The Cost Of Playing Your Hand

April 27, 2026 | Season 8 | Episode 13

The world can hand you the strongest leverage and still punish you for using it. We open with the latest shocks out of Washington and then zoom out to the bigger question driving the morning: what happens when the U.S. holds overwhelming power in the U.S.-Iran conflict, but the real cost of escalation makes that power expensive to deploy? That gap between “having the cards” and “playing the cards” becomes the lens for everything that follows, from diplomacy to decision-making under pressure. 

We connect the geopolitics to negotiation reality, including why risk tolerance can be its own weapon and why the side willing to go further can bend outcomes. To make it concrete, we tie the same logic to corporate deal dynamics, then trace historical parallels where superior force struggled against resilience and political constraints. We also explain why any new Iran nuclear agreement is complicated by the shadow of the 2015 JCPOA and the domestic politics of accepting a deal that looks familiar. 

Then we bring it home to financial markets and investing. We discuss why stocks can churn higher even as oil prices react and Middle East headlines keep coming, why AI stocks and semiconductor stocks are acting like the market’s anchor, and why consumer sentiment matters for companies tied to household spending. We preview a packed earnings season and central bank week, including the Federal Reserve decision and the PCE inflation print, and we share what professional investors are rotating into, from energy to small caps to international stocks. We close with a focused look at Berkshire Hathaway’s valuation debate after the Buffett premium fades. 

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Transcript

Breaking News And Iran Focus

Alan Eppers 0:00

And now introducing Mr. Keith Lanton.

