Enlightenment - A Herold & Lantern Investments Podcast

Why Tariffs, Currencies, And Fed Policy Collide To Move Stocks

• Keith Lanton • Season 7 • Episode 45

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December 8, 2025 | Season 7 | Episode 45

We trace how a weak yuan powers China’s record trade surplus despite tariffs, and why history with Japan’s yen still shapes today’s strategy. We map the U.S. pivot to talent and capital, the odds of a hawkish Fed cut, retiree tax moves for 2025, and two stock spotlights: Weyerhaeuser and Apple.

• China’s $1T trade surplus and currency dynamics
• Tariff rerouting through Southeast Asia, Mexico and Africa
• Lessons from Japan’s Plaza Accord and export pricing
• U.S. advantages in capital access, education and innovation
• Market setup into the FOMC and earnings week
• Retiree tax planning: RMD timing, QCDs, medical deductions
• Weyerhaeuser asset value versus depressed earnings
• Apple’s measured AI path, privacy focus and partnerships

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Alan Eppers:

And now introducing Mr. Keith Lanton

Keith Lanton:

Good morning. Today is Monday, December 8th. Hope everyone had a fantastic weekend here as we move quickly towards your end. We've got about three weeks to go in 2025. Last week markets showing resilience and bouncing back from some weakness in the prior couple of weeks. Some concerns about what the Federal Reserve is going to do about interest rates, concerns with respect to the artificial intelligence build out and whether or not the Magnificent Seven companies, as well as companies like OpenAI, would see a return on their investments and their massive infrastructure spending on artificial intelligence. Those concerns seem to mitigate over the past two weeks, , although that mitigation was somewhat of a reflection of a rotation, which is arguably very healthy for financial markets, where we saw a rotation out of some of the artificial intelligence names that had been winners into some new names. Barons this week talked about Apple as potentially being a winner in the AI race, something that just if you went back six months ago, the general consensus was that Apple was way behind and was not going to be a major winner in AI without making an acquisition. And you see how quickly mentalities on Wall Street shift. So you have to really decide what makes sense, what great management is doing if you believe in the management, if you believe in the story, and not get caught up in the hype of the moment, and need to really make sure that you've got your own investment thesis and not get swayed by the whims of emotions. Also, we had lots of concerns just a couple of weeks ago that the Federal Reserve was seeing some inflation data, and that inflation data and that concern was outweighing some of the discussions on potential labor market weakness, and the expectations were shifting very rapidly that the Federal Reserve was not going to cut interest rates this week. We got an interest rate decision just in two days from the Federal Reserve. Now the probability of an interest rate cut is up to about 87% on the tail of some weaker than expected employment data, as well as some commentary from some of the Fed officials that despite the fact that they are seeing inflation, they think that the rate cut is in the cards. So we'll see if we get that rate cut on Wednesday. For probably more importantly, we'll see what the Federal Reserve has to say with respect to interest rates going forward. Of course, the other key factor here is that Jerome Powell, next year we're gonna see a transition at the Fed, and we may see a new Fed governor. we will see a new Fed governor. we may see Kevin Hassett, , who is at the moment the potential leading candidate in the Trump President Trump's decision to replace the Fed governor, but we'll find out his choice, he's saying sometime in January of next year. And that Fed leader will certainly have a significant role in influencing interest rate policy, although as has been much discussed, the Fed governor is still well the Fed the Fed chair is still one vote, so they certainly have a strong influence, but they cannot dictate policy at the Federal Reserve. This morning what we're gonna do is we're gonna just discuss an article in this morning's New York Times. It was something that I had been given a lot of thought to even before the article presented itself, but I think it provided a great opportunity to have a conversation with respect to U.S. dollar value, dollar value, currency values throughout the world. And what I'm getting to specifically is what's going on with the second largest economy in the world, and that is the Chinese economy, and here in the United States, sometimes we may forget how powerful the Chinese economy has become, and the New York Times this morning reporting that the Chinese trade surplus has now reached one trillion dollars. And we'll talk a little bit about how that's happened. We'll talk a little bit about the tariffs and what impact tariffs have had and perhaps why tariffs have become such an important tool here in the United States. You know, President