When Hype Meets History In Public Markets

May 26, 2026 | Season 8 | Episode 16

SpaceX is finally nearing the public markets and the hype is already loud, but we’re not treating it like a fairy tale. We walk through what a SpaceX IPO could look like at an enormous valuation, why mega IPOs often behave differently than classic “ground floor” listings, and what history says about first-day pops versus the next three years. We also dig into the mechanics that can move the stock after the opening bell, including lockup expirations, insider supply, and the buying pressure that can come later when major indexes and index funds need to add shares.

From there, we widen the lens to the daily drivers behind today’s tape: Middle East negotiations, oil sliding, Treasury yields easing, and why that combination can lift equity futures even when the geopolitical backdrop feels unstable. We preview key US economic releases like consumer confidence and the PCE inflation report, and we talk about how inflation expectations and deficits feed into the bond market and, ultimately, stock valuations.

If bonds still make you uneasy after 2022, we offer a clearer way to think about risk now that starting yields are higher. We cover practical ideas like shorter-term bonds, preferred stocks, and TIPS, then discuss higher-yield options like business development companies (BDCs) with a frank look at the tradeoffs. We also share why Japan is back on the radar for global investors and wrap with a quick scan of a few “unloved” US stocks outside big tech.

Subscribe on Apple Podcasts or Spotify, share this with a friend who’s watching SpaceX, and leave a review telling us: are you buying day one or waiting for volatility to settle?

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

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Transcript

Holiday Open And Market Setup

Alan Eppers 0:00

And now introducing Mr. Keith Lanton

Keith Lanton 0:03

Good morning. Today is Tuesday, May 26th. Hope everyone had a fantastic three-day weekend here in the United States, Memorial Day, honoring soldiers here in the United States that have made the ultimate sacrifice. As we begin this morning thinking about our soldiers in the Middle East and what's taking place between the U.S. and Iran and what impact that's having on financial markets. We are seeing this morning some optimism about a potential deal getting consummated, and . We are seeing futures higher, we're seeing oil lower. Uh that lower oil is driving down interest rates, which is creating a flywheel effect and lifting futures a little bit higher as well. So a secondary factor lifting the futures markets. So this morning we're gonna focus on a few different aspects of the financial markets as we've had strength continue. Last week got off to a bumpy start, but eighth straight week of SP 500 advances. Here we are at the end of May, the end of the second month of the second quarter, and financial markets defying lots of expectations, especially with the uncertainty taking place in the Middle East, and we're continuing to see equity markets perform really well, even as interest rates which have come down a little bit recently have have gone up meaningfully, and that has been something that defied expectations. A lot of this has been driven by artificial intelligence and optimism about some IPOs here in the United States, specifically SpaceX, Anthropic, and OpenAI all on tap but to possibly come public in a little while, creating lots of enthusiasm and some would say euphoria. We're gonna talk about the SpaceX IPO. We here at Herald and Lantern Investments will be getting lots of incoming inquiries regarding SpaceX, the IPO, how to invest pre-IPO. Barents had it on their cover talking about the upcoming IPO and what individual investors may want to think about doing, and we'll discuss that. We'll discuss the news this morning as we talk about the geopolitical situation in the Middle East as well as what else is taking place both in the United States and throughout the world. Today

Texas Runoff And Trump’s Influence

Keith Lanton 2:20

in Texas we have a runoff in the Republican primary between President Trump's endorsed candidate Paxson and the incumbent Cornyn. Uh this some suggest is an important litmus test for the traditional Republicans like Republican Senator Cornyn and the upstart Paxon, who is the controversial attorney general in Texas, , some suggesting that if Paxon were to get the nomination, and that's looking like it's more likely than it was before, although not a foregone conclusion that President Trump has endorsed him. I mean he is a less traditional figure than Cornyn, who is well respected within the Senate. And some are suggesting that if Paxson were to get the seat, that that would give the Democrats a better chance of getting a Senate seat in Texas, something that they have not had in quite some time and possibly could play into the maneuvering in the Senate and whether or not Democrats could gain a majority in the Senate, possibly more likely with a Paxson candidacy. So be lots of attention focused. Uh there will be another litmus test of President Trump's power within the Republican Party.

