Enlightenment - A Herold & Lantern Investments Podcast

Wall Street's Annual Jitters: How to Survive September

• Keith Lanton • Season 7 • Episode 32

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September 2, 2025 | Season 7 | Episode 32

September has historically been Wall Street's most challenging month, with the S&P 500 declining 56% of the time by an average of 1.17% since 1927. As we navigate this traditionally difficult period, several key events could significantly impact market performance – most notably the Federal Reserve's September 17th meeting, where there's currently a 90% probability of a 25 basis point rate cut.

The upcoming August jobs report (September 5th) will be closely watched as a barometer of economic health and a potential influence on Fed policy. With expectations set at just 92,000 jobs added – better than July's disappointing 73,000 but still reflecting sluggish growth – the market's reaction may be tempered if these low expectations are already priced in. Similarly, producer and consumer inflation data (September 10-11) will provide critical insight into whether inflation pressures are easing enough to justify rate cuts.

Looking beneath surface-level valuations reveals an interesting market dynamic: while the S&P 500 trades at a seemingly expensive 22-23 times forward earnings, this is heavily skewed by the "Magnificent Seven" tech stocks trading at 29 times earnings. An equal-weighted version of the S&P 500 trades at just 17.2 times earnings – roughly in line with historical norms. This suggests potential opportunities beyond the largest tech companies that have dominated performance.

For individual investors, it's worth considering what you're up against when making short-term trades. Institutional players like Citadel Securities – which handles 25% of all US equity trades and 35% of retail flows – employ 260 PhDs analyzing over 100 terabytes of data (more than the entire Library of Congress). The alternative data market, where firms collect information on everything from truck movements to store foot traffic, represents a $3.3 billion annual investment by hedge funds seeking an edge that individual investors simply cannot match.

As we approach year-end, significant changes to charitable giving tax rules should factor into your planning. Those who don't itemize might benefit from waiting until 2026 when new deductions become available, while itemizers may want to accelerate donations into 2025 before new limitations take effect. For the most tax-efficient giving, consider donating appreciated securities directly to charities – potentially saving thousands compared to selling assets and donating cash.

What's your strategy for navigating September's historical challenges? Are you preparing for potential buying opportunities if markets weaken, or taking a defensive stance until the traditionally stronger November-December period?

** 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 Tuesday, September 2nd, third quarter of 2025. Hope everyone had a fantastic Labor Day weekend and it is, in many parts of the country, back to school. In other parts of the country, school's been in full force. Here in New York, though, the streets are more crowded and we see the buses on the roads and people getting back from work and vacations and back to taking a look at their portfolios in a meaningful way. So, to get started, today we are beginning the month of September. Although it is September 2nd, september 1st being Labor Day, it is something I want to focus on is how markets have performed in September, and many of you may have heard that September is the worst month of the year for equity markets and that has historically been true over the course of the last 90 or 100 years, and it's also been a treacherous time for the bond market. So we will dive into that and take a look at what's taken place historically in September, and we're seeing this morning, with Dow futures down a little over 300 points and Treasury yields elevating for a few different reasons which we'll talk about we're seeing that some of these concerns with respect to September are already playing out here.

Keith Lanton:

This morning. We'll talk about the news flow this morning, what we have to look forward to in terms of economic data, especially the employment report which comes out this Friday, key critical number that will certainly be indicative of what the Federal Reserve may do next week. We'll talk about NVIDIA, which certainly is one of the key drivers of the equity markets, a significant portion of the S&P 500. And Barron's talking about NVIDIA and we'll give some sort of context in terms of what NVIDIA's stock price means relative to the entire market and what its growth rate has been and what the future may be for NVIDIA. And then we'll talk about data and the accumulation of data. And when you hear how much data some of the large institutional firms are accumulating and how they're accumulating and what they're doing with it, you may want to think twice about perhaps trying to trade the markets against these behemoths and understand what information they have at their fingertips versus what we as individuals and mere mortals have at our fingertips when we're trying to make a gut trade or a day trade and recognize who is on the other side of those changes trades. And then we're going to talk about charitable giving. We talked about this two weeks ago and I think it's an important topic and we'll address it again. Barron's talking about charitable giving, the changes and how you may want to affect the changes to your giving based on the changes from the recently passed legislation, also known as the Big Beautiful Bill.