Trump began the policy of in instituting more meaningful tariffs on Chinese goods and services. The Biden administration continued that policy, and of course, President Trump has ramped up the discussion with respect to tariffs, especially the with respect to tariffs when it comes to China. And we'll talk about the past and like so many things in in the financial markets and history, what we're seeing today with respect to China and why China has such a big trade surplus goes back about 40 years to what happened when Japan had a huge trade surplus here in the United States, and what happened as a ref as a as a matter of response to the huge trade surplus that the Japanese were were were being able to perpetuate throughout the world, and the pushback from not only the United States at the time, but the Europeans as well, and what happened to Japan as a ref as a result of that pushback and what the Chinese may have learned from it. So for those who were in the i in the economy going back 40 years, some of the younger folks may not remember, but Japan had a lot of similarities to China. Japan was growing very rapidly, manufacturing was moving very swiftly to Japan. There was great concern that we were losing our manufacturing base to the Japanese, because we were, and there was a great deal of concern that Japan was going to surpass the United States. Books were being written the coming war with Japan, which with the benefit of hindsight seems a little bit excessive given that the Japanese back then basically had no military and are only now just beginning to build up their military after World War II. Times were different back in 1985 versus today. World War II was only was only about forty years from its end, and lots of the Americans who fought against the Japanese were very adamant against allowing the Japanese to build up their military. So we're seeing today a different mentality that we want the Japanese and we want the Europeans, who we were also wary of, especially the Germans, of building up their defenses from allowing them to do that, and we're seeing a change in tone here in the United States. So that's one of the big differences between then and now. But New York Times this morning, let's go let's just take a look at this, talks about China's trade surplus climbing past one trillion dollars for the first time ever. Last year they almost hit one trillion, but here we are 11 months into the year, and we are looking at a trade surplus for China with the rest of the world of $1.08 trillion. Now you may say to yourself, how are they doing that? Aren't we imposing tariffs on the Chinese here in the United States? Aren't we their biggest market in terms of in terms of trade? And that is absolutely true. But keep in mind we have raised tariffs, we have cut back as a result of those tariffs, we've cut back our purchases of Chinese goods, but the Chinese have also cut back their purchases of U.S. goods, and therefore that trade deficit has stayed high, relatively speaking. It's gone from like $500 billion to $400 billion with the United States, but it's still a very big number. And what the Chinese have done is they have made up for that by trading with the rest of the world. They have also beside-skirted tariffs by moving some production outside of China and then shipping from those outside areas, something that the Trump administration is pushing back on. But , when you create incentives to to take different actions, you get different actions, and these are some of the things that the Chinese are doing. Now we'll talk about what's going on here and the main reason that they're able to have such a large surplus. Now, what they are doing is this sifting assembly of their goods to Southeast Asia, Mexica, and Africa, and then shipping finished products to the United States as well as to Europe and other destinations. And this has allowed the Chinese to bypass some of President Trump's tariffs on goods coming straight from China. China now sells more than twice as much to the EU as it buys. Triadus trade surplus with the EU has widened considerably this year alone. And one of the major reasons this has happened is because the Chinese currency has been weak over the last several years against other currencies, particularly the euro, but the dollar as well. And this is what has propelled these exports. There is talk that the Chinese currency could be undervalued as much as 50, 60, 70 percent versus the euro or the dollar. So despite the fact that we impose tariffs of 40 percent, the Chinese then do an end run around that to some extent. Perhaps the ultimate end is that the tariffs have a cumulative effect of a tariff of you know 10, 15, 20 percent. nobody knows the exact cumulative effect. But because of those end runs and because of those tariffs around 40 percent, the fact that we have tariffs on the Chinese of 15 to 20 percent weighed against the fact that their currency is significantly, arguably undervalued by 50, 60, 70 percent, still makes the case extremely compelling on why consumers throughout the world are purchasing Chinese goods, because potentially they are holding down the value of