Why Interest Rates Shape Stocks

Keith Lanton 3:33

Then we're going to talk about the bond market, critically important influence, obviously, in the stock market as yields rise. It makes it more expensive for corporations to finance their business, especially important with artificial intelligence, which is requiring a tremendous build-out data centers and rising costs to build those data centers certainly could impact the markets as well as just general Fortune 500 companies as interest rates rise causes their finance costs to rise, and it also makes future earnings less profitable, so arguably that's something that weighs on stocks. So we'll talk about the outlook for interest rates, , whether bonds still make sense in portfolios and some possible interest rate ideas on how you can earn a little bit more money. And then we're gonna move on to Japan, Japanese stocks. Uh personally just returned back from Japan, so give you some insights into what I saw over there and whether or not there are some opportunities in the Japanese market. And then we'll talk about opportunities here in the U.S. market outside of technology and whether or not there are some interesting scenarios to consider outside of technology, where all the returns and all of the action in general, when I say all, of course, not 100%, but if you're looking at the indexes, it's a very large portion of returns coming from technology and specifically from companies that are benefiting from artificial intelligence. And despite the fact that there are some companies in the technology space, specifically software companies, that have been viewed as the losers at the moment in the artificial intelligence race, but those losers are getting overwhelmed by the winners. And it's not even clear in the long term whether or not those software companies that are suffering today will ultimately be companies that suffer in the long term. One of the potential sufferers has been suggested to be the jobs of people who working in some of the software companies. We've seen some layoffs at some of the big tech companies, and this morning OpenAI's CEO, Sam Altman, said the rapid development and adoption of artificial intelligence he said would not lead to a global jobs apocalypse, and the technology has not claimed as many white collar jobs as he has feared. That would be something that would be music to the ears of certainly many American workers and the financial markets.