Keith Lanton:

So let's take a look, let's back it all the way up. Let's take a look at what's going on here in September Right now, markets coming into. Today, after a pullback on Friday, we're still riding very high, after the S&P 500 crossed the 6,500 mark for the first time. For anyone that's considering adding to their positions or perhaps initiating new positions, it's worth considering September's rocky reputation. It's historically been the weakest month for US stocks. The S&P has fallen 56% of the time in September, by an average of 1.17%. That's according to Bank of America's Paul Ciani, who cited data going back to 1927,. All this information coming from Bloomberg data going back to 1927, all this information coming from Bloomberg Citadel Securities we're going to talk some more about has data going back to 2017, which showed that, after a strong June and July, which is something we got this year retail buying activity starts to slack in August, while September typically marks the low point for retail participation.

Keith Lanton:

Now there are many events that could turn the markets narrative that we've been experiencing upside down Payroll data, inflation, federal Reserve decision on interest rates. Currently, the Federal Reserve is expected, with a about 90% probability, to cut rates by 25 basis points at the September meeting. Now it is also historically been evident that if there is a swoon in September, that it may be an opportunity going forward, because markets have historically recovered in November and December. So if we do see a sell-off, you can see that as potentially not only something that is negative, but perhaps that we're seeing a ray of opportunity. So markets entered August, as I mentioned, on a down note, but investors may want to start thinking about what they want to do in September and where they may want to put money to work, and we'll talk about a few different ideas if markets do weaken.

Keith Lanton:

So let's talk a little bit about last week. The Dow fell about three-tenths of 1% and that was dragged down. On Friday, specifically following another report showing persistent inflation pressures, s&p 500 and NASDAQ reached down one-tenth of a percent, despite the downbeat end to last month. All three indexes were up last month between one and a half and three percent. Now we're here in September historically the worst month for stocks we talked a little about the reasons why September has been a challenging month. But this September we do have a little bit of a unique situation where we have the Federal Reserve, we have President Trump, who's been pressuring the Federal Reserve, federal Reserve coming with an interest rate decision on September 17th. So all eyes will be on September 17th and we'll see what impact that day has on the month of September and the potential returns for September.

Keith Lanton:

Now Barron's is saying that, despite the fact that we have some growing concerns, they're saying that all is not doom and gloom. We do have the August jobs report due out, as I mentioned, this week, september 5th. It's expected to show that only about 92,000 jobs were created, up from a disappointing 73,000 in July, but still relatively sluggish growth. If you're looking for a silver lining, well, but still relatively sluggish growth. If you're looking for a silver lining, well, that slowdown that we're seeing here to 92,000, better than the 73,000. So basically, what we're saying is that expectations have been very tempered. So perhaps the bad news that we receive in terms of slowing growth will not be poorly received because it's already being priced into the data.

Keith Lanton:

If you want to focus on a few other things going forward. Some things to keep your eyes on are producer and consumer inflation data out September 10th and 11th. Market participants are wary of the effects of inflation and the effects of tariffs, and we'll talk a little bit more about tariffs after the appeals court decision on Friday nullifying some of the tariffs. And we'll talk a little bit more about tariffs after the appeals court decision on Friday nullifying some of the tariffs. So we'll talk a little bit more about that as well. And the other factor that we have here, certainly in September, is excitement about the rate cuts and what the Federal Reserve does and says could have a very significant impact on the overall markets.