their currency. And let's take a look at what it costs, just to put this into perspective, for goods and services in the United States versus in China. So if you want to stay a night at the Waldorf Hotel in the heart of Manhattan, right now you're looking at about $2,000 a night. But if you want to spend a night at the Waldorf in the heart of Beijing, that costs about $340 a night. And hotel rooms are not all that is cheap in China if you're a lower-end consumer and say, hey, I'm not staying at the Waldorf, so what does that matter to me? Well, you might say to yourself, let me go get myself a Big Mac here in the United States. Well, if you go get yourself a Big Mac in China, you'll be paying about 50% less for that Big Mac. So large discrepancies between prices inside and outside of China point to a big distortion in the global economy today, and that is the low value of China's currency. The weakness of China's currency, which is known as the Rem NIMBY or the Yuan, Yuan, is is not the only reason prices are low in China. We've had a persistent decline in housing, and that has erased much of the savings of Chinese households, and that has left the Chinese reluctant to spend. So as I mentioned, if the Chinese were to change the value of their currency, then you might see a significant change in that purchasing power. You might see a significant change in currency, but the Chinese are extremely reluctant in order to move the price of their currency. Now it wasn't always like this. Let me just give you some historical context on the value of the Yuan or Remnimbi compared to the dollar. So in 2005, when China was just an emerging economy, just after they had gotten most favored nation status, the Chinese Yuan was trading around eight to the dollar. Fast forward to 2015, it had moved to about six to the dollar because the Chinese were exporting a lot more to the rest of the world, and the Chinese were letting their currency float more traditionally against other currencies because the Chinese wanted their currency to be included in something known as special drawing rights. In other words, a currency that could be included as a reserve currency, which was something that they were aspiring to. And by letting their currency float, the International Monetary Fund was much more likely to grant them SDR status, which they ultimately did. And then in 2015, China did something very unexpectedly, as their economy was showing some signs of distress. What they did was they started depreciating their currency, all the way to the point that now from back in 2015, when the Chinese had a much smaller trade surplus versus the rest of the world, their currency was at 6.2. Today it's at 7.07. If you take Economics 101 and you say to yourself, if a currency keeps if if an economy keeps exporting more than they're importing, well, the currency has to get stronger. And that is in fact the exact opposite of what was happening. And back in 2015, when the Chinese surprised the markets and they started devaluing their currency, those who are around may remember something called Black Monday, which was August 24th of 2015, when this news hit the world, and we saw significant worldwide declines in equities at that time. Everybody's forgotten about it. It's 10 years ago. People were predicting all sorts of terrible things. They didn't come to fruition at that point, you know, going forward. The Chinese weakened their currency, and their exports continued to move back up significantly to where we are today, which is with a significantly weaker currency and a tremendous amount of exports to the rest of the world. So, what does this now have to do with what we were just talking about? And what does this have to do with Japan? Well, I started out talking about Japan and how the Japanese were a huge exporting economy, similar to China, in the sense that they were very good at manufacturing electronics at the time. You know, the products have changed back then it was televisions, it was stereo equipment, it was radios, and and of course it was automobiles. And the Chinese, the Japanese, excuse me, had their currency, which they still have, which is the yen. And in 1985, the yen was about two hundred and thirty-eight to the dollar back in nineteen eighty-five. And what happened is in nineteen eighty-five there was this agreement called the Plaza Accord, in which the Japanese along with the US, the West Germans, not Germans, but at the time the West Germans, and the French and the UK got together and they agreed to devalue the yen in 1985. And as they agreed to, as they agreed to make the yen more expensive, when I say to make the yen more appreciate more, so they agreed to revalue the yen and take and this took the yen from 238 in 1985 all the way up to 111 in 1993. And what happened is as a result of this appreciation, the Japanese engine, their economy, which was so export-driven, suddenly became very expensive to drive those exports. And what we saw is what we have observed recently is the Japanese economy has been stuck since 1993 after they took this policy. Well, the Chinese are good students of history. They pay lots of attention. They