SpaceX IPO Hype Versus History

Keith Lanton 6:00

So we've been hearing a lot about SpaceX and whether or not individual investors should consider investing in SpaceX. This is a company that's been around for a long time and is now going public. SpaceX has been around since 2002, so even though it's the first opportunity for many individual investors to get on board, institutional investors have been on board for almost 24 years, so this is not your typical startup. So Baron's talked about SpaceX IPO is a game you should play at your own risk. If you go back in the you know the bygone days of initial public offerings, they were a way for investors to get in the ground floor of a promising company. When you take a look at some of the IPOs today, but specifically SpaceX, Barron's saying this IPO is more like parachuting onto the roof. So when SpaceX does go public, and that's expected to happen next month, the company is likely to carry a valuation approaching two trillion dollars. So this is no typical you know startup company going public. Uh this is going to be from a valuation standpoint one of the top companies in terms of valuation day one, arguably top five, certainly top ten in terms of valuation. Obviously, it depends where things stand when it comes public. SpaceX is gonna probably raise a record $75 billion in the deal. And Elon Musk may become mankind's first trillionaire. So arguably we're way past the startup phase. So you know just bear in mind this is not getting in on a company that has the typical IPO runway. That doesn't mean it's not an appropriate investment, it doesn't mean it's a bad investment, but it doesn't mean it's a good investment, and it doesn't, and what it but what it does mean is it's not your typical IPO. And we need to go back in history and take a look at traditional IPOs and large issues of of stock and see what's happened historically with IPOs, because many of us who have been shut out from participating in many of these startups are understandably anxious to participate. But we need to look back at the history. We've talked about history a lot before in order to make intelligent decisions and to not let our emotions get the better of us. So historical data show that large US IPOs, especially the largest, tend to underperform the market with a not insignificant share of these stocks delivering negative returns. And if you're looking at the coming wave of mega IPOs, which we mentioned, SpaceX, Anthropic, OpenAI has a few Databricks is another. Private investors are lip licking their chops at the prospect of cashing in on long-awaited gains. So keep in mind that for every retail investor that's dying to get in, there are many institutional, individual investors, workers at these companies that have been waiting a long time to get liquidity, and those folks are equally excited about the potential to possibly get some of their money back. And if you go back in history and you look at the ten largest IPOs that have ever occurred, these are names like Meta platforms. At the time it was called Facebook, Uber, the United Parcel Service, Coinbase, General Motors, Visa all the way back in 2008. And you look at their relative total return. This is relative total return, this is return of the stocks relative to how the S P 500 performed since they became public. If you look at this list of 10 stocks, eight of these ten have relatively underperformed the SP 500 since they've come public. So eight out of ten, you may be thinking, okay, what were the two winners? The biggest winner was Visa, and the second big winner was was Meta. Other than that, the other eight out of ten have underperformed the S P 500 since they have gone public. So every slice of data narrowing in on tech companies and expanding to to exclude the IP the dot com bubble, you'll notice a pattern. On average, stock spikes on their first day of trading for these large IPOs, or if you're looking at IPOs in general, they typically have a strong first day pop, meaning they open up above their offering price very frequently and have a positive day one return relative to where the company went public. It doesn't necessarily mean relative to where it opened, but on average since 2011, the average stock on its first day from where it from where it goes public, again, not necessarily where it opens, not where you can buy it that day, um, we're seeing a pop of twenty-three percent. But over the next three years, IPOs have lagged behind the market by about twenty-five percentage points or twenty-five percent. And when you look at the largest of the IPOs in terms of their price to sales ratio, in other words, what is the company being valued at relative to their sales? And when you look at companies that have price to sales ratios above 40, well, we've seen an average three-year drop for those companies after they go public of 45%. So maybe you may say to yourself, well, how does SpaceX stand what is their price to sales ratio? Is it over that that number? Is it over 40? It's 93. So again, it doesn't mean the SpaceX will look like the others, but looking back at history, these companies that trade at very high multiples to sales have historically, again, not every single one, but have historically struggled. Now I'm not predicting that SpaceX is going to flop or not have a great return. Don't expect this data to spook many investors. There are again lots of people waiting for years to get on board, and there are many reasons to expect another explosive first day gain in June when SpaceX goes public. The star at the hard numbers are impressive. SpaceX accounts for the majority of all orbital launches worldwide. Its use of recycled rockets has driven per launch costs well below what the sector ever thought