Keith Lanton:

Now, if you're thinking about where the opportunities may lie, some are suggesting that the overall S&P 500 trading in around 22 to 23 times forward earnings is expensive, and part of the reason it's expensive is because the MAG-7, those high-flying, large-cap growth stocks that we know well well, they're trading around 29 times earnings. If you look at an index like the Invesco Equal Weight ETF, which is an equal weight of the S&P 500 stocks, that's trading at just 17.2 times earnings. So historically, the market's trading around since 2017, you're looking at a PE of around 17. Basically, you take the MAG7 out of the equation and those seven stocks, and you're looking at a market that is roughly in line with historical norms. So perhaps markets aren't as expensive as it looks because of those MAG-7. Magsavvy, nvidia, microsoft, the Metas, the Teslas of the world, that those stocks, the alphabets, that they deserve those high multiples for various different reasons, and their potential growth trajectory. So the argument could be made that perhaps that the multiples are appropriate. Of course, history will tell us and we'll know the answer to that, two, three, four, five years down the road.

Keith Lanton:

Now you may say to yourself OK, september is a bad time in the equity markets, let's go hang out in the bond market. Well, sorry to say that historically, september has not, over the past 10 years, the worst month of the year, down almost 2% If you're looking at historical patterns over the last decade. That trend will worry bond investors, with the longest-dated debt already lagging behind shorter maturities this year. On concerns governments will ramp up borrowing to fund spending pledges. What could worsen it is sticky inflation in Japan, political turmoil in France, speculation that President Trump may push the Federal Reserve to cut interest rates and the concerns this morning that some of the tariffs may be declared illegal. Some concerns that those tariffs when I say illegal, meaning that President Trump didn't have the authorization to impose those tariffs without Congress and that therefore creates some concerns that perhaps some of the government revenues that have come into the coffers of the United States may have to be returned and therefore concerns about a growing deficit. And that's behind some of the backup in yields this morning.

Keith Lanton:

But it's not just that. The vulnerability of long-dated government debt reflects years of heavy issuance to fund public spending, which has certainly added to budget deficits. So we see long-dated bonds under pressure, not just here in the United States we have the 30-year bond here in the US near 5% but also in the UK. We're seeing interest rates on the long end at their highest level in 30 years, about 5% on the UK's 30-year bond. The equivalent rate on French notes rose six basis points to 451. Jim Reed at Deutsche Bank says we're seeing a slow-moving vicious circle rising debt concerns pushing yields higher, worsening debt dynamics, which in turn is pushing yields higher again.

Keith Lanton:

Others are suggesting that some of the weakness that we're seeing in the fixed income markets in September could be more seasonal, basically that there is a lack of issuance, especially in the corporate bond market in July and August, and then there's also minimal issuance coming into Christmas time. So, starting in September, you start to see very heavy issuance of corporate bonds. Therefore, you see increased supply and perhaps that's another factor weighing on the weakness that we see in September. If you want something to take a look at outside the United States, japan is going to be issuing a 30-year bond later this week, and how that sale goes is another factor that will be carefully watched. You may say to yourself well, I'm not going to be buying 30-year Japanese bonds, so I don't really need to pay attention to that.

Keith Lanton:

But markets are every year becoming more and more intertwined, so higher rates elsewhere in the world have an effect here in the United States. If the rest of the world is paying higher rates for their government bonds, well, the US Treasury is competing with those other countries for investor dollars and when you take into account the currencies and returns, there is a competition for the US and for US bonds. So what rates are in the rest of the world certainly does matter and does have an influence on what rates are here in the United States. All right, let's shift.

Keith Lanton:

Let's take a look at this morning I was talking about government bonds, talking about the effect of a Friday afternoon ruling by a appeals court, and here's what they said. Federal Circuit Court of Appeals said that the law Trump invoked when implementing his tariffs, including his so-called reciprocal duties, did not actually give him the power to do so. It was a 7-4 ruling, but the court did pause its ruling from taking effect until October 14th, giving the Trump administration time to appeal to the Supreme Court Following the ruling. President Trump called the appeals court highly partisan and indicated he believes the Supreme Court will undo the decision. Treasury Secretary Scott Besson also said he anticipated the Supreme Court to side with the White House. Treasury yields reacted negatively to this report, and that's what we're seeing this morning as equity futures sell off and we're not seeing. What we often see is some of that money come into the bond market because of these concerns that the US may be having higher deficits, with the potential of the tariff revenue not flowing in.

