Full Transcript for When The Past Warns The Market About Tomorrow

taking unilateral action against a dictator here in Venezuela, and the questions that now come to mind aren't so much what does this mean today as what does this mean going forward? 00:03:12.639 --> 00:03:23.039 Does this mean that the United States will be more aggressive in taking out other leaders perhaps in Cuba, as Marco Rubio is referred to as a potential next target? 00:03:23.039 --> 00:03:30.400 We saw Stephen Miller ate to President Trump, his wife posting on X that perhaps Greenland will be soon. 00:03:30.400 --> 00:03:37.039 That would be something that potentially could really try the the alliance we have with the European countries and NATO. 00:03:37.039 --> 00:03:43.520 And , of course, the continuous giant elephant in the room is what does this all mean? 00:03:43.520 --> 00:03:54.879 What is the message to China with respect to the Indo-Pacific region, and specifically with respect to Taiwan, and what are their thoughts with respect to these actions. 00:03:54.879 --> 00:04:04.879 So we wake up today to a world where we face perhaps even more geopolitical uncertainty after the capture of President Maduro. 00:04:04.879 --> 00:04:08.560 This is a move that could potentially unlock Venezuela's oil reserves. 00:04:08.560 --> 00:04:19.040 We'll talk about what this may mean for oil prices and could boost risk assets over the longer term, has the potential to weigh on sentiment as things settle in. 00:04:19.040 --> 00:04:21.839 We are seeing this morning that U.S. 00:04:21.839 --> 00:04:24.639 refiners' shares are moving higher. 00:04:24.639 --> 00:04:26.399 These are the companies that process oil. 00:04:26.399 --> 00:04:28.160 The reason for that is why U.S. 00:04:28.160 --> 00:04:29.199 refined why are U.S. 00:04:29.199 --> 00:04:31.360 refining stocks moving higher? 00:04:31.360 --> 00:04:42.000 Well, the refineries that were built here in the United States, specifically built along the coast, the Gulf Coast, California, they were largely built to process heavy crude. 00:04:42.000 --> 00:04:46.720 And heavy crude is predominantly drawn out of the ground in Venezuela. 00:04:46.720 --> 00:04:55.040 The oil that we that we produce here in the United States as a result of fracking tends to be a lot less viscous, a lot less, a lot less thick. 00:04:55.040 --> 00:05:01.600 And therefore, we can't, in the current refineries that we have here in the United States, by and large, we can't refine that oil. 00:05:01.600 --> 00:05:06.160 The refineries are actually built here to refine lots of Venezuelan oil. 00:05:06.160 --> 00:05:16.560 So the potential to have this heavy oil now have access to it is something that could be a big benefit to the refiners here in the United States, which can't refine a lot of the oil that we have. 00:05:16.560 --> 00:05:26.639 Interesting fact is that the United States imports six million barrels of oil a day, even though we produce so much oil, and we export four million barrels a day. 00:05:26.639 --> 00:05:30.319 And that is largely because of the fact that we can't refine this oil. 00:05:30.319 --> 00:05:34.160 So there is a strong business component and a benefit to the refiners here. 00:05:34.160 --> 00:05:50.160 Also, a big stock that may be a beneficiary is Chevron, which is still operating in Venezuela, so potential that Chevron could see an increase in the business that they're doing there in Venezuela. 00:05:50.160 --> 00:06:00.959 And Chevron is up significantly this morning, as well as Halliburton Slumberger, the companies that are the facilitators or the infrastructure builders of oil and gas assets. 00:06:00.959 --> 00:06:10.160 Venezuela's leader Nicolas Maduro is doing New York court to face drug charges while the UN is scrutinizing the legality of U.S. 00:06:10.160 --> 00:06:13.839 President Trump's extraordinary operation to capture him. 00:06:13.839 --> 00:06:18.399 The Colombians, with support of the Russians and the Chinese, are requesting a U.N. 00:06:18.399 --> 00:06:22.879 Security Council meeting that is taking place today in New York. 00:06:22.879 --> 00:06:25.600 There are jitters in Latin America. 00:06:25.600 --> 00:06:33.920 The Mexican peso is the worst performer among major currencies, weakening about three-quarters of one percent against the dollar after President Trump said the U.S. 00:06:33.920 --> 00:06:38.240 will have to do something about the flow of drugs from the country. 00:06:38.240 --> 00:06:42.720 Investors are also keeping an eye on the Colombian peso after the U.S. 00:06:42.720 --> 00:06:48.639 President said the country's leader has to watch himself, and that's the leader of Colombia, Petro. 00:06:48.639 --> 00:07:10.000 Venezuelan bonds, poised again, defaulted notes from the sovereign country of Venezuela and state-run oil company, which is PDBSA, they have more than doubled from to between 22 and 33 cents on the dollar in recent months, and a potential debt restructuring could potentially fuel further advances. 