สำเนาบทสนทนา 🔗
WEBVTT
00:00:00.400 --> 00:00:02.000
And now introducing Mr. Keith Lanton
00:00:02.160 --> 00:00:06.719
Okay, today is Monday, September 21st.
00:00:06.719 --> 00:00:10.640
Tomorrow is the official start of fall.
00:00:10.640 --> 00:00:16.480
And we are just turning the corner here, almost done with the third quarter of 2026.
00:00:16.480 --> 00:00:24.719
Want to wish all who are celebrating Jewish holidays a happy new year and easy fast today for Yom Kippur.
00:00:24.719 --> 00:00:31.280
We are going to talk this morning about financial markets, history in financial markets.
00:00:31.280 --> 00:00:49.200
We're gonna talk about income opportunities, specifically income opportunities with real estate and in the municipal bond market, where we have seen a dramatic sell-off in municipal bond prices, thereby potentially creating a big opportunity with respect to yields.
00:00:49.200 --> 00:00:53.200
Barron's calling it a generational bond opportunity.
00:00:53.200 --> 00:00:57.039
we will talk about what the opportunities are in the municipal bond market.
00:00:57.039 --> 00:00:59.840
We'll talk about opportunities in the real estate market.
00:00:59.840 --> 00:01:16.400
We will also focus on Apple, which recently came out with their new lineup of iPhones, the duo getting lots of attention with its folding screen and lots of folks impressed with the technology.
00:01:16.400 --> 00:01:28.319
But we are going to focus on what Baron's talked about, which is arguably Apple's secret weapon, and that is the chip strategy that Apple has been employing since 2008 and is aggressively pursuing.
00:01:28.319 --> 00:01:45.920
And we'll talk about how that strategy is perhaps creating a important strategic advantage, or really building on an important strategic advantage that Apple has has harnessed over the last decade and a half and perhaps pulling away with with this with this new generation of chips.
00:01:45.920 --> 00:01:50.719
And we'll talk about what these chips can do and what Apple is doing differently than a lot of its competition.
00:01:50.719 --> 00:01:53.359
And then we'll talk a little bit about anthropic.
00:01:53.359 --> 00:01:56.959
AI certainly is the topic most everyone's minds.
00:01:56.959 --> 00:03:04.400
Anthropic still going forward with their IPO after OpenAI had said that they would postpone theirs until 2027, and we'll talk about what that IPO may look like, what makes it unique, and then we're gonna talk about artificial intelligence to start us off this morning, because it is a topic that creates lots of concern about things like the destruction of humanity, which is something that probably is at the top of most people's lists, and we will talk about if humanity has ever experienced anything like what artificial intelligence can do and whether or not we are living in truly unique times, or if we can look back at history and learn from some other major inflection points, arguably inflection points in human knowledge, and seeing what happened when there were inflection points in human knowledge, what caused them, and what were the effects, perhaps we can get some insights that would give us some comfort with respect to artificial intelligence and also perhaps give us some insights into how we want to strategically position our portfolio.
00:03:04.400 --> 00:03:48.639
So if we were to go back almost 3,000 years and we were to think about the technology that was being developed that we now take for granted, but 2,500, 3,000 years ago this was something that was revolutionary, and what I am talking about is the ability to write down or or record for posterity events where the ability became prevalent where you could actually record things by putting on a piece of papyrus with something that created a what we would view as ink today, and be able to be able to reference back to this as opposed to having to remember every single thing that existed in history.
00:03:48.639 --> 00:03:54.000
Just think about how revolutionary it must have been when suddenly you were able to write things down.
00:03:54.000 --> 00:04:09.759
And in fact, Socrates, the famous orator from from the Greeks, and many credit Socrates and his student Plato and his student Alexander the Great with giving us lots of Western ideas and thoughts.
00:04:09.759 --> 00:04:13.520
Socrates himself never wrote down a single word.
00:04:13.520 --> 00:04:17.600
Everything we know about his philosophy comes secondhand from his student Plato.
00:04:17.600 --> 00:04:21.839
In fact, Socrates was deeply suspicious of the written word.
00:04:21.839 --> 00:04:31.839
So here we have one of the most intelligent people alive at the time, arguably one of the most intelligent people to have ever lived, but was very uncomfortable with the written word.