Leverage Versus The Cost Of Force

Deal Lessons From Corporate Takeovers

History Shows Will Can Beat Power

Why Stocks Rise During War Risk

Talks Updates And Oil Implications

Security Shock And A Packed Week

Company Headlines From Meta To Verizon

Trump Headlines Move The S&P 500

Fed Decision And PCE Inflation Watch

Earnings Season Breadth And Guidance

Where Pros See Value Now

Berkshire After Buffett Premium Fades

Where To Listen And Disclosures

Keith Lanton 0:03

Good morning. Today is Monday, April 27th. Last Monday in the month of April. World continues to impress us with the unexpected. Unfortunately, this weekend we had an event in Washington D with attempt on some of the lives of some of the elected officials here in the United States, including the president of the United States. , fortunately, that person is in police custody, and we will get more details respect to that. We can expect this increased security in Washington, D.C., and further further news forthcoming with respect to that event. This morning we continue to focus on what's taken place between the U.S. and Iran. I'm gonna talk about that in a historical context, both how it affects the geopolitical world and geopolitical situation and the implications for financial markets, but also draw some parallels between the events with the US and Iran and the current negotiations that are or are not taking place, and how those negotiations in some ways are somewhat similar to the mechanations that public companies have to have to factor into their thinking and how this all may affect us and our investment decisions. So a situation where we're talking about the geopolitical situation, but again, when you're talking about you know trying to make a deal, which is what's really taking place here, and a situation where one party, the United States, as President Trump has said, seems to hold all the cards, yet the United States, , as we talked about before, because of some of the leverage that the Iranians have have have used, and because of some of the restraint that the United States has shown, and we'll talk about the why we've shown some restraint and what the broader implications of that and some historical parallels to that so that we can think about that and make more intelligent decisions both in our own lives and our own investing lives, and maybe hopefully be able to make some sense of the world. So having the cards and playing the cards are not always the same thing. So the United States arguably has tremendous amount of cards in terms of their position with Iran, and it's not just the United States, keep in mind the United States did go in with with help from Israel, the United States claimed the superpower, but Israel being a participant. And the United States clearly has the potential to exercise its will to a large extent in in the situation with Iran. But there are certain cards, important cards, that the United States has that we can play, but there is a significant cost of playing those cards. And the United States is and President Trump at the moment seem to be weighing very heavily the cost of playing those cards, the cost of American lives, the cost of getting the Gulf closed for a long period of time, the political cost, the human cost, the financial cost, and therefore the United States has at the moment made a determination that playing those cards to be able to vanquish an enemy that the juice is not worth the squeeze. And we've seen similar situations to this when it comes to corporate mechanisms. When you think about just recently, you had Netflix and and Skydance Paramount engaged in takeover discussions for Warner Brothers, and we had a situation where at the end of the day, Netflix decided that the cost for them wasn't worth the the expense, the costs being too high and the benefits being too low, and you had Skydance Paramount backed by Larry Ellison, and their thought process was no price is too high. We're willing to keep raising our prices. That seems to be the MO that they operated under. And given the fact that they were willing to really take this to the nth degree, whereas Netflix, , based on the fact of the fact that they bowed out, wasn't. Again, Netflix had the cards, they had more money, they had more ability to complete the acquisition from a financial standpoint. There were other concerns that they had with whether or not the government would ultimately approve the transaction. But again, they had the cards to win in price, but they chose not to because for them the juice wasn't worth the squeeze. So we need to think about when one side cares more about the cost than the other side, then having the cards is not always as potent or relevant to the negotiation as the side that has that power would like. And there are certainly historical contexts to this. So it is logical to think that the fact that the person who does not necessarily have the strongest hand can nevertheless have other cards that they can play that can turn out to be very powerful cards because they have the mindset that they are willing to go to the end. And you can think about this in many aspects of your life if you're up against a foe and that foe is willing to take it to the max. You could see this, for example, in art auctions. If you have an art auction, you could have a billionaire up against a multimillionaire for a painting. Yet the millionaire is the one that ultimately walks away with the painting for 20, 30, 40, 50 million dollars. And the billionaire who had the financial means to go a lot higher wasn't worth it. Again, the juice wasn't worth the squeeze for that person, but for the other person they were willing to go to the ends of their net worth in order to secure that, and the other person was not. So very often, the ultimate person who is willing to take it so far, that in effect is a card of its own. Joe Frazier, when talking about boxing and being in