00:07:10.000 --> 00:07:15.680 Now I mentioned that in order to understand the present, we have to look and study the past. 00:07:15.680 --> 00:07:26.959 We've been talking about that the last several weeks, and we looking back at the past, some of us who are a little bit older may remember the 1989 U.S. 00:07:26.959 --> 00:07:45.759 invasion of Panama, where the United States sought out Manuel Noriega, has some parallels to what's happening today with Nicholas Maduro seeking Manuel Noriega on drug charges, just like we're seeing today, a little bit of a rhyme here with with Maduro. 00:07:45.759 --> 00:08:00.959 And we've seen other interventions by the United States and Latin America in recent years, involvement in the coup in Chile in the 19 seventies and involvement in the politics of other Latin American countries. 00:08:00.959 --> 00:08:20.560 But once things fade from memory and they aren't

something that have been experienced in the lifetime of those who are living, very often the history is f is forgotten, or at least largely out of the mindset of the of the majority of the people within within the nation. 00:08:20.560 --> 00:08:48.399 And as a reminder that that history does frequently repeat itself and we can learn a lot from history, bring you back to an incident that happened a long time ago, and one that when we asked the question of what was the first significant terrorist attack on US soil, specific to an attack in the tri-state area near New York City. 00:08:48.399 --> 00:08:56.720 What was that big attack that happened that that was the first big attack that happened in in the United States, specifically in New York City? 00:08:56.720 --> 00:09:01.919 Most people might say the the horrible events of nine-eleven. 00:09:01.919 --> 00:09:13.039 Some may say, oh, the first attack was actually in 1993 when when they first the middle when the when they first tried to blow up the terrorists first tried to blow up the World Trade Center. 00:09:13.039 --> 00:09:36.799 But in fact, the first major terrorist attack to happen on US soil that was in the New York City area was what is known as the Black Tom Explosion, which was an act of terrorism by agents of the Office of Naval Intelligence of the German Empire, which was a act to destroy U.S. 00:09:36.799 --> 00:09:40.639 made munitions that were about to be shipped to Allies during World War I. 00:09:40.639 --> 00:10:02.480 And what these agents did is they attached explosives in in New York Harbor, which is currently in New Jersey, just off from Ellis Island in the Statue of Liberty, and they detonated military goods worth about twenty million dollars in today's in in in 1916 dollars and five hundred and eighty million in two thousand twenty-four dollars. 00:10:02.480 --> 00:10:12.000 And this explosion was so powerful, in fact, it was the largest non-nuclear explosion to ever occur on U.S. 00:10:12.000 --> 00:10:12.559 soil. 00:10:12.559 --> 00:10:24.080 Many of you haven't heard of this, and it's almost s shocking, mind-blowing, that this explosion shattered windows, some say as far as every store up to 14th Street in Lower Manhattan. 00:10:24.080 --> 00:10:38.799 In fact, this explosion is the reason why, for about a hundred years, you still can't, but the initial reason why you could not travel up to the torch at the Statue of Liberty, because the torch was damaged as a result of this explosion. 00:10:38.799 --> 00:10:48.159 This non-nuclear explosion measured of five to five point five on the Richter scale, could be heard as far away as Philadelphia. 00:10:48.159 --> 00:10:57.440 So this was a munitions depot in the United States, and at the time you may remember the United States was neutral in respect to World War I. 00:10:57.440 --> 00:11:20.240 The munitions that were created here in the United States, in theory could be shipped to any country, including Germany, but the British Royal Navy had blockaded the the Germans, so we couldn't ship to the Germans, and we didn't really have much incentive to or desire to, , as we were very friendly with the UK and France, but nevertheless, we couldn't ship to them anyway. 00:11:20.240 --> 00:11:30.080 So the Germans decided that they would take out the largest munitions depot outside of Europe in the midst of World War I. 00:11:30.080 --> 00:12:08.399 So looking back at this event here, at the time, for a long period of time, it was not exactly known what was the cause of the blast, and some who are skeptical of figures of authority suggest that perhaps the administration at the time, the Wilson administration, Woodrow Wilson, did not want to pin this on the Germans at the time, A, because maybe they didn't know, or B, because at the time the United States was still very concerned about entering World War I, and this might have been something that pushed the United States over the top, and therefore it was kept relatively quiet at the time. 00:12:08.399 --> 00:12:22.960 But interestingly, those who were alive during this event in 1916 and World War I, even though many of us today don't know about the Black Tom explosion, those who were alive when World War II was occurring, they certainly remembered it. 00:12:22.960 --> 00:12:27.360 It was something that was in their mindset, in their psyche, something that had occurred in their lifetime. 