are not always just looking forward, they are looking backwards, and they see what happened when the Japanese were pressured to appreciate their currency and what happened to the Japanese economy. So they are very afraid of having their currency appreciate because they, similar to the Japanese, were super are super concerned about the effects of a big change happening rapidly to their economy if they change the value of their currency. So the Chinese are holding out and are very reluctant to change the value of their currency, even though by most measures it is extremely undervalued relative to other countries. In fact, if the Chinese were to revalue their currency and the currency were allowed to float, and it were to go to four to five to one instead of seven to one, their economy could become the largest economy in the world. Just like in 1993, when the Japanese let their currency float, the Japanese have a lot less people than the Chinese, but in 1993, the per capita GDP in Japan, that's the per capita per person GDP in Japan, exceeded the per capita GDP in the US significantly by almost 30%. Per capita nominal GDP in the US was 26,000, and in Japan it was 34,000. So you can see that there was a significant change. Now, as a result, what has happened is the U.S. currency has remained resilient, strong. And President Trump, through his tariff policy, is aware of many of these policies emanating from China. He sees that these policies have resulted in a continuous Chinese trade surplus and a hollowing out of the manufacturing base here in the United States, and he has instituted policies to try and effectuate change and bring back more manufacturing into the United States. At the same time, the United States was able to overcome a lot of the challenges that resulted from the fact that China had a much weaker currency than they should have. As a result, the United States did lose out in terms of losing manufacturing jobs, but the United States leveraged their strength. And what is the strength we have here in the United States? Well, we have the strength of that lots of capital wants to come to this country because we have an open system and it's viewed as one of the best places to be able to access your capital and to raise capital. And we also have the best educational system in the world. So we've got the ability to produce smart people, and we have the ability to attract smart people here into our country here in the United States. So the United States was able to shift or leverage those advantages by the fact that we were no longer able to be competitive when it came to manufacturing, but we were able to produce really smart people, and we were able to focus on bringing smart people here, and we were able to focus on where we could add the greatest value, despite the fact that our currency was expensive. And therefore, what happened between the 1980s and currently is we had this tremendous explosion in jobs that required high education, engineering expertise, manufacturing expertise, but on a super high level. And that's why here in the United States, arguably, we have the Silicon Valley entrepreneurs that we have. We have the computer companies and the cloud companies, the alphabets, the Microsoft, the Googles of the world, as a result of the flexibility of our economy, the transition. So if you think about where the the most brilliant people in the United States were seeking jobs in the 1940s, 50s, and 1960s, it was at the General Motors of the world, the Xeroxes of the world. And as the world transitioned and we became a financial powerhouse, those jobs were moving to Wall Street. And as the economy transitioned again, those jobs were moving to Silicon Valley. And therefore, as a result of the fact that we were constrained, we were able to largely overcome. We will see what the implications and what the effects are of this sustained weakness in the Chinese currency is, if it can perpetuate, if it can continue, and to continue to learn the lessons from what happened with the Japanese economy. And we'll see how President Trump, through his policies and the next administration and the administration after that, is able to is able to effectuate change as a result of fighting back, in a sense, against this regime outside of the United States, whereby they are manipulating the value of their currency in order to overcome some of the policies here in the United States that we're taking to react back to the policies that they have instituted. All right. All that is an important backdrop into building out portfolios, into deciding where in the world we seek to invest, where to allocate our capital, where interest rates are going, what's the ideal mix for our portfolios? That's a little bit of big picture. Now we're going to dive into the smaller picture, what's going on today, this morning, and we are seeing financial markets poised to start the week on a higher note as the market anticipates that rate cut we were talking about on Wednesday. Equity futures are pointing to a modestly higher opening after a Friday, so major averages close with slight gains, tapping week last week of modest