was possible. SpaceX owns Starlink, its satellite broadband system. It serves over 10 million customers as of the end of March, and it is making money. It had earnings before interest taxes, depreciation, amortization of of margins of about 63% on revenues of over eleven billion dollars. And if the innovative telecom business is the floor for SASEX stocks, well, what's what's the cherry on top? What's really getting investors excited? Well, that is the potential, but the keyword here is potential, of putting solar-powered data centers in space. But this is still to this point a science fiction idea, but a science fiction idea that has attracted serious partners like Alphabet and Anthropic. SpaceX is saying that the total addressable market for its AI business, and this is a business largely comprised of putting these data centers into space, again, something that hasn't been done yet. Uh, they're saying that the total addressable market of that technology is $26.5 trillion. That's quite a number considering the entire US GDP is $31.9 trillion. And of course, there is the hype. Oh, there is going to be lots of hype. SpaceX has been the most private company in the world, attached to one of the most polarizing public figures alive, and it has been inaccessible to retail investors for about 20 years. So that creates a generational IPO story, but you need to be mindful of managing your emotions. It is exciting that the opportunity is here, but you've got to keep in mind that this opportunity has been available to institutional investors for quite some time, and they are taking , in many cases, although not all cases, a different view of the IPO, viewing it as a liquidity event, not as a purchasing event. They are aware that SpaceX at the moment is unprofitable in the first quarter of 2026 alone. They reported a $1.9 billion operating loss, and that's despite the fact that Starlink is operating profitably. Also keep in mind that after SpaceX, we will very possibly be seeing IPOs from OpenAI and Anthropic, and they are no less famous and they are no less exciting. Wall Street Journal reported last week that OpenAI is preparing to file a confidential IPO prospectus with regulators in the next couple of days, and there are reasons to expect that both OpenAI and Anthropic will go public soon, especially if SpaceX has success with their IPO. So who are the real winners of this mega IPO? It's not necessarily the company or the public investors who are finally able to get in. It's very possibly and likely the private investors who are the ones coming out on top as they are finally able to start taking some of that profitability off of the table. Many of the initial earlier investors in SpaceX, when I say earlier, it could be as sh recently as 12 to 24 months ago, have stated that they are very likely to take some of their money off of the table. To be sure, investors won't dump right away because private investors typically have lockup periods, typically in the neighborhood of six months where they are prohibited from selling shares. But once those shares do start to hit the market, you will start to see a little bit of pressure coming into these stocks. And what you will also see is that around the same time SpaceX aware that it's very possible that there will be some selling pressure from selling shareholders. So what they're looking to do is to at the same time try and match up demand and have the index funds be the folks that step up and are the ones at that six-month period, typically it used to be a year, but SpaceX has done some maneuvering with the indexes, with the NASDAQ QQQ index and with the SP 500 index accelerating their ability to participate in those indexes and therefore accelerating demand, with the hope that some of the pressure coming from selling shareholders will be offset by the buying pressure for the indexes needing to own a piece of SpaceX as a public company. And then that begs the question: once you get past those index inclusions, what happens to the stock as as insiders still have stock that they are looking to sell? Is there enough demand to offset that increasing supply? Of course, that is a question that no one here can answer. So, what is the answer? What do you do? What Baron suggests is resisting the urge to chase the stock, but expect it to be wild and unpredictable. And perhaps the best approach is if SpaceX is something that you are interested in including in your portfolio and you understand it won't be included in indexes day one. Well, think about it in the sense of what does your overall portfolio look like? What's the percentage of the portfolio you'd like to own of SpaceX, and then think about a dollar cost averaging strategy. If you go back to the IPO that was very successful in the technology space, that was a mega IPO, that was Meta Platforms back in 2008. And those who are old enough to remember may remember that when Meta came public, the first few months were very rocky, and the stock , although it was very exciting on the IPO day after that, the stock came under some pressure. So investors who bought Meta after the first day of trading are up 1,474% today, but those who bought it six months later have booked gains of 2,454%. So the fact that you didn't participate day one doesn't necessarily mean that that you couldn't participate later if you watched, you assessed, and you thought about it. Again, no one knows if SpaceX will go public and just keep going higher. So again, if it is something that is of interest to you, keep in mind the history, keep in mind the size of the IPO, keep in mind that this is not a startup, and keep in mind that the dollar cost averaging may be a sensible approach as as a strategy to invest in SpaceX. All right, let's