Keith Lanton:

This morning, we also have a report that Kraft Heinz is going to be splitting into two companies. This undoes much of the $46 billion merger from 2015 that created the food giant that we know today. One of the two companies will focus on shelf-stable meals and house brands such as Heinz Philadelphia and Kraft Mac and Cheese. The other will include Oscar Mayer Lunchables and Kraft Singles what the company calls a scaled portfolio of North American staples. Neither business has an official name yet stock relatively unchanged. You may remember that Warren Buffett was a significant investor in Kraft Heinz when they put that merger together in 2015, and that has been one of his poorer investments in terms of its returns, at least so far.

Keith Lanton:

This morning, spirit Airlines filed for Chapter 11 bankruptcy protection. Actually, correction, they did that on Friday. It is the second filing in less than a year for the budget carrier. Meta Platforms, down about 1.4% today, saying they are removing several celebrity AI chatbots after using celebrity voices and images without their permission, according to Reuters, and a sign that people are still spending on some luxury items. Signet Jewelers symbol S-I-G up about 4% this morning. They beat on earnings per share expectations by $0.37. They beat on revenues.

Keith Lanton:

They guided revenues higher and they raised their 2026 earnings per share estimates. Tesla this morning down about 1.5%. They saw sales of its China-made electric vehicles drop 4% year-over-year in August Markets overseas Asia mixed Japan up 0.3%. China and Hong Kong down 0.5%. Korea up about 1%. European markets trading down about 1%. The DAX in Germany down the most, about 1.5%. The British market's down about 0.5%.

Keith Lanton:

I mentioned that the British government is facing pressure with respect to the yields on their gilts, now at 30-year highs, and renewed pressure on the UK to get their fiscal house in order. Also in France, a lot of political uncertainty having to do with next week's confidence vote in the French government. That pressuring French bond yields. Taking a look at the commodity markets, we are seeing strength in many commodities as we see weakness here in equity and bond markets. Oil is up about $1.76 a barrel this morning to $65.77. Gold hitting new highs up about $37 an ounce and silver quietly breaking out up over $40 an ounce, up 84 cents this morning. Significant move higher in silver. Some other individual stocks in the news this morning Nvidia down about 2.5%, and this as some are concerned about a possible AI spending slowdown. We'll talk a little bit more about the Nvidia in a little bit Pepsi this morning, up about 5% after the Wall Street Journal reported. Activist investor Elliott Investment Management has built a roughly $4 billion stake in the snacks and beverage company. Newmont Mining NEM, largest gold miner in the United States, up about 2% after gold hit a record high on Monday. Corning shares up about 1%. Stock upgraded to buy from neutral at UBS, upping their price target on the stock to 84 from 65.

Keith Lanton:

Some earnings reports we're going to see this week Salesforce, which was mentioned positively in Barron, suggesting that the terrible performance it's had so far in 2025 might be too cheap to pass up. They have earnings this week. The stock's down to a level where it's trading around 22 times expected earnings, a level we haven't seen in quite some time. On Salesforce, symbol CRM, earnings also out this week on AI chip maker Broadcom symbol AVGO New issue IPO, figma out with earnings this week. Lululemon, symbol L-U-L-U. It's a Canadian company and they'll be closely watched for the effects of tariffs and what impact it's having on Lululemon. To name a few of the companies with earnings this week, what else we have to look forward to?

Keith Lanton:

Well, we've got the Institute for Supply Management releasing its manufacturing and purchasing managers indexes for August, that is, today. We're looking for the manufacturing PMI to come in at 48.9, which would be up about one point in July. Services PMI looking for that to come in at 50.5, a bit higher than previously. Wednesday talked about this a second ago Salesforce and Broadcom Salesforce earnings Wednesday, broadcom Thursday those are the two big ones this week in terms of earnings. And then Friday, highly anticipated jobs report. We're looking for those non-farm payroll numbers to come out and we're looking for about the $90,000 increase there. Unemployment rate expected to tick up to 4.3%. Another report showing weak jobs, many say, would all but cement that. The Federal Open Market Committee would cut rates on September 17th and, as discussed, the market's pricing in about a 90% chance of that.