the ring and who's the best boxer, he said, Well, being the best boxer and the most skilled man is certainly critically a big big component of determining who is gonna win. But when she gets into that ring, it also matters is when you look at your opponent and you look at yourself, who's willing to die before he gives up? Victor isn't necessarily the more skilled fighter, sometimes it is, because sometimes skill can overcome even that factor that the other fo vote person is willing to die. But he said that the one whose will exceeds their instinct for self-preservation oftentimes can make up for their lack of skill. And when it comes to military conflict, going back to Sun Tzu in the Art of War, he said, throw your soldiers into positions whence there is no escape, and they will prefer death to flight. If they will face death, there is nothing they may not achieve. And this is the scary parallel to the Islamic Revolutionary Guard in Iran, who feels that it is an existential threat that they cannot give in, that they cannot capitulate, because they view that as the fact that they will be no more if they do that. So that is something that the United States has to contend with. Getting back to the Middle East, I mentioned there's another player there, and that player is Israel. And Israel may have a very different mindset than the United States. They may view this as more of an existential crisis than the United States, which is why the United States and Israel may have differing views on where to proceed from here. And if you go back to the founding of Israel and you take a quote from Goldemayer, who was Prime Minister of Israel in its early days, she said, We have a secret weapon in our struggle. We have no place else to go. And you can take this even back to the founding of the United States in our DNA. George Washington, when the US was fighting the British, said, Our cruel and unrelenting enemy leaves us only one choice of brave resistance or the most abject submission. We have therefore to resolve to conquer or die. And this is another parallel where the British were clearly overwhelmingly militarily superior, but the British, at the end of the day, did not have the same willingness to die as the American Patriots did in and during the Revolutionary War. You could draw a hysterical parallel to the Vietnam War, which was ultimately resolved with the Paris Peace Accords in 1973. The U.S. possessed overwhelming military, conventional, and nuclear superiority over the North Vietnamese, yet the United States could not secure a definitive victory due to the North Vietnamese resilience and the U.S.'s own political constraints. So what was taking place here with the fact that there was lots of lives being lost, and general consensus was are these lives worth it? Is the juice worth the squeeze? The general consensus at home here in the United States was no. The general consensus in North Vietnam was we will fight to the death. And the Soviets learned the same lessons when they invaded Afghanistan in 1979. The Soviet Union entered that war with one of the most powerful and largest militaries in history. And despite the fact that they won almost every conventional engagement against the Mujadin, they could not defeat the insurgency. And the Soviets back then and Mikhail Gorbachev ultimately decided that the cost of staying was higher than the cost of leaving without a victory, and this led to the Geneva Accords, which is a diplomatic framework that allowed for a Soviet withdrawal, despite leaving a fractured and unresolved political situation behind. So here we are in the United States contending with a Iran that has a power in place that views any capitulation as perhaps leading to the their existential crisis and their existential death. At the same time, we have a president here in the United States who views a deal with Iran that is anewhat worse than the deal that the Obama administration had negotiated with Iran back in 2015, known as the Joint Comprehensive Plan of Action or the JCPOA. President Trump has been severely critical of that deal as he has ascended in the political world to the president, and it will be very difficult, , if not impossible, for President Trump to accept a deal that looks like that deal or that others say is is in fact possibly not as beneficial to the United States as that deal, and therefore these are some of the factors that are making it very difficult for us to achieve an agreement with Iran in in the Middle East. And we will certainly see more information and news flow regarding that, but at the same time, we're seeing markets here in the United States continue to churn higher, despite the fact that we have all this uncertainty in the Middle East and all this conflict in the Middle East, because we are seeing at the moment that the U.S.'s economy is remaining resilient and that earnings are coming in strong, especially in the technology space, and the fact that the technology space continues to lead the U.S. economy and seems the one that is the most immune at the moment to the factors that are taking place with rising prices. That is perhaps one of the reasons why we have continued to see the technology space recently re-emerge as the undisputed leader of the financial markets, especially the chip stocks, given their need for artificial intelligence. So the thought process becoming that portfolio managers and investors are coming to the conclusion that almost no matter what happens in the Middle East, AI will continue to move forward, move on, the needs will continue to be great, and the earnings will continue to be strong. This can't be said, for example, for companies that are as dependent upon the consumer. And last week we got a consumer confidence number that showed that consumers here in the United States were their most negative sentiment had dipped to its lowest level since consumer sentiment had been recorded