00:04:31.839 --> 00:04:38.879
And this strikes some parallels to the anxiety many people feel today about artificial intelligence.
00:04:38.879 --> 00:04:49.600
So a little breakdown of what Socrates worried about regarding the written word and books and how those fears mirror our current debates about artificial intelligence.
00:04:49.600 --> 00:05:00.560
And Socrates argued that writing would create forgetfulness in the souls of those who learn it, because people would trust external written symbols rather than retaining knowledge internally.
00:05:00.560 --> 00:05:03.439
They would rely on the text instead of true memory.
00:05:03.439 --> 00:05:10.000
He argued that books give the readers the appearance of understanding without true comprehension.
00:05:10.000 --> 00:05:23.199
A reader can consume vast amounts of written information and sound knowledgeable, but without the rigorous dialogue and active engagement required for true learning, they only possess opinions, he said, not wisdom.
00:05:23.199 --> 00:05:26.800
So Socrates criticized text because
Load full transcript
it is static.
00:05:26.800 --> 00:05:31.920
If you ask a book a question it cannot answer back, it just repeats back the exact same words.
00:05:31.920 --> 00:05:35.279
It lacks the adaptive nature of living conversation.
00:05:35.279 --> 00:05:52.079
So when we look at the societal conversation today about large language models and generative artificial intelligence, we are, in a sense, running a high-tech replay of the Socratic anxiety over the written word.
00:05:52.079 --> 00:06:08.079
And the irony about Socrates is the only way we even know what he thought or felt was because his student Plato wrote it down, because he himself was not one who was trusting to the written word.
00:06:08.079 --> 00:06:13.040
So that is example number one, going back almost 2,500 years.
00:06:13.040 --> 00:06:16.959
Example number two, we have to go back just 500 years.
00:06:16.959 --> 00:06:23.040
And this is when the printing press arrived in Europe during the 15th century, so roughly 600 years.
00:06:23.040 --> 00:06:27.759
At the time, it was heralded as a miracle of human ingenuity.
00:06:27.759 --> 00:06:35.839
Yet, much like generative AI today, it sparked intense anxiety, moral panic, excuse me, and a crisis of truth.
00:06:35.839 --> 00:06:44.560
Looking back reveals a fascinating parallel every time humanity invents a technology that democratizes the creation and distribution of information.
00:06:44.560 --> 00:06:46.959
Society goes through an identity crisis.
00:06:46.959 --> 00:06:48.240
Excuse me, one second.
00:06:48.240 --> 00:07:02.959
So when the printing press arrived in Europe in the fifteenth century, we have to take a look and recognize that suddenly books could be mass produced rather than painstakingly copied by hand.
00:07:02.959 --> 00:07:05.040
Renaissance intellectuals panicked.
00:07:05.040 --> 00:07:17.920
Figures that were leading scholars complained that writing was making things confusing and harmful, that because there were so many books and so much information, people were drowning in information.
00:07:17.920 --> 00:07:20.720
Imagine that, drowning information back then.
00:07:20.720 --> 00:07:25.920
The argument was that the sheer volume of information was overwhelming humans' cognitive capacity.
00:07:25.920 --> 00:07:26.959
Sound familiar?
00:07:26.959 --> 00:07:33.360
Today we face an endless flood of AI generated articles, social media posts, synthetic images, and deep fakes.
00:07:33.360 --> 00:07:34.639
The fear is identical.
00:07:34.639 --> 00:07:39.199
We are drowning in content, making it much harder to find signal through the noise.
00:07:39.199 --> 00:07:47.120
Before the printing press, information was tightly kept by scribes, monasteries, and perhaps most significantly the church.
00:07:47.120 --> 00:07:56.480
Printing allowed anyone to publish anything, including superstition, fraudulent medical remedies, dangerous conspiracy theories.
00:07:56.480 --> 00:08:00.000
It triggered a golden age of propaganda and forged documents.
00:08:00.000 --> 00:08:00.800
Excuse me.
00:08:00.800 --> 00:08:07.680
Today, anyone can prompt an LLM to generate plausible sounding falsehoods, deep fakes or scams.
00:08:07.680 --> 00:08:14.879
The traditional gatekeepers of authority have been bypassed, leaving everyday people to wonder how do we know what is real anymore?