00:12:27.360 --> 00:12:55.679 And in fact, President Roosevelt, at the outset of World War II, when we declared war on Germany and the controversial period when the United States interned Japanese citizens in intern camps, one of the justifications for that was in fact the Blackcom explosion, which was carried out by German agents with the assistance of German Americans and the concern that Japanese might repeat that history. 00:12:55.679 --> 00:13:05.840 So, thinking back to this, other factors that affect us today is that the Black Tom explosion resulted in the establishment of domestic intelligence agencies in the United States. 00:13:05.840 --> 00:13:13.039 We may think of 9-11 as being the beginning of programs that were born out of terrorist acts. 00:13:13.039 --> 00:13:22.879 But going all the way back here to 1916, agencies were created that that would serve this country for long periods of time. 00:13:22.879 --> 00:13:45.039 In fact, Secret Service, which with the time was largely tasked solely with protecting the president, this was the period of time when the powers were expanded in the Secret Service to fact focus on not just the protection of the president, but in in enhancing the size of the Secret Service to protect protect against domestic terrorism. 00:13:45.039 --> 00:13:55.600 In addition, the FBI was significantly enhanced to focus on operations taking place within the United States having to do with terrorism. 00:13:55.600 --> 00:14:04.879

So lots of the task forces and things that we see today are actually the result of this event that happened in 1916 that very few of us may be aware of. 00:14:04.879 --> 00:14:11.279 So here we are, significant historical event, studying what could be the implications. 00:14:11.279 --> 00:14:34.879 One of the thought processes that makes a lot of sense is not only to think forward, but to look backwards in order to be able to determine what are some of the possible outcomes going forward so that we can make more intelligent decisions as it pertains to our investments and our portfolio, which is critically important as we begin 2026. 00:14:34.879 --> 00:14:48.960 So talking about 2026, let's let's take a look back at 2025, where we had a year where the SP was up about 16%. 00:14:48.960 --> 00:14:57.679 This is on the heels of last week, where where we saw markets decline slightly. 00:14:57.679 --> 00:15:07.679 Last week we were down about 1% roughly last week, and that was something that preceded a strong December. 00:15:07.679 --> 00:15:09.279 So up 16%. 00:15:09.279 --> 00:15:19.039 Overall, the market was somewhat relaxed going into the end of 2025 as we look for the buildup into 2026. 00:15:19.039 --> 00:15:27.919 The expectations are that the Federal Reserve will keep cutting interest rates, which could keep bond yields down, help expand the economic expansion. 00:15:27.919 --> 00:15:41.759 We also, of course, have the AI push continuing to drive profit growth, and at least at the moment nothing has interrupted that that trajectory here for for artificial intelligence. 00:15:41.759 --> 00:15:55.759 We have the volatility index, so the SIBO, the VIX volatility index, closed the year around 14, down from 26 after a brief spike in late November, and near the low end of its range in the past five years. 00:15:55.759 --> 00:16:19.600 So given geopolitical risk that we see today, one of the things that market participants will be focused on is does volatility increase from here, not only because of geopolitical risk, but because of uncertainty about interest rates, uncertainty about profit margins, uncertainty about the continued AI investment, uncertainty about whether or not we're gonna have a government shutdown at the end of January. 00:16:19.600 --> 00:16:25.200 So these are the these are the short-term milestones that the markets will be focused on. 00:16:25.200 --> 00:16:32.320 Now, you may want to study history and say, well, what's happened when the SP has gained more than 10% in each of the past three years? 00:16:32.320 --> 00:16:40.559 Well, certainly in the last past three years we've been up more than 10%, and cumulatively over the last three years, the market as gauged by the S P 500 is up 78%. 00:16:40.559 --> 00:16:50.559 So in the nine times when the index is up at least 10% three years in a row, the average move following that year is a rise of 4.6%. 00:16:50.559 --> 00:16:54.720 And of those nine years,