Keith Lanton:

Geopolitical news. President Trump says India has offered to cut their tariffs to nothing, but it's getting late. They should have done so years ago. And President Trump saying it's very important that drug companies justify the success of their various COVID drugs. Over the weekend Summit held where President Xi of China, premier Modi of India and Vladimir Putin of Russia had all gotten together in a display of tempted unity, three parties who, historically, have had some contention between them over the past several years and seeking to put some of those differences aside, as we here in the United States are pressuring these countries with our tariffs. So we'll see what sort of geopolitical implications this all brings about and what the ramifications are of this group getting together, if anything substantive were to come of this meeting. But nevertheless, another factor in financial and geopolitical markets is the shifting tectonic plates of alliances throughout the world, as we see changes in different philosophies and ideas, and we'll see what impacts that has going forward. But these are other factors being priced into the market.

Keith Lanton:

All right, we talked a little bit about the biggest stock in the financial markets, and we'll talk a little bit more about that, and that is NVIDIA symbol NVDA under pressure again this morning. And Bar'll talk a little bit more about that, and that is NVIDIA symbol NVDA under pressure again this morning. And Barron suggesting that investors, at the very least, are best served by taking a long-term view and not selling in response to volatility unless there is a significant change in NVIDIA's long-term outlook. Saying that investors shouldn't get distracted by the noise about China, that NVIDIA is positioned to benefit from its most important and largest product ramp up in history, which is still forthcoming If you're looking back at earnings from last week.

Keith Lanton:

Despite the sell-off, nvidia did deliver an impressive report with unprecedented growth rates. Revenue for the July quarter was up 56% to $46 billion. So we're talking huge numbers and huge percentages on huge numbers. Nvidia's outlook for the next quarter was solid, company providing a revenue forecast with a midpoint range at about $54 billion, which was slightly above analyst estimates of $53.5 billion. Now NVIDIA's stock fell after the results, which Barron says likely has more to do with profit-taking, considering the stock rose 35% over the previous three months.

Keith Lanton:

Now China certainly remains a significant problem, but Barron feels that, despite the noise, there's a good chance that things will get resolved with China, given that China had originally asked NVIDIA for H20. That's the chip that NVIDIA was allowed to sell in China. They had asked for those licenses and, with the high demand for NVIDIA's GPUs in China, despite some of the talk from government officials, the demand is there. The question is whether the government will allow that demand to be met. Barron's suggesting that the latest developments are more likely theatrics than a significant change in policy in China. But they say no matter what happens with China, nvidia investors should focus on the company's main AI chips. And they say the company is coming out with two significant product releases. These aren't specifically chips, but they say the company is coming out with two significant product releases. These aren't specifically chips, but the way that the chips are used. They're coming out with a 72 GPU rack server called the GB200NVL72, and another bigger rack called the GB300NVL72 as well. This is an unprecedented density of computing power that is crucial to running and training the latest AI models. So Barron's feeling that more is still to come from NVIDIA, despite the tremendous growth that's already been seen, that there is still more potential going forward. Certainly lots of reliance on the large cap tech companies buying their products Amazon, alphabet, microsoft, meta, to name a few but nevertheless they remain cautiously optimistic with respect to NVIDIA.

Keith Lanton:

Now let's just do a fun little exercise here and talk about NVIDIA's valuation. Nvidia is actually on a PE basis, as the stock has fallen and the earnings per share estimates have risen. Is actually getting cheaper as analysts are raising their estimates and the share price is falling. The PE ratio down to around 32,. Raising their estimates and the share price is falling, the PE ratio down to around 32, 33 times earnings. Just a few weeks ago it was north of 35.

