10% this year and more than 30% from the April lows around that tariff turbulence. Now why are we up so much? Well, we kind of covered it, but tech stocks NVIDIA, microsoft, palantir powering the move in the S&P 500, and they represent about 16.4% of the 10% advance. So, in other words, the technology clearly powering the markets, the other sectors, the laggards weighing the S&P down. Recently, tech laggards have taken up the slack from the tech leaders, which took a little bit of a breather. Alphabet and Apple have revived Apple up more than 10% since the second quarter ended.

Keith Lanton:

So if you look back at just this past week and you're investing in the S&P 500, well, tech makes up 34.5% of the S&P 500. That's up from 32% at the end of last year and 20% just seven years ago in 2018. So you're looking at its allocation is up about 75% in the last seven years, but that doesn't tell the full story. The current figure understates the true tech weighting because the S&P Dow Jones indices, which oversee the benchmark, categorize meta platforms and alphabet not as technology stocks but as communication services stocks, and they look at Amazon as a consumer discretionary stock and they look at Tesla as a robotics and automatic driving stock. So if you were to include those stocks in the S&P 500 as technology stocks, which I think most of us logically would do well, then your tech sector weighting is 45%. So if you're investing in the S&P 500, think you're well diversified, think you've got lots of exposure to other sectors, may not be as accurate as you're thinking. So let's put this into a little bit more perspective.

Keith Lanton:

Nvidia $4.5 trillion market cap about 8% of the S&P 500. Nvidia alone is equal to almost the entire healthcare sector. So if you take all the healthcare stocks in the S&P 500, they total about $4.7 trillion. Nvidia, $4.5 trillion. Why do the numbers matter? Because the index is market cap weighted. So NVIDIA has almost the same effect on the daily movement of the S&P 500 as do all of the other healthcare stocks that are in the index.

Keith Lanton:

You can think about energy stocks. Well, energy is a huge sector, right? Exxon Mobil, chevron, oil, gas this is a super powerful. I must have lots of exposure to energy if I'm invested in the S&P 500. Well, energy has a $1.5 trillion market cap in aggregate. So if you owned every energy stock in the S&P 500, it's weighting, its contribution is onethird the contribution of NVIDIA alone. So if NVIDIA is down 1%, you would need energy stocks to be up 3% for the index to be average, to be indexed, to be unchanged. So energy is just 3% of the S&P 500. So if you're investing in the S&P 500, you need to be mindful of these.

Keith Lanton:

Technology stocks are trading about 30 times forward earnings Sectors that you have less exposure to, like healthcare, energy and financial trading. Closer to 15 times earnings Stocks like Palantir, which are making up an increasingly larger percentage of the S&P 500. Palantir is kind of the poster child of evaluation but as an example, it's trading at about 100 times sales. So if you're thinking about how to diversify your portfolio, stocks like Exxon Mobil and Chevron, which you could add to outside of your S&P 500 allocation if you wanted that diversification to that sector, they're trading about 15 times earnings, yielding about 4%. European counterparts like British Petroleum and Shell are even cheaper. You can take a look at Schlumberger, which is down about 15% this year. It's trading at about 10 times earnings.

Keith Lanton:

Now let's transition to healthcare, which is down 3% for the year. Did have a good week last week. Health care was up about 2%. Good reasons to be worried about health care Concerns about drug pricing, concerns about tariffs, concerns about the top health official here in the US, robert F Kennedy, but Goldman Sachs pointing out that despite those worries, or perhaps because of them, health healthcare is as cheap as it's been to the overall market in 30 years.

Keith Lanton:

So where to look for opportunities in healthcare? Barron suggesting taking a look at two industry leaders. One is Eli Lilly, the other one is United Healthcare. Lilly dominant in GLP-1 diet drugs with injectables Zetbound and Monjorno. There's also recently some disappointment with respect to a GLP-1 pill that Eli Lilly came out with results on a couple of weeks ago the stock dropped significantly. This pill didn't live up to expectations. Patients lost about 11.5% of their body weight. Street was looking for 13%, 14%, 15%, but analysts suggesting that the sell-off very much may have been overdone, that there's still a very big market for potential weight loss pill as opposed to injections, and Lilly's stock now at 684, is down from a summer peak of 1,000. Lilly is a top choice of UBS analysts. It's also a favorite of JP Morgan's Chris Schott, who recently wrote that the stock was attractively valued and that CEO Dave Ricks had recently purchased shares in the stock.

Keith Lanton:

Unitedhealthcare, which had been the worst performing stock in the Dow Jones this year. That stock some analysts are suggesting and Warren Buffett recently validated by making an investment in UnitedHealthcare, as well as value investors like Dodge and Cox who have been purchasing UnitedHealthcare. The thesis here is that the disappointments in earnings may be turning the corner, that we may see better days going forward because of repricing of health insurance plans like Medicare Advantage and Bernstein. Analyst Lance Wilkes laid out a bullish case for health care insurance, saying its woes were driven by higher usage of medical services that is starting to decelerate back to normal and he sees margins recovering in Medicare Advantage plans. He said that he's now bullish on UnitedHealthcare and Elevance Health, which was formerly Anthem, as well.