five years saw declines. 00:16:54.720 --> 00:17:01.039 Most recently, 2022, after we had three up years, we saw declines of 19%. 00:17:01.039 --> 00:17:07.119 So what are strategists saying about 2026? 00:17:07.119 --> 00:17:09.759 Well, let's look back to what strategists thought last year. 00:17:09.759 --> 00:17:14.240 Strategists were expecting a rise of 7% going into 2025. 00:17:14.240 --> 00:17:19.359 We can safely say that they were wrong because we know that SP was up 16%. 00:17:19.359 --> 00:17:28.960 This year, I don't know how much credence we put in this given the track record, but this year, strategists expect the SP to gain about 9.6%. 00:17:28.960 --> 00:17:37.519 That's probably unlikely because gains of between 0 and 10% are very unlikely, not impossible. 00:17:37.519 --> 00:17:44.000 If you look back at gains of 9%, that has happened once in the last about 25 years. 00:17:44.000 --> 00:17:49.039 In 2015, the SP was up nine and a half percent. 00:17:49.039 --> 00:17:50.799 So we'll see. 00:17:50.799 --> 00:17:56.480 If strategists are right, perhaps they'll get this one right, and we will see a gain of roughly nine percent. 00:17:56.480 --> 00:18:05.200 But if history is is a gauge or a guide, it is a difficult target to achieve to predict what the financial markets will do. 00:18:05.200 --> 00:18:07.920 Of course, there's so much uncertainty, so much information. 00:18:07.920 --> 00:18:15.519 All right, so let's take a look at markets where we are this morning, relatively quiet despite all of the news. 00:18:15.519 --> 00:18:23.279 The Dow futures are down 17 points, SP futures are up 15, Nasdaq futures leading the way up about 150 points. 00:18:23.279 --> 00:18:30.319 Oil this morning is up about 60 cents a barrel, so that is certainly something markets will take a look at. 00:18:30.319 --> 00:18:42.319 Gold up about 2%, up about $90 an ounce, silver is up about 5%, copper up about 4%, so we're seeing a move to safety amid the geopolitical turmoil. 00:18:42.319 --> 00:18:44.559 Interestingly, the 10-year U.S. 00:18:44.559 --> 00:18:52.319 Treasury bond, which typically sees flows, positive flows when financial uncertainty is abounding. 00:18:52.319 --> 00:18:57.200 Ten-year treasury now is relatively unchanged, so that is an interesting development. 00:18:57.200 --> 00:19:08.160 We were seeing 10-year treasury yields lower a little while ago, and the dollar is relatively flat, so we're not seeing a big move to the dollar outside of some of the Latin American currencies relative to the dollar. 00:19:08.160 --> 00:19:12.000 Secretary of State Marco Rubio told NBC News that the U.S. 00:19:12.000 --> 00:19:13.440 is not at war with Venezuela. 00:19:13.440 --> 00:19:16.880 Axios is reporting that the country's interim leader, Del C. 00:19:16.880 --> 00:19:23.839 Rodriguez, has vowed to cooperate with President Trump after he threatened a second strike if they, quote, do not behave, unquote.

00:19:23.839 --> 00:19:31.119 Besides the smattering of corporate news items, headlines are relatively quiet elsewhere as the market gears up for its first full week of trading of the new year. 00:19:31.119 --> 00:19:36.319 At 10 o'clock today, we will receive the December ISM Manufacturing Index. 00:19:36.319 --> 00:19:41.279 President Trump did repeat that he plans to travel to China in April. 00:19:41.279 --> 00:19:48.880 Political reporting that the Republicans and Democrats are both signaling a government shutdown will be avoided on January thirteenth. 00:19:48.880 --> 00:19:56.960 NBC News is reporting that a clear extension of the affordable care subsidies is likely dead on arrival in the Senate, even if it passes the House. 00:19:56.960 --> 00:20:01.359 In Hong Kong, Minimax, which is A competitor to DeepSeek. 00:20:01.359 --> 00:20:22.160 You may remember DeepSeek as being the company that briefly sent shockwaves through the AI world as they were able to achieve some powerful results with respect to artificial intelligence computing with not as not as up-to-date state-of-the-art chips from NVIDIA, so Minimax a competitor to them going public. 00:20:22.160 --> 00:20:27.599 Goldman Sachs expects China's gross domestic product to grow about 4.8% in 2026. 00:20:27.599 --> 00:20:30.880 The Chinese recently reported that 2025 was about 5%. 00:20:30.880 --> 00:20:38.240 We had talked about the potential for chip shortages last week, and Honda this morning is considering a production pause in China due to chip shortages. 00:20:38.240 --> 00:20:41.839 We may see more of that and see what effects that has on inflation. 00:20:41.839 --> 00:20:51.839 Paramount Skydance, symbol PSKI, is reportedly running out of patience amid increased offers for Warner Brothers, WBD, according to the New York Post. 00:20:51.839 --> 00:20:59.839 This is as Paramount Skydance and Netflix both compete to purchase Warner Brothers Discovery. 