gains. Stocks drifted higher for the bulk of last week after a sharp sell-off on Monday that came as a result of a cryptocurrency sell-off. Action in recent sessions has been somewhat muted, some back and forth again ahead of this FOMC Federal Open Market Committee decision. As I mentioned, markets expecting the Fed to deliver on a hawkish cut on Wednesday. So a cut, but with some rhetoric that they are concerned about inflation. Probability this morning, I mentioned around the high 80s is 89% roughly of a 25 basis point cut, but just a 21.8% probability of a cut in January at the next Fed meeting. On the trade front, the Supreme Court could rule as soon as this month on President Tariff's tariff authority as companies file lawsuits to get refunds. In company news this morning, we have a large large deal where IBM is making a $11 billion purchase this morning. They are purchasing Confluence. So Confluence stock, it's Confluence stock is up 29%. It's eleven billion dollar acquisition. Also, we have news out of Berkshire Hathaway that Todd Combs, the investment lieutenant to Warren Buffett and Geico CEO, is leaving the company to go to JP Morgan. So interesting change of the guard at Berkshire Hathaway. Warren Buffett saying that Todd Combs has made many great hires and has broadened its horizon. Nancy Pierce, the chief operations officer at GEICO, will replace Combs as the business CEO. Microsoft this morning announcing that they are switching their custom chip business from Marvell, MRVL, which is down about 6%, to Broadcom AVGO, which is up about 2.5%. Next era, symbol NEE, announcing a partnership with Google Cloud, a strategic energy and technology partnership to accelerate AI growth and transform the energy industry. Alphabet down slightly this morning. Next era up about 3% on this news. President Trump over the weekend telling reporters that the Netflix deal to buy Warner Brothers, Netflix winding up as the apparent winner of the stakes to buy Warner Brothers. Talk was that the one of the co-CEOs of Netflix felt like he had spoken to President Trump and that President Trump was okay with that acquisition. Well, over the weekend, President Trump saying there could be an antitrust problem here. Also, President Trump said he will be personally involved in the approval process of of who is the winner, so to speak, , for purchasing purchasing the stock of Warner Brothers. Finally, mentioned that some geopolitical news this morning. Wall Street Journal reporting that Canada, Mexico, and the United States agreed to work toward renewing the existing agreement between those countries, which is up for renewal next year. Lots of speculation on what President Trump may think about some of the provisions in there as this agreement comes up for renewal. House Speaker Mike Johnson is expected to unveil a Republican health care plan this week, while the Senate will vote on a Democratic bill. Neither bill is expected to pass. The Supreme Court will hear a case on President Trump's authority to fire the Federal Trade Commission Commissioner. This is interesting because this very similar case was brought to the Supreme Court in 1935, having to do with the firing by FDR of an FTC head. The Supreme Court at that time ruled unanimously that the president could not replace the FTC Commissioner, and this current Supreme Court seems much more sympathetic to overturning that decision or to allowing the president to do that. We'll get more insights into that as we hear the justices questioning on that case. Wall Street Journal saying that advertising spending is expected to grow more than expected. Also reports that Elon Musk says that SpaceX will be the most highly valued private company as a result of the next round of their financing, which is expected to carry an $800 billion valuation. President Trump will soon announce $12 billion in farming aid, according to Bloomberg. And this week, I mentioned Wednesday, Federal Open Market Committee with their interest rate decision. Also, on Wednesday, we get quarterly results from Adobe and Oracle, followed by Broadcom and Costco on Thursday. Before that, on Tuesday, the Bureau of Labor Statistics will release what's called the Joltz Report. JOTES standing for Job Opens Openings and Labor Turnover Survey. We're gonna get those numbers for both September and October. At the end of August, there were 7.2 million job openings and 1.2 unemployed people for every open position. That was the highest ratio since 2021. You may be wondering how Christmas shopping is going. Black Friday saw retail sales increase 4.1%, excluding autos, up from 3.4% last year. And speaking about artificial intelligence, venture funding for AI is up 64% over the first nine months of last year. Also speaking of AI, Ed Yardini, who has been bullish on the Mag 7 since 2010, saying on Friday he is no longer overweight the Mag 7, ending a 15-year bullish stance on U.S. tech stocks on worries out of overelevated concentrations and opportunities in the broader markets. speaking of those opportunities, he said he sees more opportunities in industrials, financials, and health care than he sees in technology. Looking