Iran Talks And Today’s Data Watch

Keith Lanton 18:28

talk about financial markets this morning. What's going on? Equity futures right now are pointing to a higher open as we return from the long holiday weekend, the headlines of negotiation between the U.S. and Iran and progress in that in those discussions, and that is giving markets encouragement. Geopolitical volatility last week resulted in choppy action, but as I mentioned earlier, it ultimately resulted in the SP 500 extending its winning streak to eight consecutive weeks, and the Dow finishing at record highs on Friday. Axios is reporting that the U.S. and Iran are negotiating a 60-day memorandum of understanding that will include the reopening of the Strait of Hormuz with no tolls and a commitment from Iran to never pursue nuclear weapons and negotiations over the removal of the stockpile of highly enriched uranium, some suggesting that perhaps place for that highly enriched uranium to go might be China. Crude oil is down four dollars a barrel, about four percent to ninety-two sixty, and treasury yields importantly a lower across the curve, ten-year treasury down about eight basis points to a four point four eight percent. Uh Wall Street Journal saying that the peace talks are hitting a snag over the nuclear program and sanction relief. Another fly in the ointment, so to speak, is that the President Netanyahu or Prime Minister Netanyahu of Israel said that Israel plans to intensify its strikes on Hezbollah in Lebanon. The ceasefire between Israel and Hezbollah is important to Iran, so that strikes as not being in alignment with what Iran said that they are seeking. Also, yesterday the United States conducted self-defense strikes near the Straits of Hormuz. NBC News is reporting that despite those self-defense strikes, there is no indication yet that this action has changed the temporary ceasefire. CBS News reporting that Marco Rubio is saying that an Iran deal is still possible within days despite those new U.S. strikes. President Trump has said negotiations with Iran are proceeding nicely. Says it will be a great deal or no deal at all. And he said, and this is getting some attention this morning, that it should be mandatory for Saudi Arabia, Qatar, Pakistan, Turkey, Egypt, and Jordan to sign on to the Abraham Accords. Some initial pushback from Qatar and Saudi Arabia on those comments. Some are suggesting that if President Trump were to succeed in getting some of these countries to sign on to the Abraham Accords, it would potentially offset some disappointment of the U.S. not getting everything that they are seeking in terms of the nuclear concessions from Iran. Speaking of those nuclear concessions, President Trump said the enriched uranium will either be immediately turned over to the United States, be brought home and destroyed, or preferably in conjunction and coordination with the Islamic Republic of Iran, destroyed in place, or at another acceptable location with the Atomic Energy Commission or its equivalent being witness to this process and this event. Other news this morning, the Pentagon is reportedly upset with Starlink over price increases during the Iran War. This is price increases to the U.S. government. CBS News reporting that there was record Memorial Day travel yesterday. And Fox News talking about Pope Leo, who warned that artificial intelligence risks becoming a tool of domination, exclusion, and And death without government limits. What do we got going on today and this morning? Well, later this morning at 10 o'clock, we will receive the consumer confidence index. We're expected to come in at 92. This week will be lighter in terms of the total number of releases, but Thursday is the big release here in the United States. And on Thursday, we get the Bureau of Economic Analysis releasing the Personal Consumption Expenditure Index. This is also known as the PCE price index for April. Analysts are expecting a 3.8% year-over-year increase. That would be up three-tenths of one percent from March. The core PCE, which excludes food and energy, is expected to rise 3.3% versus 3.2% previously. If these estimates are correct, it would be the highest annual change since May of 2023. So the inflation data certainly will get lots of attention this week. Taking a look at the Asian markets, Tuesday they ended mostly lower. Keep in mind they were open Monday. We closed for Memorial Day, and we had strong markets in Asia Monday, so a little bit of a pullback. But when you look at the net effect, positive, and the same could be said for European markets, which are slightly down as well today, but again, European markets were up yesterday, so U.S. doing a little bit of catch-up. A couple of individual companies in the news this morning, Financial Times reporting in general U.S. oil companies are increasing production. Also reports that airlines are expecting record Memorial Day travelers. We talked about record day Memorial Day, and lots of those people are flying. Uber in the news, , they are considering raising their offer for delivery hero, which is kind of like Uber Eats outside the United States. That's after a shareholder refused a previous offer from Uber. Uh we are seeing strength in the chip stocks again this morning. Intel up about 2.8%, Micron up 6%, Sandisk SNDK adding 3.3%, Dell is up over 4%, Dell has earnings on Thursday, satellite company EchoStar, which Wall Street sees as a way to get in on the SpaceX IPO. They sold some Spectrum to SpaceX and now have a position in SpaceX, and EchoStar stock has been moving up and it's up another 4.6% this morning. Oil down today, Chevron down 1.2%, Exxon down about 1.4%. Ferrari stock, symbol Race R A C E is down over 3% after they inveiled their first electric vehicle. It's called the Loose, and this car is selling for over half a million dollars, and some analysts are suggesting it it doesn't stand out, looks too much like other cars, , doesn't look like a Ferrari, and that's leading to some disappointment. Eli Lilly stock up about 2%. They had positive results from a trial for gene editing treatment for high cholesterol for for Eli Lilly. A couple of other numbers to keep in mind. We are keeping our attention focused on Africa and the Ebola outbreak, number of cases now suspected to be rising to over 900, number of countries affected, possibly up to 10, and Africa has seen the largest rise in populations in 1950, 1.3 billion. It's the only region in the world with a fertility rate above replacement rate. So the economy in Africa is growing in importance, and the Ebola epidemic is something that could upend that and will be , I think, in my opinion, getting lots more attention here over the next week or two as we hopefully see the ability to rein in the spread of that disease. Also, it's taken place, interestingly, something as a result of higher oil prices, something that wasn't expected per se with President Trump and his views on electric vehicles, , but electric vehicle sales in the world continue to increase. In fact, the percentage of global sales of electric vehicles and plug-in cars is expected to be up to 30% of all vehicles in 2026. And I mentioned interest rates, one of the big factors that interest rates affect is the housing market, and the 30-year fixed rate mortgage last week hit 6.5%. That is the highest number since last August when we got up to 6.56%. So those high rates certainly don't make things easier for home buyers, especially first-time home buyers. So