00:20:59.839 --> 00:21:09.359 Philadelphia Fed President Anna Paulson, who is a voting member, says she sees inflation moderating, the labor market stabilizing, and growth coming in around 2% this year. 00:21:09.359 --> 00:21:15.839 She said if all that happens, then some modest further adjustments to the Fed funds rate would likely be appropriate later in the year. 00:21:15.839 --> 00:21:21.440 So giving some indication she's not necessarily for a rate cut in the near term, but perhaps later. 00:21:21.440 --> 00:21:40.319 Also, with respect to the oil markets, Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman have reaffirmed their commitment to market stability, unsteady global economic outlook, and current healthy oil market fundamentals, as reflected, they said in low inventory. 00:21:40.319 --> 00:21:46.319 And today, Versant Media Group, symbol VSNT, will trade independently. 00:21:46.319 --> 00:21:48.480 It had been trading on a win-issued basis. 00:21:48.480 --> 00:22:11.039 This is a spin-off from Comcast, CMCSA, Versant Media Group comprised of companies or properties like CNBC, the USA Network, the Golf Channel, Fandango, and Rotten Tomatoes, all comprising Versant Media Group VSNT, that spin-off being officially launched. 00:22:11.039 --> 00:22:16.880 This morning, I mentioned today we get the manufacturing PMI, expected to come in at 48.4. 00:22:16.880 --> 00:22:20.559 The Services Purchasing Managers Index is being released on Wednesday. 00:22:20.559 --> 00:22:26.640 We're looking for that to come in at 52.2, which would be down from 52.6 in November. 00:22:26.640 --> 00:22:32.480 On Wednesday, we get what's called the JOLTS or Job Opening and Labor Turnover Survey results. 00:22:32.480 --> 00:22:39.119 Consensus calls for 7.7 million job openings on the last day of November, about even with October. 00:22:39.119 --> 00:22:47.359 Job opening figure is important since they give us some sort of insight into how many jobs are available for folks who are looking for work. 00:22:47.359 --> 00:22:52.960 And then on Friday, speaking of folks looking for work, the Bureau of Labor Statistics is reporting the jobs for December. 00:22:52.960 --> 00:22:58.079 This is the first up-to-date look we get on the jobs report in a few months because of the government shutdown. 00:22:58.079 --> 00:23:03.039 Economists forecast a 55,000 job increase in non-farm payrolls. 00:23:03.039 --> 00:23:05.599 That's after the 64,000 gain in November. 00:23:05.599 --> 00:23:12.240 The November numbers affected by the government shutdown. 00:23:12.240 --> 00:23:14.000 So first sort of clean look. 00:23:14.000 --> 00:23:18.799 Unemployment rate expected to edge lower to 4.5% from 4.6%. 00:23:18.799 --> 00:23:28.400 Also on Friday, we get the Michigan, University of Michigan releasing the consumer sentiment index for January, looking for 53.5. 00:23:28.400 --> 00:23:44.480 Consumer expectations of year-ahead inflation was 4.2% in December, which sounds like a high number when inflation as recorded by the CPI is about 3%, but that 4.2% was the lowest it's been in 11 months. 00:23:44.480 --> 00:23:46.640 All right, let's talk oil here. 00:23:46.640 --> 00:23:48.880 Obviously, Venezuela, big oil-rich country. 00:23:48.880 --> 00:24:01.599 Not only are they a big oil-rich company, based on proven reserves, Venezuela has the most proven oil reserves in the world, about 20% of all proven oil reserves, more than Saudi Arabia at this point. 00:24:01.599 --> 00:24:07.279 So Venezuela certainly a lot about what has to do with the oil there. 00:24:07.279 --> 00:24:15.039 Goldman Sachs this morning talking about what the implications may be for oil prices given the events over the weekend. 00:24:15.039 --> 00:24:32.000 And they say that they are leaving their oil price forecast unchanged for Brent crude at about $56 a barrel and $52 for West Texas Intermediate, but they say there are some potential effects that could change those forecasts. 00:24:32.000 -->

00:24:45.200 They say in the near term they see some risks to those forecasts, and they say that you could see a potential slight increase in the price of oil as a result of this uncertainty. 00:24:45.200 --> 00:24:53.119 You might see a reduction in the amount of oil coming out of Brazil initially due to the actions over the weekend. 00:24:53.119 --> 00:25:07.119 And they also think that in the near term, after there is a period of digestion of this initial conflict, that we could see a increase in supply and therefore a decrease in oil. 00:25:07.119 --> 00:25:16.480 So suggesting that in the near term, instead of that 5652, you might see 58.54 on Brent to West Texas intermediate. 00:25:16.480 --> 00:25:24.240 But longer term, they say that we could see a pr increase in production in oil prices from Venezuela. 