00:08:14.879 --> 00:08:23.279
You go back to the printing press, you had an entire group of intellectuals suddenly on the verge of extinction.
00:08:23.279 --> 00:08:27.360
Scribes, block cutters saw their livelihoods vanish almost overnight.
00:08:27.360 --> 00:08:33.039
Craft guilds protested the displacement of human artistry by cold mechanical metal type.
00:08:33.039 --> 00:08:39.200
Today, copywriters, translators, coders, and graphic designers faced the same unsettling shift.
00:08:39.200 --> 00:08:50.320
Back in the early 1500s, late 1400s, religious and political leaders feared that putting the power of the word directly into the hands of the masses would lead to heresy, rebellion, and moral collapse.
00:08:50.320 --> 00:09:00.080
And arguably they were right in a way, because the printing press did fuel the Protestant Reformation and decades of religious warfare.
00:09:00.080 --> 00:09:07.840
Today, regulators and ethicists worry about autonomous weapons, bias, copyright threat, and the erosion of intellectual accountability.
00:09:07.840 --> 00:09:13.840
So when machines can think and create, who bears the responsibility for the outcome?
00:09:13.840 --> 00:09:37.679
So when we think about artificial intelligence today, and we think about the potential for chaos that it may create, we can look back to when the printed word just began, and we had Socrates being highly skeptical of the printed word, and the ability of some folks who retained information were sources of information, suddenly no longer as needed as before.
00:09:37.679 --> 00:09:54.799
Suddenly we had the dissemination of information and knowledge being more ubiquitous, and then this was significantly compounded upon almost 2,000 years later when we had the printing press be able to disseminate massive amounts of information, as before it was limited.
00:09:54.799 --> 00:10:00.559
Now we could disseminate massive amounts of information and we could disseminate massive amounts of misinformation.
00:10:00.559 --> 00:10:17.840
And today we have recursive intelligence with artificial intelligence not only being able to disseminate information at the most rapid pace ever on this planet, but we also have the concern that this information is not only being generated by humans, but is being generated by machines.
00:10:17.840 --> 00:10:23.759
So we have another true paradigm shift, another inflection point in human history.
00:10:23.759 --> 00:10:34.000
We will experience this together, but what we can learn from this is that this has happened in a different way, but in a very upending way in the past.
00:10:34.000 -->
00:10:42.240
That it wasn't always a smooth transition, as we can attest to from the Protestant Reformation and the upheaval that resulted from it.
00:10:42.240 --> 00:10:45.360
And we can draw parallels to the past.
00:10:45.360 --> 00:11:20.559
There will be arguably new technologies, even perhaps greater than artificial intelligence, that will be developed sometime in the next one, two, three, five hundred, a thousand years that will shake the boots and core of humanity again, and they will have the opportunity to look back on what we did in this time with artificial intelligence as they look to go forward, not only as a society, but we can think about this as as how we want to think about the future and how we want to think about how this will affect the future and how this will affect our investments going forward.
00:11:20.559 --> 00:11:30.080
So, speaking about investments, speaking about going forward, let's take a look here and pause for a second and take a look at the financial markets this morning.
00:11:30.080 --> 00:11:44.480
So this morning, we are looking at equity futures pointing to a firmly higher open as oil prices and treasury yields starting the week, with crude oil down roughly 2.5% to under $98 a barrel.
00:11:44.480 --> 00:11:48.159
Ten-year treasury note yield is down to 4.95%.
00:11:48.159 --> 00:11:51.360
that's down about five basis points.
00:11:51.360 --> 00:11:56.000
Rural effortly trading in line with energy prices as oil prices change.
00:11:56.000 --> 00:12:01.840
Treasury yields at the moment, moving in lockstep at least the last several trading sessions.
00:12:01.840 --> 00:12:15.440
We are seeing markets being driven by oil yields and the performance of artificial intelligence-related stocks, driving some choppy action last week that saw the Nasdaq rise three-quarters of one percent, and the Dow down 1.7%.
00:12:15.440 --> 00:12:18.240
That was the Dow's worst week since March.
00:12:18.240 --> 00:12:28.960
Those themes remain in focus following last week's Federal Open Market Committee, Federal Reserve's rate hike, with the simultaneous pullback in oil and treasury yields providing a favorable backdrop for equities this morning.