Bonds Under Pressure And How To Adapt

Keith Lanton 26:47

let's talk about interest rates and let's talk about the bonds, and if you are thinking about no longer working, one of the things that you're also thinking about is the stock market's volatile, and you are worried that if you were to sustain a long downturn in equities, well, that would be very problematic because you're no longer receiving income and you need those funds to carry you through your retirement years, so very often you think of investing in bonds. So Baron says for retirees, don't panic about bonds, but think about how you can protect your bonds and your portfolio. Bonds are causing angst for retirees and other investors as yields rise and prices slump. Many investors have a recency bias and they think back to 2022 and they remember feeling lots of pain in their bond portfolio. And this is very likely not a sequel to 2022, the last time bonds really tanked, but it does it does pay and it makes sense to make some moves to protect yourself. Bonds are under pressure as investors worry inflation is here to sit stay. We talked about the PCE coming out later this week and inflation possibly approaching 4%, core inflation in the neighborhood of 3%, but the market is worried that inflation will be higher for longer, and that's why long-term bond yields are rising. Some would say rising sharply. Yields on the 30-year Treasury recently touched 5.2%, they were about 4.6% before the Iran War. Highest levels too since 2007. But there are big differences between what happened in 2022 and what's happening today. If you go back to 2022, it seems like a long time ago, but it was only four years ago. At the time, when we went into 2022, we were looking at a federal funds rate of 0.25%. And the Federal Reserve wound up hiking rates all the way up to 5.5%. So we saw a significant rise in the Fed funds rate, over 5% increase in the Fed funds rate in the early 2020s. That is something that at the moment looks extraordinarily unlikely. We're looking at a Fed funds rate right now, just under 4%. So the probability of the Federal Reserve taking interest rates to 8-9% seems at the moment to be extraordinarily unlikely. So we're unlikely to experience a rise in the Fed funds rate like we experienced in 2021, 22, 23. At the same time, the starting yield that investors are receiving is a lot higher. So if you're earning a 10-year treasury yield of 1% as opposed to 4.5% today, the amount of protection you have from rising rates is is a lot less. Today, if you're getting a real yield of of two percent or you're getting a nominal yield on the 10-year treasury of 4.5%, well that yield offsets the decline in price if interest rates rise. So the probability of suffering as much of a decline in the overall value of your bond portfolio, including those interest payments, is a lot less likely because we are starting with so much higher of an interest rate. So what to do, what to think about in terms of bonds and bond yields. One thing you can think about is the yield curve is relatively flat, so short-term bonds, which aren't as interest rate sensitive, offer attractive yields and at the moment will not decline in value as interest rates go up nearly as much as longer-term bonds. Uh, Baron says preferred stocks are another option. Hybrid stock and bond securities, , which are preferred, so generally yielding north of 6%. Um, and then of course you can add some Treasury inflation protective securities, also known as TIPS, which keep pace with inflation. Back in 2022, they underperformed because the real yield on tips was so low, 0% in many cases. Now you're looking at real yields on tips of 1.5 to 3% depending on maturities, and those are worth a look as as well today. Rising interest rates also impact equities, and if interest rates were to continue to increase, the risk that your equity portfolio would suffer more than your bond portfolio arguably is something that you need to take into consideration. This concern with respect to bond yields is not just being driven by inflation concerns with respect to rising oil prices, but have to do with the pandemic era borrowing and persistent deficits also affecting the outlook for inflation here as the U.S. federal debt exceeds 100% of GDP. So Barron's running an article entitled Bond Yields Are Nearing the Danger Zone, and the danger zone that they're talking about is the danger zone of what happens to equities if we get to the point that you start seeing 6% yields on 30-year bonds or high 5% yields on 10-year treasuries. Well, that's something that could start squeezing your bond portfolio a little bit, but your stock portfolio a lot, and that's something that you need to think about when you're doing your allocation because one of the best cures for high interest rates is high interest rates, meaning that high interest rates can in of themselves create slowdown in the economy, in other words for recession, and that in of itself could cause interest rates to start to decline as the stock prices decline and people seek the safety of bonds and inflation mitigates because the economy's weakening and people don't have as much money to spend. All right,