00:25:24.240 --> 00:25:34.319 Venezuela did produce 3 million barrels a day at its peak in the mid-2000s, and any recovery in production they say would be gradual and require substantial investment. 00:25:34.319 --> 00:25:43.039 But they say that if that were in fact to come to fruition, they estimate a $4 a barrel of downside to their 2030 oil prices. 00:25:43.039 --> 00:25:56.640 So over the longer term, the potential for lower oil prices on increased production, you might see a little bit of a bump in the short term because you really can't get that oil online and may have some setbacks before you start increasing that supply of oil. 00:25:56.640 --> 00:26:01.839 With respect to oil and oil stocks, I mentioned some of those companies moving higher this morning. 00:26:01.839 --> 00:26:12.960 Barron's before, this was written on December 31st, so this happened before all the events over the weekend, but Barron's suggesting that oil stocks are worth a bet in 2026. 00:26:12.960 --> 00:26:17.519 I don't think that the events over the weekend would dramatically shape or change that view. 00:26:17.519 --> 00:26:33.119 They were saying going into 2026 that oil prices are were reflecting a lot of bad news and oil stocks had lagged the market, and they said that buying oil stocks now makes sense in the face of some tailwinds that could commence soon. 00:26:33.119 --> 00:26:39.200 Saying that everything that could go wrong did go wrong for oil stocks in 2025. 00:26:39.200 --> 00:26:42.640 Overproduction was an issue with both OPEC and U.S. 00:26:42.640 --> 00:26:48.799 producers drilling more than the markets needed, and therefore supply high, higher than demand. 00:26:48.799 --> 00:26:51.680 We know that means that prices are lower. 00:26:51.680 --> 00:26:53.759 Now oil stocks didn't have a terrible year. 00:26:53.759 --> 00:26:58.799 They were up about 8.5%, but that is less than the SP's 19% rise. 00:26:58.799 --> 00:27:09.359 But they say the coming year could be better, suggesting that oil prices have exhibited a floor at around $55 a barrel, and that may hold. 00:27:09.359 --> 00:27:22.240 And also saying that oil holding

up in a rough environment could be a sign that oil sector's makeover could be working, saying that the oil stocks are no longer simply a bet on the direction of oil prices. 00:27:22.240 --> 00:27:28.079 Companies now are managing their balance sheet, their free cash flow, they're buying back stock, they're growing their dividends. 00:27:28.079 --> 00:27:39.519 So suggesting that as the oil business becomes even more mature, that the outlook for shareholders could be bright in 2026. 00:27:39.519 --> 00:27:51.920 One company that was mentioned very positively in Barron's was Charles Schwab stock, symbol is SCHW, Sam Charlie Hotel Whiskey. 00:27:51.920 --> 00:27:58.319 Barron saying that Charles Schwab is back on offense, its stock is a buy. 00:27:58.319 --> 00:28:18.160 You may remember a few years ago Charles Schwab stock was under pressure because the predominant way that Charles Schwab, the company, makes money is that if you are an investor in in with Charles Schwab, the default for your cash is a very low-yielding Charles Schwab money market. 00:28:18.160 --> 00:28:24.400 And you have to move that cash into a higher-yielding product if you don't want to get that very low rate. 00:28:24.400 --> 00:28:28.559 And most investors, when rates are fairly low, just left their cash in the money market. 00:28:28.559 --> 00:28:40.880 It was easier, and the Charles Schwab was making a lot of money because they were paying investors who kept their cash at Charles Schwab a rate below what investors could earn elsewhere, and Charles Schwab was earning the differential. 00:28:40.880 --> 00:28:58.640 What happened is when the Federal Reserve started raising interest rates in 2021, well, what started to happen is investors that had their accounts at Charles Schwab started noticing, hey, I'm getting a quarter of a percent or a half a percent on my money, and my friends are getting two, three, four percent on their money market balances. 00:28:58.640 --> 00:29:02.960 What can I do in my Charles Schwab account to earn a higher return on my cash? 00:29:02.960 --> 00:29:15.519 And investors started moving their cash into higher yielding investments at Charles Schwab, higher yielding money markets, and therefore Charles Schwab was earning less on their cash. 00:29:15.519 --> 00:29:25.680 And also because they had less cash available to them, they had to go out and borrow money because they didn't have access to this cash hoard from these low-yielding deposits. 00:29:25.680 --> 00:29:29.440 So they had to borrow money, and at the time the cost to borrow that money was high. 00:29:29.440 --> 00:29:34.400 So a double whammy for Charles Schwab margins decreasing, borrowing costs increasing. 00:29:34.400 --> 00:29:38.960 At the same time, they had bought the T D and they were integrating T D. 00:29:38.960 --> 00:29:41.920 That was a very large integration, very challenging. 00:29:41.920 --> 00:29:56.559 So you had two big headwinds going on at