here, and there are concerns that stocks that rely on the consumer, despite the fact that the consumer continues to spend, that this sentiment may eventually translate into less consumer spending. So, therefore, that leads to the conclusion, hey, let's stick with that technology trade. So, with that backdrop, let's take a look here at futures. They are pointing to a flattish open as these discussions between the U.S. and Iran continue to have fits and starts. Wall Street Journal reporting that President Trump said future talks with Iran could occur by phone. That's after the cancellation of the trip this weekend by Steve Whitkoff and Jared Kushner, who were expected to go to Pakistan over the weekend, and that did not come to fruition. There are reports that Iran offered the U.S. a proposal to reopen the Strait of Hormuz and end the war, but the offer was seeking to postpone nuclear talks to a later date, and that has not moved forward. Also talks that the Iranians are going to meet with the Russians and Vladimir Putin, and that that may inject another player, so to speak, into the discussions here in in Iran. Iran's foreign minister arrived in Russia for a meeting with Vladimir Putin, and so far, if you look at the price of oil traders , which is up about one and a half percent this morning, not expecting much there, but nevertheless, another potential participant to try and see arrange the U.S. Iranians. We talked about the man who was accused of storming the White House correspondence dinner, reports this morning that he had spent years building an arsenal, doing it quietly. Preliminary evidence suggests that this person, Cole Thomas Allen, was targeting administration officials, and this attack is raising additional questions of security around the president, and that will certainly be getting lots of attention because this morning King Charles III arrives in Washington for a four-day state visit, and this is amidst the tensions between the U.S. and the UK and the strained relationship, and some comments from President Trump again reiterating that he Keir Starmer, the US the UK Prime Minister is certainly no Winston Churchill been saying about him of late. But President Trump has suggested the British monarchy could absolutely help repair the relationship between the United Kingdom and the United States. This week, if there ever was a week, Bloomberg saying that investors could look beyond the Iran peace process. It's this one. Central bank meetings for every G7 country this week. Forty-four percent of S P 500 companies reporting that's by market capitalization, five of the Magnificent Seven companies reporting earnings. So Jim Reed of Deutsche Bank saying it's shaping up to be a blockbuster week, even before factoring in the Iranian war news flow. Also, we have central banks, the Fed, the European Central Bank, the Bank of England, the Bank in Japan, and Canada, all likely to make decisions on interest rates, all expected to leave rates unchanged. But investors will certainly be paying lots of attention to not only what they do, but what they say, specifically what they say about their concerns about inflation, how transitory this inflation is, how much inflation they expect from the price oil. So we will keep our eyes and ears open for central banks and their mindset few days. Some specific companies in the news, Eli Lilly this morning announcing another acquisition. Barron's also out positive on Eli Lilly over the weekend, so two factors Eli Lilly stock price. They are set to acquire Ajax Therapeutics for $2.3 billion in cash. Stock's been changed. I looked at it. Also this morning, significant news with respect to Meta. Meta was seeking a $2.5 billion purchase of Manus, and reports are that China is blocking this acquisition. This is an important test of the Chinese and their technology, where MANS was a Chinese-founded artificial intelligence startup. As they grew up, they decided to move their headquarters and some of their operations to Singapore, and therefore were some were suggesting this could be a model for future Chinese tech startups, seek out capital at China and my companies, and some were viewing this the litmus test on whether or not to fly and the Chinese will not fly, and therefore blocking notifications are for Chinese startups and as well as the big US companies and other international partner. Verizon Communications, symbol VZ, stocks trading up about 3%, a point and a half this morning. They beat expectations on earnings by 7 cents. Their revenues came in a little bit lower than expectations, but importantly they raised 2026 earnings per share guide above cents earnings. Also, this morning, if we look overseas, markets in Asia Pacific region starting the week on a higher note, Japan up over one percent, South Korea up over two percent, China relatively flat, Australia also relatively flat, and India up about one percent. In Japan, the Prime Minister there, Takeichi saying that Japan had secured a stable supply of oil into next year. This is very important for the Japanese economy, very heavily dependent upon oil imports. Taking a look at Europe, major averages there starting the week on a higher note with some encouragement from indications that the US and Iran negotiate continuing despite a lack of in-person over the weekend. Bloomberg reporting that Elon Musk's is planning to introduce X Money, a new banking and payments platform. And in Canada, the province of Manitoba plans to ban young people from social media. That also, according to Bloomberg. Other stocks in the news here, just seeing a few others. , Qualcomm is up almost 10% as analysts are saying that industry checks suggest that Qualcomm is working with OpenAI and Taiwan's Media Tech to develop processors. We are seeing a little bit of a pullback in GE Vernova, which dramatically on earnings, expectations, continued build-out of gas turbines to power our