Keith Lanton:

But if we were to take a look at NVIDIA and take a look at its price to sales and compare it to another market darling like Palantir. Nvidia's current market capitalization is an eye-popping $4.5 trillion. But to give you an idea of the very rich market capitalization of Palantir and to put these two in perspective, and if you say to yourself, well, I think NVIDIA perhaps is the most overvalued stock in the market it's $4.5 trillion market capitalization Well, if you were to take NVIDIA sales and you were to take Palantir sales and you were to say, well, nvidia should at least trade at the market capitalization of a company like Palantir, well, nvidia's market cap is about $4.5 trillion. If it was priced like Palantir in terms of a price-to-sales ratio, its market capitalization wouldn't be $4.5 trillion, it would be over $25 trillion. So you can look at that and say, well, I think that Palantir is really expensive, or I think NVIDIA potentially has some more upside, or you could look at both and say, well, I think the overall market is just really high and I don't know what to make of it. But nevertheless, when you take a look at those levels and you say, well, I think things have gotten expensive, perhaps NVIDIA is not as expensive as your initial thought may have been All right.

Keith Lanton:

Let's turn to investing, individual investors and what individual investors are up against. Because on a day-to-day basis, we often get lost in the noise. We hear news, we turn on the TV Bloomberg, fox Business, cnbc, whatever it is that you're looking at or reading and you think to yourself I think ABC is terrific. I just saw a report. I read a few articles. I think it's a wonderful opportunity. Well, we're going to talk a little bit about what you, as an individual investor, are up against when you think that something is a great opportunity for the short term. And we're going to talk about an article in Barron's talking about hedge funds and their new secret weapon. And their new secret weapon is kind of an old weapon that's just getting better and that is called data, and smaller and smaller companies are able to provide better and better data to individual investors.

Keith Lanton:

And Barron's cites a company called Ryan Joyce's Cameras and Barron's Sites a company called Ryan Joyce's Cameras and this is a company called Genlogs and it is a startup that collects data on the movements of America's semi-trailer trucks. The company operates 1,000 cameras that monitor the nation's roads and they snap pictures of 18-wheelers as they drive past. Now you may say to yourself why would I care about that? Well, who does care about that? Is people who are interested in data. So most of Genlog's customers are traditional logistics and freight companies wanting to know where their trucks are at. But recently the company has received lots of interest from new clients hedge funds and they want this data because it can tell them the volume of truck traffic in the United States. Why is that useful? Well, it'll let them know the health of the American economy. It will let them bet on specifically publicly traded stocks like Walmart, or trucking giants like JB Hunt Transportation Services.

Keith Lanton:

So the bottom line is welcome to the world of alternative data. It's a fast-growing market where companies collect information on everything from credit card transactions to the number of travelers passing through security airports. Investors then buy the data, hoping to glean insights beyond those provided by traditional company filings. Now, as I said, this is not something new. People have been buying data for many years. But what has changed is the volume, sophistication and variety of the data being collected. Thanks to recent advances in computer vision technology and web scraping tools, even small companies can harvest large and complex data, and it's not just trucks. Data vendors now tell investors how many customers are clicking on a particular product on an e-commerce website. They track how many pedestrians are entering a specific bricks and mortar store. Not surprisingly, as the quality of alternative data has improved, a rapidly growing share of the investment community has embraced it. The CEO here of Genlog says that his business to hedge funds is up 100% year over year. Now, the folks that you're competing against in your day trading. They're spending $3.3 billion a year on on alternative data.

Keith Lanton:

Now I'm going to change gears to another individual who is using data, and this is an article from Barron's and it talks about Ken Griffin, who is the CEO of Citadel. Citadel is quietly becoming the next generation hedge fund leader, securities market leader. Hedge fund leader, securities market leader. Arguably, ken Griffin, who's about 56 years old, is becoming the modern day Steve Schwartzman, ray Dalio, the next generation master of the universe, who is not only dominating the hedge fund space but also the security space, and he is doing it by using data, and he is using that data to glean information so that, when you are selling your stocks, he is able to make an intelligent decision at what price to pay and to also be able to trade against the individual and institutional investor. So what we're seeing here is Ken Griffin, and Citadel is behind a new wave of digital-first powerhouses.