the same time, but now it looks like the company is leaning into their traditional strengths, and Barron's talking about them adding to new strengths as well. 00:29:56.559 --> 00:30:02.079 UBS analyst Michael Brown saying the company has made a clear shift from defense to offense. 00:30:02.079 --> 00:30:06.400 He has a buy rating and $119 target on the stock. 00:30:06.400 --> 00:30:12.400 Morgan Stanley analyst Michael Cyprus has a street high $148 target on the stock. 00:30:12.400 --> 00:30:17.680 The stock's trading just over a hundred dollars a share coming into this morning. 00:30:17.680 --> 00:30:26.720 So Schwab is now opening new accounts, putting more investing dollars into, as investors are putting more investing dollars into stocks. 00:30:26.720 --> 00:30:32.960 Schwab has seen new brokerage account openings exceed a million for four consecutive quarters. 00:30:32.960 --> 00:30:41.519 And Schwab this year through November had raked in more than $440 billion in core net new assets this year. 00:30:41.519 --> 00:30:47.279 Put that into perspective, Robinhood's total platform assets are $325 billion. 00:30:47.279 --> 00:30:52.400 So that means basically that Schwab onboarded one Robinhood this year alone. 00:30:52.400 --> 00:31:00.079 So investors bidding up Schwab stock up 36% this year, on pace for their largest gain since 2021. 00:31:00.079 --> 00:31:07.920 Despite that, the shares trade at a market at a multiple below the market, trading at 18.2 times forward earnings. 00:31:07.920 --> 00:31:12.480 market is trading around 23, 24 times forward earnings. 00:31:12.480 --> 00:31:22.400 Schwab five years ago traded around 23 times forward earnings, so perhaps Schwab can regain that mojo from years past. 00:31:22.400 --> 00:31:26.400 In addition, there are some trends working in Schwab's long-term favor. 00:31:26.400 --> 00:31:37.440 More Americans are trading stocks, more Americans are seeking out financial advice, and nearly four in ten investors have both advised and self-directed accounts. 00:31:37.440 --> 00:31:49.920 Charles Schwab is also going to be investing into enhancing their platform to offer potentially private investments to their clients, perhaps through a fund. 00:31:49.920 --> 00:31:54.480 They recently bought a company called Forge Financial in order to accomplish that. 00:31:54.480 --> 00:32:01.119 And also they say they have a forthcoming cryptocurrency offering set to launch in 2026. 00:32:01.119 --> 00:32:09.519 Schwab will finally allow investors to directly hold Bitcoin and other digital assets and may consider launching its own crypto fund. 00:32:09.519 --> 00:32:18.880 At the same time, Schwab is leaning into its in-person experience by adding locations to its 400-plus branch office networks. 00:32:18.880 --> 00:32:22.400 The company is also having success attracting younger investors. 00:32:22.400 --> 00:32:27.680 Two-thirds of new customers are either millennials or Gen Zers. 00:32:27.680

--> 00:32:39.759 Alright, let's change gears here as we come into the end of the discussion this morning, and let's talk about income ideas for 2026. 00:32:39.759 --> 00:32:46.000 Baron's saying the outlook for income is good in 2026 despite some growing risks. 00:32:46.000 --> 00:32:58.160 Income investors last year they said had a very healthy year, lending further credence to the sort of the 60-40 split between stocks and bonds for those who want a more conservative portfolio. 00:32:58.160 --> 00:33:06.319 And if you are looking forward to 2026, they say that yields are generally good, not great in stocks and bonds. 00:33:06.319 --> 00:33:24.079 Within fixed income investors can get 3-5% on municipals, 6-10% on junk bonds, 10% plus on private credit loans, 6% yields on preferred stocks, 5% on mortgage securities, and 3.5 to almost 5% on treasuries. 00:33:24.079 --> 00:33:26.240 Where do they suggest looking for yield? 00:33:26.240 --> 00:33:30.640 What's their favorite spot in 2026? 00:33:30.640 --> 00:33:32.400 And that would be U.S. 00:33:32.400 --> 00:33:33.519 dividend stocks. 00:33:33.519 --> 00:33:44.480 Dividend paying stocks last year had a mediocre 2025, but still offer bond-like yields and appreciation potential, they say, making them an ideal choice for income investors. 00:33:44.480 --> 00:33:49.440 What are spots within the dividend paying universe that they find attractive in 2026? 00:33:49.440 --> 00:33:51.599 Well, they say take a look at the Schwab U.S. 00:33:51.599 --> 00:33:59.680 Dividend Equity ETF, that symbol is SCHD, which now yields almost 4% and was only up 5% last year. 00:33:59.680 --> 00:34:10.880 And the ProShare is 500 dividend aristocrats, symbol NOBL, which invests in companies with 25 consecutive years or more of annual dividend increases and yields 2.5%. 