artificial intelligence power stations. GE Vernova this morning getting a downgrade from BP Pariba. It's down about one and a half percent this morning. Interestingly, it may not surprise you to know, but here are the facts that since taking office in January of 2025, President Trump's comments to reporters as well as his posts on social media have been the primary driver behind the five best days and the five worst days in the SP 500 since President Trump took office that is unmatched by any modern American leader. No matter the president's been behind so directly the five best in the market, yet alone doing it just on a year and a half at a time. What else do we got going on this week? Well, we talked about a big earnings week. We talked about 44% of companies by market capitalization, about a third of companies by in in the S P 500 will be reporting earnings this week. If you're looking at the big tech companies, Alphabet, Amazon, Meta, Microsoft, and Qualcomm earnings on Wednesday, Apple, Caterpillar, Eli Lilly, MasterCard, Merck on Thursday. In the energy space, Chevron and ExxonMobil reporting their earnings on Friday. On Wednesday, Federal Open Market Committee announcing monetary policy decision, widely expected to keep the Fed funds rate unchanged at 3.5 to 3.75%. This could be Fed Chair Powell's last meeting at the helm of the Fed if his nominated successor, Kevin Walsh, is confirmed by the Senate before the mid-June meeting. That's looking a lot more likely with reports this morning that Senator Tillis, who had been holding up Mr. Walsh's confirmation pending the dismissal of charges against Chairman Powell at the Fed for the cost overruns of the Federal Reserve's construction on their new on their existing building, saying that given recent comments from DOJ that vote to approve Mr. Walsh. Thursday, the Bureau of Economic Analysis releases an important inflation number, the personal consumption expenditures index. This is known as the PCE, widely watched by the Federal Reserve to get a gauge on inflation, looking for that to increase 3.5% year over year. That would be a significant increase from last month's reading, obviously, to the elevated costs, oil fueling inflation and inflation concerns. The core PCE is expected to be up 3.2%, a little more moderate because it factors out gasoline prices, some knock-on effects from the war in Iran. We are seeing the increase in electric battery vehicle registrations in Germany as energy prices increased in the continental European state. 66% increase in electric vehicle registrations in Germany this year versus last year. All right, let's look back to last week. Markets had a overall positive week with the SP up one half of one percent, the NASDAQ up one point four percent. The Dow was down about six-tenths of one percent. Barron saying despite the fact that we're seeing strong earnings, and we talked about the super strong earnings in technology, when you dig a little bit below the surface, the breadth or the the overall Tone of earnings season is not as positive as we get at first blush. Barron saying only 190 stocks in the SP 500 were up last week's breadth of markets, even though in general higher, more stocks than not are trading lower last week. Also, earnings instead of being the source of upside haven't lived up to the high expectations that have built been built into them. So going into earnings season, the general expectation was for earnings growing year over year. In fact, they're on pace to increase 16%, up from 13% last quarter. Many had expected them to be better than expected. So far, 81% of earnings that have come in have topped earnings expectations, and that's better than average over the last year of 78%. But that hasn't been enough for stocks like IBM, ServiceNow, and General Electric, which got hit hard despite their earnings beats. And that's because the bar for profits is high, macro uncertainty is also high. So what stocks are trading on more so than earnings is guidance going forward. So that's one of the main factors that is going to continue to be a heavily heavy determinant of price action after earnings come in. Also, there'll be lots of attention being paid to the effects of higher energy prices. so far on conference calls this month, executive mentioned executives mentioned the war in some form over half the time. The one sector where we're not seeing talks related to energy prices, and we are seeing incredible strength, and this is what has been leading the market, are the chip stocks. If you look at the Van X semiconductor exchange traded fund that was up over 9% last week, led by Intel last week, which came out with earnings and gave really strong guidance. Again, the earnings were better than expected, but the guidance was a lot better than expected, and that's what the market focused on. In fact, Intel's earnings were able to propel AMD higher on expectations that they will experience a similar market environment to what Intel is experiencing and will benefit significantly as well. Also, we had earnings from Texas Instruments, which reported strong earnings and strong guidance. But what some of the clinicians and market folks will be really focused on will be not only the technology earnings, but the non-technology earnings to get the health of the consumer, to get the health of the overall U.S. economy, and to get a broader picture, because if the market stays concentrated in a handful of names propelling it higher, typically what happens when you get breath like that that's more indicative of a market that's struggling than a market that has the legs continue to move higher. So there will be scrutiny on earnings in other sectors like financial, like energy or goods, like the airline exposed to higher energy costs. Now, speaking of the general feeling of investment professionals and what they're thinking for the future, Barron's over the weekend had a discussion