Chasing Yield With Public BDCs

Keith Lanton 32:25

let's transition to a more aggressive way of getting interest rate return and yield. And Barons suggests possibly weading into the water of an area that has been under a lot of pressure, and that is business development companies or BDCs. These are companies that lend money to private companies, and this is an area that's been under a lot of pressure with private investments getting lots of attention as being illiquid, and this was an area that lots of folks had FOMO on. I wasn't investing in private equity, I wasn't investing in private credit, my friends were, and therefore I should have been doing it. Uh lots of folks rushed in, and then the rug got pulled out. Some of the investments that were being made were more risky than anticipated. Investors started to s experience losses, wanted their money back. These private credit funds said, hey, , we have limits on giving money back to investors, we're not going to give you your money back quite as fast as you want. That only made people want their money back more. Um and we started getting into a little bit of a spiral. And Barons are suggesting that perhaps that spiral is mitigating, but a better way, they say, of investing in private credit is to do it in the public markets, which are already reflecting some of the weakness and concerns in the marketplace. If you're looking at business development companies and business development company indexes, they're down about 20% over the last year, but are now offering yields of 11 to 13 percent as investments, and Barons are suggesting that those types of returns maybe, and again, this is another scenario, dollar cost average, don't jump in, but Barron's suggesting that maybe those 11 to 13 percent yields in the public business development company stocks may be compensating you for that risk and that things may be stabilizing, and therefore this may be a time to take a look at these private credit markets. Some of the companies that they mention here in this article are Aries Capital, ARCC, which targets senior secured loans for companies with established private equity sponsors. Another one is Hercules Capital, symbol HTGC, , which pursues a similar strategy focusing on technology companies. Uh other companies mentioned as well. There are risks. Payout ratios are high, but that's the nature of the business. Investors should realize that business development companies' dividends can and do fluctuate. Investors should watch credit quality and the direction of interest rates for indications of where they may be headed. Falling rates in particular can impact the payout on business development companies because they're often variable rates, although at the moment it's not looking as likely as it was a little while ago that the short-term interest rates were going to be declining. Alright, let's move on. It's getting