00:12:28.960 --> 00:12:39.200
On the geopolitical front, President Trump has threatened another attack in Iran, but said he remains open to meeting Iranian president during this week's United Nations General Assembly.
00:12:39.200 --> 00:12:42.000
President Trump is going to be speaking there tomorrow.
00:12:42.000 --> 00:12:57.279
And importantly, diplomacy certainly getting lots of attention as we have President Xi and President Trump meeting this week Thursday in Washington at the same time that the United Nations General Assembly is in session.
00:12:57.279 --> 00:13:07.840
So we have the juxtaposition of leaders of the two strongest nations in the world meeting at the same time as the rest of the United Nations is meeting in New York.
00:13:07.840 --> 00:13:10.399
Certainly interesting times indeed.
00:13:10.399 --> 00:13:14.080
Lots of attention being focused on the oil markets.
00:13:14.080 --> 00:13:23.919
President Xi of China over the weekend had called on Iran to try and rein in the Houthis from attacking Saudi Arabia and affecting global oil supplies further.
00:13:23.919 --> 00:13:41.440
So far, that plea has fallen on deaf ears as the Houthis have extended their attacks on the Saudis, but oil this morning is trending lower on reports that the Saudis are still able to get oil out, perhaps more oil out than the markets were initially expecting.
00:13:41.440 --> 00:13:44.480
Strength this morning is also extending to cryptocurrencies.
00:13:44.480 --> 00:13:49.279
Bitcoin crossed the 85,000 mark to reach its highest level since January.
00:13:49.279 --> 00:13:52.240
Bitcoin up thirty eight hundred dollars this morning.
00:13:52.240 --> 00:13:59.919
So just a few months ago, as some were proclaiming perhaps that the age of cryptocurrency was fading off into the sunset.
00:13:59.919 --> 00:14:14.559
Here we are seeing cryptocurrencies resurgent here in September at the same time that the gold, which had taken a lot of the attention away from cryptocurrencies, been trading relatively flat as Bitcoin has been rising.
00:14:14.559 --> 00:14:18.080
This morning gold's down sixteen dollars an ounce to about $4,400.
00:14:18.080 --> 00:14:21.120
So gold's been between four and five thousand dollars an ounce.
00:14:21.120 --> 00:14:26.960
Crypto, as measured by Bitcoin, had sold off significantly and now is rallying.
00:14:26.960 --> 00:14:36.720
So definitely a disconnect between gold and cryptocurrency, and we'll see if if those two asset classes align at some point.
00:14:36.720 --> 00:14:44.480
Other than the meeting between President Trump and President G, economic calendar relatively light this week.
00:14:44.480 --> 00:14:48.159
There is no economic data of note today.
00:14:48.159 --> 00:14:58.639
Other news this morning, OpenAI anticipates a cash burn rate of get this, $280 billion by the end of 2030.
00:14:58.639 --> 00:15:04.480
So over the next four years, spending $280 billion more than they will bring in in cash flow.
00:15:04.480 --> 00:15:06.480
That is quite a staggering figure.
00:15:06.480 --> 00:15:12.879
Back to Anthropic, their IPO is likely to happen in November as opposed to October, according to the Wall Street Journal.
00:15:12.879 --> 00:15:16.960
This morning, Treasury Secretary Besson was on CNBC.
00:15:16.960 --> 00:15:29.440
Many again described his meeting with the Chinese foreign minister as successful, saying they had discussions including trade negotiations and proposals for handling AI incidents.
00:15:29.440 --> 00:15:40.240
Some other companies in the news, Novo Nordisk NVO, the company that initially brought us GLP1 drugs, is is down about 5% this morning.
00:15:40.240 --> 00:15:54.879
, this despite the
fact that saying one of their candidates for weight loss, Cargi SEMA, achieved a significant result in terms of weight loss in a 60-week phase 3 diabetes trial.
00:15:54.879 --> 00:16:08.720
Analysts this morning expressing some disappointment with Novo Nordisk with their patent for their weight loss application expiring in 2032, so markets becoming apprehensive of what comes next.
00:16:08.720 --> 00:16:16.080
Novo Nordisk laid out a vision for the future that the markets viewed as underwhelming, at least initially.