at some thoughts here from Barron's, Barron's talking about the new tax law, which we have some provisions going into effect in 2025. One of the big factors in the new tax law is that it helps retirees a lot, and it helps retirees slash their tax bills. We've talked about this in the past, but to re-emphasize, taxpayers age 65 and older can expect an annual 4.5% increase in after-tax income due to the new tax bill. The big beautiful bill introduces a new 6,000 per person deduction for taxpayers age 65 and older. The law also extends historically low income tax rates, keeping the top tax rate at 37% instead of 39.7%. So if you are retired, what might you do as a result of this? Well, RMDs are required minimum distributions for retirees or for anyone for that matter, begin at age 73. But perhaps you might want to think about withdrawing even before you get to age 73 because these tax rates are lower. Obviously, you've got to factor in all the other income that you've got and see if this makes economic sense for your particular situation. But if you are able to take higher RMDs because you won't push yourself into a higher tax bracket, well, you'll have smaller future RMDs and you'll potentially avoid a higher tax rate in the future. Another strategy for retirees, if you're over age 70 and a half, you can make qualified charitable distributions directly out of your retirement account. So if you are charitably inclined as a result of the big beautiful bill, you may have lost some tax deductions that were in existence in 2025 that you will no longer enjoy in 2026 for charitable contributions. But if you are over age 70 and a half, you can take that charitable contribution directly from your retirement account. You can't take the distribution and then give it to charity. You can take the distribution directly from your IRA. If you're over age 73, it'll qualify towards your RMD, your required minimum distribution. If you're under age 73, you don't have to take that distribution, but it may be more tax efficient for you to make that charitable contribution directly from your retirement account, which will thereby reduce the size of your retirement account, reduce future mandatory distributions, and make that charitable contribution directly from your retirement account. Another thought for retirees: if you've had an event that's going to require a great deal of expense for medical expenses, things have changed. Now we have a salt cap or the cap for you know state and local and property taxes. That salt cap if you're earning under $500,000 a year and single or married earning under $600,000 a year, well that salt cap, well, it's $500,000 for both, it phases out at $600,000. But that salt cap with that significant increase for many taxpayers will now have lots more taxpayers itemizing their deductions. And as a result, taxpayers now who have medical expenses that exceed 7.5% of their adjusted gross income, who are now itemizers, may be able to enjoy the fact that they can write off some of those expenses that exceed 7.5% because they have so many deductions from that state and local tax, so it'll exceed the standard deduction. So you may want to pay more attention to your medical expenses if they exceed 7.5%. You may be able to get a bigger tax break by breaking those out on your taxes as well. All right, I'm gonna talk about two stocks in Barons, one of which is kind of like old world industrial, the other is a Mag 7. I'm gonna talk about White Weyerhauser, symbol WY, and the other stock is is, as I alluded to a little bit earlier, is Apple. So Wyerhouser stock, symbol WY, is a 125-year-old company. It is the largest private owner of timberland in North America, 10 million acres, including valuable tracts in the Pacific Northwest, where it holds 2 million acres. They also operate 33 manufacturing plants across the U.S., where it produces wood products, also have operations in Canada. Warehouser stock, however, has dropped 20% in 2025 due to weakness in two key and now depressed drivers of demand. New home construction as well as renovation and remodeling activity. This has caused lumber prices to fall 20% this year. The shares of Warehouser now, at least before this article, trade around 21.5. They're down about 50% since 2022, and Warehouser stock is trading where it traded in the late 1990s. But many times follow periods lead to renewal. Barronce feels this is the case for Warehauser, especially for investors seeking income over long periods of time. Shares of the company, which now yield almost 4%, trade for less than the value of the timber assets that Warehouser has accumulated over a century, and they feel that offers considerable downside protection for the stock. And while Wall Street is not optimistic on the housing market in 2026, that view could be overly pessimistic. The stock, they say, offers massive upside if lumber and wood prices do improve. Now it may not look that way at first glance. Warehouser, which by the way is structured as a real estate investment trust as a REIT, so it is going to generate a K1, is now operating at just above break-even based on generally accepted accounting