Japan Stocks, Yen Risk, And Robotics

Keith Lanton 35:20

late here to Japan. I mentioned just got back from Japan and Barons over the last two weeks talked about investing in Japanese stocks, talk about the Japanese currency, which has been under pressure as the Iran War challenges Japan, where 80% of its oil is imported via the Strait of Hormuz as opposed to the U.S., where almost none of our oil comes from the Straits of Uh Hormuz. Um but despite that, some of the geopolitical tensions between the U.S. and China are benefiting Japan. Japan has crucial rare earth minerals. In fact, they just discovered the third largest potential deposit of rare earth minerals off of their coast. Uh Japan is also starting to experience the ability to raise prices. Uh Japanese companies have been very reluctant to raise prices as the Japanese economy was stuck in neutral and interest rates remained extremely low. But now we are starting to see Japanese companies have pricing power and it's not as anathema to increase prices. So companies starting to raise their prices, Japanese stocks trading around 18 times forward earnings versus about 21-22 here in the US for U.S. companies. Um Japanese companies are becoming more Western-like in that they are buying back their stocks. And perhaps the greatest potential change in Japan is that the Japanese investors may be looking more likely to invest in their stock market at home. Today, Japanese investors have just 14% of their portfolios allocated to stocks. That number is about 25% in Europe and about 35% here in the United States. If we had Japan just look like Europe and individual investors start to invest more in equities, especially as interest rates start rising there, Morgan Stanley estimates that could translate into 1.7 trillion in equity purchases, and that is about 20% of the market capitalization of the Tokyo stock market, so a potential for some fuel there in the Japanese market. Japan also being one of the leaders because of their shrinking population, but their continued prowess in manufacturing, so one of the leaders in robotics, and that's something that obviously is also becoming a crucially important component to manufacturing as countries look to onshore here not only in Japan, but here in the United States as well. From having been over there for the past couple of weeks, I can tell you that looks like the Japanese consumer is certainly willing to spend. Lots of restaurants, bars, , stores all all looking crowded, full. So the economy there looks like, from an observer, casual observer standpoint, looks to to be a company country that is experiencing consumer confidence. Finally,

Unloved US Stocks Worth A Look

Keith Lanton 38:24

last topic here in the United States, we talked about technology, talked about overseas, talked about Japan. Let's talk about U.S. stocks that are unloved. And Baron's talked about some quality stocks that have hit new lows and potentially look like bargains. I'll mention them quickly because we're running out of time. One of which is Home Depot out of favor, but if we were to see any sort of change in direction of interest rates like we are today, if that were to sustain itself, Home Depot is trading around 20 times earnings, a stock down significantly over the last 52 weeks, almost 20%, offering potentially opportunity for patient investors. Another company, Zoetis, symbol ZTS, leader in animal health, once viewed as a can't miss play on America's infatuation with our pets, but pet-oriented medical spending unexpectedly slowed, and Zoetis stock has been hammered. Stocks trading around 80, down about 35% this year, and it's down 70% from its peak in 2021. Morgan Stanley analyst Aaron Wright is bullish on the stock, saying that they have an unmatched breadth in their portfolio. Stocks trading at about 12 times forward earnings, 3% dividend yield, and still capable of single-digit annual earnings per share growth, and insiders have been buying Zoetis stock last 52 weeks down 50%. Another stock down almost 50% over the last 52 weeks. Another former Darling is Accenture, symbol ACN, trading for 12 times projected earnings for fiscal year ending in August, has a 4% dividend yield, has been buying back stock. The worry here is artificial intelligence, but a UBS analyst Kevin McVeigh remains bullish, noting that Accenture has the scale, deployment, capability, and skills that upstart AI players lack. He has a buy rating, the stocks trading at around 164. It's a very ambitious target of $320 per share. McDonald's stock down about 10% over the last 52 weeks, trading near a year low, relying on low-income consumers who have getting hurt by high oil prices. But if you believe that oil prices may start to stabilize or even decline, well, McDonald's at around 20 times earnings and a 3% dividend may offer an attractive risk reward. Finally, I will mention McCormick, symbol MKC. Wall Street hates its acquisition of Unilever's food business. The stock's down about 37%, and McCormick's down to about a 15 times forward PE, dividend yield north of 4%. But TD Cowan analyst Robert Moscow saying the damage to McCormick stock could be over, and he has a target price on that stock significantly higher than the $46 current price. That's everything I've got.

Closing And Where To Find Us

Keith Lanton 41:18

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Alan Eppers 41:19

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Sophie Cohen 41:36

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