00:16:16.080 --> 00:16:20.000
Sometimes after folks have a chance to digest, they view things differently.
00:16:20.000 --> 00:16:26.000
But at the moment, despite these better results, Novo Nordis down about 5% this morning.
00:16:26.000 --> 00:16:30.639
Overseas Asian markets trading relatively flat.
00:16:30.639 --> 00:16:37.519
The Japanese market is closed through September 23rd for respect for the aged holiday.
00:16:37.519 --> 00:16:40.960
European markets are trading modestly higher.
00:16:40.960 --> 00:16:49.120
I mentioned in the commodity space oil down, gold down as well, silver and copper modestly to the upside.
00:16:49.120 --> 00:16:56.480
President Trump announcing that he has a deal with Denmark on the security and providing a U.S.
00:16:56.480 --> 00:16:58.879
military presence in Greenland.
00:16:58.879 --> 00:17:12.799
President Trump also announcing that in the near future he will be announcing a AI czar reports from Axios that President Trump is going to meet with Zelensky of Ukraine in New York on Tuesday.
00:17:12.799 --> 00:17:22.559
CNN, MS Now, and Politico, who have been barred from White House access are suing with respect to that access.
00:17:22.559 --> 00:17:29.440
I mentioned that the Houthis launched some more attacks on Saudi Arabia, specifically Riyadh, over the weekend.
00:17:29.440 --> 00:17:38.160
And reports are that Saudi Arabia did manage to export nearly 3 million barrels of oil per day over the last six days out of the Strait of Hormuz.
00:17:38.160 --> 00:17:54.880
Accenture stock, ACN, is trading higher after they partnered with Anthropic on embedding AI safety evaluators, where Accenture is going to help Anthropic measure the safety of their artificial intelligence.
00:17:54.880 --> 00:17:56.640
What else we got going on this week?
00:17:56.640 --> 00:18:04.640
Well, I mentioned Thursday is the day that President Trump and his counterparts, Xi Ji Jinping, will be meeting at the White House.
00:18:04.640 --> 00:18:10.160
Topics include tariffs, trade agreements, Iran, Taiwan, AI.
00:18:10.160 --> 00:18:19.759
last time the two world leaders met was in Beijing in May, and have so far agreed to pause further trade war escalation.
00:18:19.759 --> 00:18:38.000
On Wednesday, the SP Global releases its Manufacturing and Services Purchasing Managers Index for September, and then we get new home sales coming out Thursday from the Census Bureau, and on Friday, the Census Bureau releases the durable goods report for August.
00:18:38.000 --> 00:18:51.519
Barons over the weekend was pretty positive on equity markets going forward, saying why a market rally might be next, saying that artificial intelligence boom has more room to run.
00:18:51.519 --> 00:19:02.880
We did have panic strike at the beginning of last week after AI Pioneer Anthropics suggested slowing down development of a technology for safety reasons, warning of catastrophic risks.
00:19:02.880 --> 00:19:15.759
And then on Monday of last week we saw a sell-off in chip stocks, semiconductor ETFs plunging 5% in its worst session in two months, but investors quickly realized the economic stakes are simply too high for a real slowdown.
00:19:15.759 --> 00:19:19.920
Chip EPTF bounced back for four straight days and ended the week flat.
00:19:19.920 --> 00:19:22.000
The narrative shifted rather than crashing.
00:19:22.000 --> 00:19:26.640
The market expects AI self-regulation, keeping the cash machine humming.
00:19:26.640 --> 00:19:33.039
Test number two came on Wednesday when the Federal Reserve raised its benchmark interest rate for the first time in three years.
00:19:33.039 --> 00:19:38.880
Markets briefly swooned when Fed chair Wars signaled that further rate hikes could be on the table.
00:19:38.880 --> 00:19:40.720
Yet stocks shrugged it off.
00:19:40.720 --> 00:19:41.359
Why?
00:19:41.359 --> 00:19:44.160
Because corporate America is in remarkably good shape.
00:19:44.160 --> 00:19:53.119
SP companies have significantly lowered their debt levels over the last two decades, and earnings growth is sitting at a staggering twenty-six percent.
00:19:53.119 --> 00:19:58.880
Even better, quiet summer trading range has actually cooled things down according to Goldman Sachs.