Keith Lanton:

So a few more minutes and then we'll wrap up. Take some questions, thoughts and comments. Let's talk a little bit about mistakes that wealthier investors sometimes make with their money and how to avoid them. There's a song out there more money, more problems. One of the things that the folks who accumulate wealth will often do is go out and buy a second home, and very often the second home becomes a significant money pit. So if you are thinking about buying a second home, think about how often you're going to use it. How remote is it? How often are you going to get there? What is the repairs necessary? What are the condo fees, association fees, golf fees? How much are you going to use that house? How much pleasure, how much joy. Perhaps you'd be better off going on vacation if you're only going out there for two weeks at a time, twice a year. Take the family to a resort twice a year and you will save lots of aggravation and lots of money over the long term.

Keith Lanton:

Another thing that some of the wealthy do is they like to invest in illiquid, exciting startup companies that sound like they have tremendous potential. Startup companies that sound like they have tremendous potential and very often they do have tremendous potential, but they often take longer than you think in order to work out if they work out at all. Oftentimes, if you look at the amount of time that the funds were tied up and it's very illiquid. So if you need those funds, they're hard to get. The returns on those investments don't always live up to the hype. And then, something we can all learn from some of the mistakes that wealthy investors make is that they don't think about estate planning and tax planning. They're afraid to give up control of their assets and then by the time that they realize they've got to do something, it's too late and their options are limited. Let's talk a little bit about investing. You've worked your whole life. You've saved up money. You've got retirement accounts Maybe it's IRA, 401k, tax-deferred wealth, perhaps you saved $1 million. Just keep a nice round number. Bill Bengen is kind of the father of the studies for what's a safe withdrawal rate. Those of you who have followed Mr Bengen and the general financial press have probably often heard about the 4% rule, which means that you can take out 4% of your principal and you can index it for inflation. So what that means is that if you have a million dollars and you don't want to deplete your wealth and this is a 30-year trajectory, so you've got 30 years, let's say between retirement date and zero date meaning you've got no potential funds left. If you were to withdraw 4%, index it for inflation in all the scenarios that Mr Bengen ran, even going back to the Great Depression, you would have not depleted your assets if you had taken out that principal amount every year. The good news is that, because interest rates are higher, the withdrawal rate that he says currently is appropriate is up to 4.7% from 4% and he said it might even be as high as 5.2%. He says that the average safe withdrawal rate over the past 100 years was a tad over 7%. So as market conditions change, there are some adjustments and that's based on equity valuations, interest rates, but right now somewhere between 4.7% and 5.25% withdrawal rate. Now, what are the assumptions he's making Important? He's assuming you're retiring at 65. He's assuming you're not living past 95. He's assuming you invest your portfolio in 55% stocks, 40% bonds and 5% cash. So those are the assumptions somewhere in the neighborhood of 4.7% and 5.25% today. All right, going to conclude here to talk about a company that was perhaps the NVIDIA or the Microsoft of its day. That was perhaps the NVIDIA or the Microsoft of its day, something that we can perhaps think about, learn lessons from Barron's talked about it in the tech column and that is Kodak, and Kodak's troubles hold a lesson for the AI age.

Keith Lanton:

Kodak was founded in the late 1800s happens to be on the verge of bankruptcy for the second time. Kodak was once a giant of consumer products, but Kodak was disrupted by digital photography. If you're a business school student, you might even be doing some case studies on what happened to Kodak, but it certainly holds an important lesson for the big tech companies of today. So if you go back to the late 1800s, photography was for professionals. Lots of technical knowledge needed to operate the photography equipment, but Kodak was the first company to mass market cameras. The first camera that they had tremendous success with was the Kodak Brownie camera in 1900. Used cheap material like cardboard and allowed Kodak to charge $1 for a Brownie camera, which is about a fifth of the cost of the company's previous models. But how did they make money on this product? Well, they didn't make much money on that camera, but what they did make money on was the film sales and the processing services. So those of you who may remember, you had to buy film, then you had to go develop that film and you brought it to, bought Kodak film and brought it to a developer that used Kodak products.

Keith Lanton:

So throughout most of the 20th century, kodak was synonymous with safe investing. Kodak even stood up to the challenge of Polaroid, another nifty 50 stock in the late 60s, where you take a picture and you instantly can get a photo without developing it. But Kodak withstood that challenge. And Kodak was forward thinking. They didn't sit on their laurels. They weren't waiting for digital photography to put them out of business.

Keith Lanton:

In fact, kodak in 1978, their engineers were granted a patent for electronic imaging apparatus. Think of it as an electronic still camera was the technology that Kodak developed. They also had patents and developed patents on image sensors, photo storage, printing technologies. Yet they were not able to take all of those products and developments and transition and become a leader. In the 21st century they were replaced by companies like Apple, who incorporated cameras into their phones, companies like Adobe, who were able to take images and simply incorporate those images into documents, into files.

Keith Lanton:

Kodak was not able to withstand those challenges and to pivot and be able to be a company that was successful in the 21st century, and this is something as the internet is blossoming and as AI is blossoming. It's a lesson that it's hard to know where the competition is coming from at an inflection point like today. Kodak was keeping a close eye on Canon and Nikon, when it turns out that Apple, samsung and Alphabet's Google passed all three. When you think about when the internet was booming in the mid-1990s, Google and Meta didn't yet exist. Amazon had just been founded. So if you're thinking about AI and the AI revolution, it's very possible that some of the future stars you haven't even heard of yet, and that some of the losers may be companies that you view as icons, just as Kodak was viewed as an icon and the icon star could fade, and that's something to be cognizant of.

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. heroldlantern. com.

Sophie Cohen:

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