Keith Lanton:

Citadel is a two-headed business consisting of Citadel LLC, which is a $68 billion hedge fund, best known for its flagship Wellington Fund no relation to the Wellington Fund at Vanguard and Citadel Securities, which is a market maker that facilitates and engages in trading stocks, derivatives and interestingly, increasingly bonds. Now Citadel, the hedge fund, is a huge deal as a standalone. It has produced an average annual return of 19.2% net of fees and there are big fees here. So 19.2% net of fees since its inception in 1990. That's about double the market's performance. If you invested a million dollars in the Citadel Wellington Fund back in 1990, today it would be worth $452 million. But Citadel Securities is perhaps the crown jewel. Citadel Securities now these are mind-boggling statistics trades 25% of all US equities, 25%, 35% of retail flows, 45 billion options quotes a day and is a top three trader in US treasury securities and swaps. So think of all the data that Citadel Securities is accumulating. So this is a different company than people understand, says a partner at Sequoia Capital who sits on Citadel's board. Sequoia owns 5% of Citadel.

Keith Lanton:

Citadel is taking math and their distribution and technology power to price risk using techniques not traditionally used on Wall Street. Like other market makers, such as Jane Street and Virtu, citadel Securities receives orders from retail and institutional clients like yourself. It processes customer trades by executing them, mostly on an exchange, sometimes in a dark pool, which means not on an exchange. Citadel can make money off the spread but, more important, it uses those securities in many different strategies, including hedging, mitigating risk or trading for its own account. Trading data, which is the data that they are accumulating, can be fed into Citadel's massive computer stack. Now, this is what you're up against 260 PhDs have access to 100 terabytes of data. How much is 100 terabytes of data? How much data does Citadel have because of all this information that they're collecting? More than the entire collection of the Library of Congress. 260 PhDs with more data than the entire Library of Congress. Citadel data scientists and traders use that information to identify inefficiencies between securities, arbitrage opportunities, to obviate risk and make trades, and some of these trades are not short-term. Some of these trades are long-term trades. So while one generation of Wall Street titans like Ray Dalio and Steve Schwarzman is winding down, another, with Griffin at the fore, is gearing up. So we will see what Citadel Securities and Ken Griffin have in store for the next decade or two.

Keith Lanton:

Finally, I mentioned, and I'll quickly rehash, changes coming to charitable giving and how to get maximum savings. So July 4th, one Big, beautiful Bill Act expanded charitable deductions for some taxpayers and cut them for other taxpayers. So for taxpayers who do not itemize, currently you cannot take a deduction for your charitable gifts starting next year. If you're single, you can take a $1,000 deduction for your charitable gifts. If you're married, a $2,000 deduction. Again, those changes don't take place until next year.

Keith Lanton:

So if you're, thinking about making a charitable gift and you are a person who does not itemize. You may want to wait until next year. Also important to keep in mind that this donation has to be a cash donation directly to a charity.

Keith Lanton:

Cannot use a donor advised fund. Cannot gift clothing and get a tax deduction. Cannot gift your car and get a tax deduction. Must be a cash gift. This again for folks who do not itemize Starting next year $1,000 if you're single, $2,000 if you're married. You do get the deduction if you make a cash gift. No donor advised funds, no non-cash benefit. Let's talk about folks starting next year who do itemize. If you do itemize, that means you're not taking the standard deduction. Standard deduction next year is $15,750 for individuals Actually that's for this year $15,750 and $31,500 for married taxpayers. So just to rehash, if you are a taxpayer, you either claim the standard deduction or you itemize.