00:19:58.880 --> 00:20:06.319
The SP 500's forward PE ratio has dropped from twenty-two at the start of the year to 19.2 today.
00:20:06.319 --> 00:20:16.240
So valuations are looking healthier because earnings have grown significantly, and therefore the market has quietly built a solid foundation.
00:20:16.240 --> 00:20:25.680
So as long as earnings hold strong and the AI monster stays contained, the stage looks set for stocks to push to new highs.
00:20:25.680 --> 00:20:31.920
That , according to Goldman Sachs and their take on the financial markets.
00:20:31.920 --> 00:20:39.359
I mentioned Apple and the fact that they had come out with some exciting new technology.
00:20:39.359 --> 00:20:47.039
Perhaps one of the greatest aspects of that technology is hidden and buried within Apple's devices.
00:20:47.039 --> 00:20:52.799
Back in 2008, Steve Jobs realized that designing your own silicon is the ultimate superpower.
00:20:52.799 --> 00:21:03.119
Fast forward to today and the rollout of the iPhone 18 Pro with its brand new A20 Pro chip, and it shows why owning the hardware stack changes the game entirely.
00:21:03.119 --> 00:21:10.480
On paper benchmarks show the A20 outperforming PC chips from Intel, AMD, and Qualcomm.
00:21:10.480 --> 00:21:19.440
But the real magic isn't just brute force, it's how Apple builds a system on a chip tailored precisely for its software and its services.
00:21:19.440 --> 00:21:20.960
Take power efficiency.
00:21:20.960 --> 00:21:35.359
The A20 includes specialized hardware for everything from video decoding to advanced tracing for mobile gaming, enabling the iPhone 18 Pro to deliver up to an incredible 36 hours of video playback.
00:21:35.359 --> 00:21:39.599
And then perhaps most importantly, now there's artificial intelligence.
00:21:39.599 --> 00:21:53.759
While cloud giants are spending billions of dollars on massive data centers, Apple is taking a radically different privacy first approach, heavy on device processing backed by its custom private cloud compute servers.
00:21:53.759 --> 00:21:59.759
The A twenty features a massive doubled neural engine and AI accelerator built into the ground.
00:21:59.759 --> 00:22:02.960
I know that sounds complicated because it is.
00:22:02.960 --> 00:22:08.480
But what it does is it allows the phone to handle complex AI tasks without draining your battery.
00:22:08.480 --> 00:22:15.440
The ultimate example of this hardware software synergy is the brand new feature called Siri Rewind, which is on the latest Apple Watch.
00:22:15.440 --> 00:22:18.240
It securely summarizes your conversations.
00:22:18.240 --> 00:22:23.519
Sounds scary, but they're trying to keep it all contained and outside of the cloud.
00:22:23.519 --> 00:22:35.440
So it's listening to your conversations throughout the day using a specialized, quote-unquote, secure enclave that talks directly to your iPhone, all while keeping your data encrypted and private.
00:22:35.440 --> 00:22:54.960
So instead of blowing billions on traditional data centers, Apple is weaponizing its custom chips to deliver personalized private consumer AI right in your pocket, and Wall Street is starting to notice as Apple shares begin trading higher as an alternative to volatile chip stocks.
00:22:54.960 --> 00:23:03.119
So Apple, by owning the silicon, is not just building better phones, it's building an entire ecosystem.
00:23:03.119 --> 00:23:06.880
Alright, let's move on to another aspect of the market here.
00:23:06.880 --> 00:23:18.079
We just talked about Apple, we talked about anthropic and artificial intelligence, and now we're going to move to more income-oriented segment of the market.
00:23:18.079 --> 00:23:25.519
We're going to talk about first real estate investment trusts, and then we're gonna talk about tax-free municipal bonds.
00:23:25.519 --> 00:23:37.920
So, talking about real estate investment trusts or REITs, there was an aspect of the real estate market that was really in the doghouse after COVID, and that was real estate investment trusts that had to do with office space.
00:23:37.920 --> 00:23:42.240
And the narrative was that COVID was a game changer.
00:23:42.240 --> 00:23:44.000
We aren't going back to the office.
00:23:44.000 --> 00:23:49.519
People are gonna work from home, Zoom is fantastic, city centers are gonna be hollowed out.