00:34:10.880 --> 00:34:16.000 Buying companies with an impressive dividend record has generated strong results over time. 00:34:16.000 --> 00:34:32.159 The ProShares NOBL fund has had a single-digit return for two straight years, well behind the market, but they suggest perhaps their time has come and 2026 could be better for both NOBL and for SCHD. 00:34:32.159 --> 00:34:37.360 Number two on their list, having to do with energy, and that is pipeline stocks. 00:34:37.360 --> 00:34:46.639 While pipeline stocks don't have a lot of exposure to oil, despite that fact, the fact that oil dropped 15% last year did send a chill through the sector. 00:34:46.639 --> 00:34:51.920 But Barron's saying the sector offers high yields, dividend growth, and improving balance sheets. 00:34:51.920 --> 00:34:54.239 That should enable more stock buybacks. 00:34:54.239 --> 00:35:06.960 Senior investment portfolio manager at Tortoise Capital, Rob Thummel, sees 10% total returns in 2026, driven by 5% dividend yields and dividend growth. 00:35:06.960 --> 00:35:14.800 Number three on the list is real estate investment trust REITs were just up 4% last year, but Barron thinking this year could be better. 00:35:14.800 --> 00:35:25.360 They quoted JP Morgan Securities REIT analyst Anthony Paulone, saying that you have a relatively cheap sector with reasonable growth. 00:35:25.360 --> 00:35:35.599 He sees total returns in the neighborhood of 10%, driven by 4% annual dividends, and growth in funds from operations of about 5%. 00:35:35.599 --> 00:35:49.920 Also, what could be a catalyst for the REIT sector is that if you're looking at the valuation of public real estate versus private real estate, public real estate trading at a discount to net asset value significantly more than private real estate. 00:35:49.920 --> 00:36:00.880 And we're starting to see deals where companies that are in the private space are buying public companies and taking them private because that's where the discounts or the valuations are. 00:36:00.880 --> 00:36:06.880 Recently, Blackstone bought Alexander and Baldwin, and you may see more of that going forward. 00:36:06.880 --> 00:36:14.000 Apartment REITs like equity residential and Avalon Bay communities trade below private market values, now yield 4%. 00:36:14.000 --> 00:36:23.119 They could get a boost if investors were to take a peek outside of private REITs and take a look at REITs for public markets. 00:36:23.119 --> 00:36:28.639 We mentioned a couple of weeks ago Barron's talking about their top 10 picks for 2026. 00:36:28.639 --> 00:36:38.800 Among those was SL Green, which is a leading Manhattan office REIT, which is benefiting from strengths in midtown rents, and that's another option in the REIT arena. 00:36:38.800 --> 00:36:51.199 Going in order of where Barron sees the opportunities, foreign dividend stocks, then tabling telecom, like ATT yielding 4.5%, and Comcast yielding about 4.4%. 00:36:51.199 --> 00:36:55.280 then they suggest taking a look at business development companies. 00:36:55.280 --> 00:37:00.800 A little further down the list, there's certainly some risk here, but yields north of 10%. 00:37:00.800 --> 00:37:30.719 Then they suggest looking at utilities, mortgage securities, emerging market debt, and then rounding out the bottom of the list, preferred stocks, municipal bonds where they don't see a lot of value in the shorter term municipal space inside about 10 years, but do see some attractive valuations on the longer end, albeit with some risk from longer maturities, and finally treasury securities rounding out the income opportunities in 2026. 00:37:30.960 --> 00:37:32.159 That's everything I've got. 00:37:32.320 --> 00:37:33.920 Thank you for listening to Mr. 00:37:33.920 --> 00:37:34.960 Keith Lanton. 00:37:34.960 --> 00:37:41.679 This podcast is available on most platforms, including Apple Podcasts and Spotify. 00:37:41.679 --> 00:37:49.840 For more information, please visit our website at www.heroldlantern.com. 00:37:50.239 --> 00:37:54.960 Opinions expressed herein are subject to change and not necessarily the opinion of the firm. 00:37:54.960 --> 00:37:58.159 Past performance is no guarantee of future results. 00:37:58.159 --> 00:38:05.440 The information presented herein is for informational purposes only and is not intended to provide personal investment advice. 00:38:05.440 --> 00:38:11.039 It is important that you consider your tolerance for risk and investment goals when making investment decisions. 00:38:11.039 --> 00:38:15.119 Investing in securities does involve risk and the potential of losing money. 00:38:15.119 --> 00:38:19.840 The material does not constitute research, investment advice or trade recommendations.