Keith Lanton:

If you itemize, you're taking into account your property taxes, your mortgage taxes, your charitable donations and other potential deductions that you have If you're married and those exceed $31,500, well then, more than likely, you are going to itemize. And if you do itemize, well, starting next year, there are meaningful changes. The law imposes a new threshold that donations must clear before they can be deducted. Again, this is for folks who itemize. So if you itemize, only gifts that exceed one half of 1% of your adjusted gross income qualify. So if your adjusted gross income is $500,000 and you itemize, you can only deduct donations once they exceed half a percent of that $500,000. So once they exceed $2,500, so the first $2,500 of your deductions next year not deductible. You want to donate $10,000 to charity? Okay, that's great. First $2,500, no deduction. The next $7,500, deduction. So keep in mind, if you are an itemizer, you may want to make those charitable donations this year, because this year you can still deduct all $10,000 no floor. Also, next year, if you're in a high tax bracket, the benefit that you get from donating to charity is reduced to 35% tax bracket instead of the 37% tax bracket, meaning you are going to be 2% worse off in terms of the benefit that you get from that charitable donation in-touch charitable distributions which allow retirement account owners to satisfy their required minimum distribution by donating up to $108,000 in charitable distributions directly to a qualifying nonprofit. What does this mean? You've got to take a required minimum distribution. You're age 75, you're over age 73, therefore you must take an RMD. If you are charitably inclined, you can take that RMD. Let's say your RMD is $35,000. You'd like to make a $10,000 donation to a charity. You can donate that $10,000 directly from your retirement account to the charity. It satisfies $10,000 of the $35,000 RMD and you will not pay any tax and you'll only need to take an additional $25,000 distribution from your retirement account.

Keith Lanton:

Finally, if you're thinking about making a charitable gift this year, you may want to think about donating appreciated stock. Lots of advantages here if you were to donate your appreciated stock directly to a charity or directly to a donor-advised fund. So let's just take an example before we conclude. Let's say that you bought, and you were fortunate. You bought NVIDIA many years ago and you invested about 100 shares at $20 a share and it was an investment of $2,000. The stock has flipped many times and now that NVIDIA investment is worth $52,000. So you have a gain of $50,000.

Keith Lanton:

Let's say you live in a high tax state let's call it New York, where I'm located and you sell that $52,000 worth of NVIDIA and you book that gain of $50,000. Well, you're going to pay 20% capital gains tax. If you're in the highest bracket, you're going to pay a 3.8% what's called an Obamacare tax, which is to fund the healthcare plan. So you're going to pay a 3.8% what's called an Obamacare tax, which is to fund the health care plan. So you're going to pay 23.8% in gains. If you're in the highest bracket, you're going to pay about 10% in state tax. So at the end of the day, if you're living in the state of New York on that $50,000, you're going to pay about 34 percent of that fifty thousand dollars to to the Uncle Sam or to the government. So at the end of the day, you are going to net the fifty thousand dollar gain less than seventeen thousand in taxes. So you're going to net thirty three thousand plus your cost of two thousand. So you're going to have thirty five,000 in your pocket as a result of selling your NVIDIA stock or you could donate it to charity.

Keith Lanton:

So you take that $52,000, you donate the stock. Now you're donating the stock at current prices to charity. The stock is worth $52,000. You donate it directly to a charity. You do not sell the stock and give them worth $52,000. You donate it directly to a charity. You do not sell the stock and give them the $52,000. You donate the appreciated stock to the charity.

Keith Lanton:

So now you're taking that $52,000 and you are receiving a tax break. Now that tax break again we're assuming you're in the highest tax bracket means that you're in a 37% tax bracket and a 10% state tax bracket. So federal plus state equals 47%. So you are receiving a tax break of about $24,000. That's $52,000 times that 47% and you're receiving a tax break of roughly $24,000. So by gifting that $52,000 in stock, you are in effect $11,000 worth off. So you get the benefit of making a $52,000 gift to charity. If you took the money, you would have received $35,000. As a result of gifting it to charity, you get a $24,000 benefit. So if you are charitably inclined, this is the smart way to do it. You are getting the benefit of being able to give $52,000 to your charity and the actual out-of-cost pocket to you is $11,000. So if you are thinking about making a gift to charity, you very well may want to think about donating appreciated stock, 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:

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 Thank you.