00:23:49.519 --> 00:23:53.359
There's no reason for people to ever have to go back to an office again.
00:23:53.359 --> 00:23:58.960
This was the apocalypse that we were hearing in 2021 and 2022.
00:23:58.960 --> 00:24:09.359
And we are seeing that that that scenario did not become the scenario of the future, and what we are seeing right now is we are seeing a new normal.
00:24:09.359 --> 00:24:20.559
So you take a place like Manhattan, um, and I can attest to this as we've been in the market for new office space, and there is a mad scramble for good office space going on.
00:24:20.559 --> 00:24:35.680
What we have right now is we have a lot of companies looking for high quality office space at the same time because of the dynamics that took place in the past, there's not a lot of high quality office space available.
00:24:35.680 --> 00:24:41.359
So by a number of measures, the top-tier office revival is here and it's now.
00:24:41.359 --> 00:24:47.759
Office usage measured in ten cities hit a new post-pandemic high watermark this year.
00:24:47.759 --> 00:24:54.400
Badge swipes at prime office buildings on busy days are within 10% of pre-pandemic norms.
00:24:54.400 --> 00:24:58.640
Office space nationally is shrinking, and this is part of the problem.
00:24:58.640 --> 00:25:19.200
We've got demand and we've got less supply as old buildings get torn down or converted into housing, where we see buildings being converted from office to residential, or in some cases buildings being torn into luxury luxury athletic clubs, while tenants are chopping up the most space since 2020.
00:25:19.200 --> 00:25:27.920
According to Cushman and Wakefield, it's just nineteen point seven million square feet of office space under construction nationally, closest to its lowest point on record.
00:25:27.920 --> 00:25:40.640
So we're seeing strong demand, we're seeing existing space being converted to residential, and we're seeing very little new construction because new construction has a lead time, go back three or four years.
00:25:40.640 --> 00:25:42.160
Why would you build office space?
00:25:42.160 --> 00:25:44.640
No one's gonna be in offices, and yet here we are.
00:25:44.640 --> 00:25:58.000
People want office space, no new space is being built, old space is being converted to other uses, so we have a classic situation where suddenly, unexpectedly, demand is strong and supply is weak.
00:25:58.000 --> 00:26:00.000
And this is not just a New York phenomenon.
00:26:00.000 --> 00:26:20.559
This phenomenon is taking place in places where artificial intelligence is booming, like San Francisco and Seattle, which were a wash-in space, and those markets, while there still is a lot of space available, that
space is slowly being repurposed and put to use, and the space is slowly coming down.
00:26:20.559 --> 00:26:21.599
So, what to do?
00:26:21.599 --> 00:26:26.400
What are the opportunities in the real estate investment trust marketplace?
00:26:26.400 --> 00:26:32.160
Well, Barron says there are a few different companies within this space to take a look at.
00:26:32.160 --> 00:26:43.759
specifically, they mention SL Green, symbol SLG, Hudson Pacific Properties, symbol HPP, and BXP, which used to be Boston Properties, now known as BXP.
00:26:43.759 --> 00:26:47.759
These are companies are all still trading significantly off their pre-pandemic highs.
00:26:47.759 --> 00:26:52.720
SL Green about 46 below, 46% below its 2019 price.
00:26:52.720 --> 00:27:06.000
BXP is night is 53% lower, and Hudson Pacific Properties is a staggering 95% lower than its 2019 price back in the pre-pandemic days.
00:27:06.000 --> 00:27:13.759
Now, keep in mind that these stocks have appreciated recently because folks have acknowledged this trend is ongoing.
00:27:13.759 --> 00:27:34.720
Also, if you're looking at Hudson Pacific Properties symbol HPP, this situation, this company has suspended and still has suspended its dividends, so it is not paying current income, but stocks trading in around $12.23 a share, and the average Wall Street target is closer to $17.09 a share.
00:27:34.720 --> 00:27:37.839
Occupancy rates have been increasing, it's up to about 82%.
00:27:37.839 --> 00:27:46.000
Hudson Pacific Properties has office space in San Francisco, Silicon Valley, Los Angeles, Seattle, and Vancouver.
00:27:46.000 --> 00:27:50.960
Also five big film studios in the portfolio there as well.
00:27:50.960 --> 00:27:55.039
BXP has a current dividend yield of 4.3%.