principles. Companies expected to earn 17 cents in 2025, 26 cents in 2026. So if you're calculating PE ratios, you'll say, well, that's pretty high. It's around 100 times forward earnings. But high valuations in economically cyclical stocks often signal a buying opportunities because they're based on depressed earnings. In fact, if you go back to 2021-2022, Warehouser was generating earnings of about $3 per share. But perhaps equally as important or even more important is if you look at the value of their timber and their manufacturing plants, you will see that the replacement costs significantly exceed the current valuation of the company. Warehouser right now is valued about $2,000 per acre of timberland, but if you were to have to go out and buy an acre of timberland, well it would cost you $2,800 to do that. And the company's forests arguably are worth even more than $2,800 because they have lots of assets in Washington state, where they produce amongst the most desirable woods of Douglas fir trees. One analyst in here has a price, has a net asset value for Warehouser at about $35 a share. Another analyst at RBC puts that net asset value at about $39 a share versus the $2150 share price. The company is the number two producer of lumber in North America, the fourth largest market of oriented strand boards, and number one in engineered wood products. And Warehouser hasn't just been sitting on its hands, they've been making the most of a tough environment. They've been cutting costs in order to maintain profitability. They have an investor day coming up on December 11th. That's their first investor day since 2021. Warehouser is taking the long view, and Barron suggests that investors should as well. All right, finally, the last company we're going to talk about is Apple, which as recently as six months ago was, you know, as far as Apple can was struggling. Share price was depressed. Warren Buffett and Berkshire Hathaway were sellers of the stock. Yet last week Apple surging to a new all-time high, up almost 40% since August, and that's despite the fact that they have delayed their rollout of their artificial intelligence product called Apple Intelligence. Barron's thesis here is that Apple, which has been slow to participate in artificial intelligence and has not been allocating the capital to artificial intelligence like Alphabet and Meta and Microsoft. Well, the new view is that may have been a smart strategic decision. Apple has increased infrastructure spending by about 7%, Alphabet like 41%, Microsoft 93%, and now the analysts on Wall Street who are cheering that on are suggesting perhaps that they have gotten overly exuberant, and perhaps Apple has got it right after all. Perhaps Apple, which says they are running a marathon versus some of these other companies which are running a sprint, that Apple may have played the smarter strategy, so to speak. The new thinking is that these companies have been working real hard to make all these investments and to build moats around their castles, but it turns out that these motes are jumped fairly easily. So whoever was the King Castle six months ago may not be the King Castle today. In fact, we see that with OpenAI, who was viewed as the clear leader in artificial intelligence, is now being significantly challenged by Google and their Gemini product. And Apple has instead chosen to take the slow path and has chosen this path partly because they want to maintain the data security and the data integrity of their users, and this is something that is becoming increasingly important now to users. , what's happening to my data? Is my data secure? Is my data going out to the artificial intelligence world and being shared with the rest of the world? Apple has insisted that they want that data to be in ensconced within their universe, and the world is kind of coming to Apple at the moment, suggesting that that perhaps is the way of the future. The issue has been is that in order to do lots of artificial intelligence processing on a on a handheld phone, the technology is not there yet. In fact, the technology requires these big data centers to do all this crunching and number crunching, and therefore it can't be done on the phone quite yet, but the technology is improving. But what Apple is doing in the meantime is they are exploring strategic partnerships while this longer-term path is still being built out, and talks are that they may work out a partnership with Anthropic or Alphabet or both in order to bridge that gap. And analysts and markets are suggesting that perhaps Apple, with their strategy, has has got the right strategy for Apple, and Apple potentially can continue to move higher, according to this article, as a result of the decisions that they have made. That's everything I've got. Thank you for listening to Mr. Keith Lanton. This podcast is available on most platforms, including Apple Podcasts and Spotify. 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. 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 provide risk and the potential of losing money. The material does not constitute research, investment advice or trade recommendations.