that they had with twice-a-year big money poll, where they take the mindset or the let's call it taking the temperature of market professionals, investors who make up a big component of running other people's, perhaps your money, and to get some sort of a temperature or feeling of what they are seeing and what their sentiment is, not just currently, but going forward. And despite the geopolitical shocks, over 54% of professional investors are optimistic about the next 12 months. Why? Because they're looking past the conflict toward a year of healthy corporate profits and a Federal Reserve that they feel looks stable. They are feeling very positive that President Trump has picked Kevin Walsh to lead the Fed. They feel that he has a steady hand at the helm, that he has the qualifications and the experience and the expertise in order to succeed Chairman Powell. Sixty-eight percent of pros say that the current monetary policy by the Fed under Chairman Powell is right on the money. So where are these pros putting their money? It's not just the usual tech giants. In fact, investors are starting to get valuation vertigo with names like Nvidia, Palantir, and Tesla being listed as some of the most overvalued stocks, and they suggest some of the money is rotating into one energy. Investors expect higher for longer oil prices, median forecast of oil being $80 a barrel. Top picks here include giants like Slumberger, SLB, and Halliburton, H A L. Next up, they say take a look at small and mid-cap stocks. The SP 500 is trading at a premium, but small caps are trading at a massive 26% discount compared to their larger peers. So the pros see a strong year ahead for the Russell 2000. And then third place to look, and we've talked about this before, but continuing this theme: international markets. 66% of respondents are bullish on stocks outside the United States as the dollar potentially slides in markets like South Korea, Taiwan, and Eastern Europe, and they suggest those markets are increasive increasingly attractive. The takeaway, well, the war discount is fading. While 41% still worry about a bear market, the consensus is that earnings are resilient, the Fed is independent, and there is value to be found if you're willing to look beyond the usual names, and if you're willing to look beyond the SP 500. Barons also ran a piece talking about Berkshire Hathaway, talking about the fact that Warren Buffett no longer CEO, but remaining the board. With Warren Buffett stepping down, Berkshire stock has been a mean underperformer. For decades, the rule of thumb was simple. Don't bet against Warren Buffett. But now investors are asking a new question. Is it time to bet on Berkshire Hathaway now that the Buffett premium has vanished? So since Warren Buffett announced his retirement about a year ago, Berkshire stock is down 13% while the SP has surged 26%. So that's a 40%, near 40% gap in just one year. So that may beg the question: is Berkshire Trouble experiencing some sort of difficulty? Because there are problems that have surfaced in the last 12 months, and the fundamentals actually suggest that things are looking better than ever, that there is no dark clouds on the horizon. Money from financial pros are suggesting that Berkshire has a cash fortress. Berkshire is sitting on a record $373 billion in cash, so that is an incredible amount of dry powder for new CEO Greg able to deploy when and if he sees an opportunity. He's also consolidated his decision making, whereby he will most likely be the person who ultimately decides where that capital gets deployed. If you're looking at Berkshire from a valuation perspective, argument being that Berkshire has gotten fr gone from expensive, trading at about 1.8 times book value, to arguably cheap, trading at less than 1.4 times book value. 1.4 times book value is a measure that Warren Buffett has often cited as being kind of a dividing line between when Berkshire is willing to step up and purchase stock and buyback stock and when they are not. So getting back to that level of 1.4 times book value. And keep in mind book value is based on the price that Berkshire paid for a lot of its assets. So some analysts suggesting that if you were to look at true book value, meaning what is the value of the assets that Berkshire truly owns, not just the value of the assets when they bought them, that Berkshire might actually be about 20% undervalued relative to true book value of their assets. And given that that book value has now dipped below that 1.4 billion after a two-year break, Berkshire is back in the market, potentially poised to repurchase up to about $50 billion of its own stock this year. Now there are valid concerns regarding Greg Abel, his lack of experience. Clearly, there's no concerns, it's just a fact that he is not Warren Buffett. But Barron's suggesting that that is now priced into the stock and then some. So with $50 billion in annual earnings power and a defensive heavy asset, low obsolescence, that halo word that Goldman Sachs has coined portfolio at Berkshire. Some are suggesting that Berkshire might be the ultimate inflation protected play for 2026. And if you're looking for a potential cherry to put on top of that Berkshire story, Barron's saying that Warren Buffett has always been a big fan of Tim Cook, and Tim Cook will be stepping down from Apple on a day-to-day basis and handing the reigns over to his successor. That perhaps Tim Cook, and this is not something that's going to happen, but Barron's suggesting it is a possible possibility that Tim Cook could join the Berkshire Hathaway board of that's everything I've got.

Alan Eppers 31:44

Thank you for listening to Mr. Keith Lanton. This podcast is available on most platforms, including Apple Podcasts, Spotify. For more information, please visit our website at www.heroldlantern.com.

Sophie Cohen 32:01

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