00:27:55.039 --> 00:27:58.480
It's currently trading around 64.70.
00:27:58.480 --> 00:28:01.200
Average analyst target just shy of 76.
00:28:01.200 --> 00:28:09.519
They have prime office space in Boston, New York, San Francisco, Washington, D.C., LA, and Seattle across 164 properties.
00:28:09.519 --> 00:28:12.640
And finally, SL Green, which is around 53.
00:28:12.640 --> 00:28:18.720
Average target is about 58.5, , not a huge spread there.
00:28:18.720 --> 00:28:21.759
And the current yield is around 4.8%.
00:28:21.759 --> 00:28:30.880
SL Green heavily concentrated in New York, and they have the trophy property in New York at one Vanderbilt.
00:28:30.880 --> 00:28:39.839
Finally, next income opportunity, and this will be the last thing we talk about today, and that is municipal or tax-free bonds.
00:28:39.839 --> 00:28:48.480
Barron's had a story talking about tax-free bonds, , the return of the 5% muni, a generational bond opportunity.
00:28:48.480 --> 00:28:57.359
Barron's saying that this corner of the financial world, municipal bonds, hasn't looked this attractive since the dark days of the 2008 financial crisis.
00:28:57.359 --> 00:29:03.119
High yield, long-term
municipal bonds now yielding over five percent tax free.
00:29:03.119 --> 00:29:09.839
So for investors who spent the last decade chasing equities, munis are suddenly giving stocks a serious run for their money.
00:29:09.839 --> 00:29:15.599
Let's break down why this is happening, how it compares to history, and where the m smart money is moving now.
00:29:15.599 --> 00:29:20.480
So to really understand how unique this moment is, we have to look back at financial history.
00:29:20.480 --> 00:29:31.920
For most of the past century, municipal bonds, that is debt issued by state and local governments to fund public projects, were seen as boring, sleepy, appropriate for conservative PAC portfolios.
00:29:31.920 --> 00:29:42.400
Think back to the early 1980s under federal chair Paul Volcker, when runaway inflation forced interest rates through the roof, and that pushed municipal yields well into double digits.
00:29:42.400 --> 00:29:48.960
Back then, investors could lock in massive tax repayouts for decades, but those days vanished as inflation cooled.
00:29:48.960 --> 00:30:03.440
Then came the 2008-2009 global financial crisis, when credit markets locked up, fear drove municipal yields to historic highs as local governments scrambled for liquidity, creating a window of opportunity for savvy bond buyers.
00:30:03.440 --> 00:30:11.839
Following that, we have lived through an entire decade of ultra-low, near zero interest rates, followed by the massive pandemic era stimulus.
00:30:11.839 --> 00:30:20.000
Fixed income investors have been starved yield, forcing many into riskier corporate bonds or into equities.
00:30:20.000 --> 00:30:23.200
So let's fast forward to today, 2026.
00:30:23.200 --> 00:30:26.400
Massive global bond sell-off has flipped the script.
00:30:26.400 --> 00:30:30.799
High grade 30-year municipal bonds are now yielding 4.8 to 5%.
00:30:30.799 --> 00:30:34.640
Total market issuance at a record $600 billion this year.
00:30:34.640 --> 00:30:39.200
Much of this issuance is being driven by massive infrastructure projects across the country.
00:30:39.200 --> 00:30:40.960
Wire yields this high.
00:30:40.960 --> 00:30:47.839
Record supply is part of the story, coupled with persistent federal budget deficits and stubborn inflation hanging around 3%.
00:30:47.839 --> 00:30:53.519
But for individual investors, the real magic lies in what's called tax equivalency.
00:30:53.519 --> 00:30:54.799
Let's look at the math.
00:30:54.799 --> 00:31:02.640
Because municipal bond interest is generally exempt from federal and often state and local taxes, the actual payout is much higher than it looks on paper.
00:31:02.640 --> 00:31:08.640
If you live in a high-tax state like New York or California, your combined tax rate can hit around 50%.
00:31:08.640 --> 00:31:17.119
So what that means is a 5% municipal yield actually translates into a tax equivalent yield of 8%, 9%, or 10%.
00:31:17.119 --> 00:31:31.440
That easily rivals top-tier corporate bonds, which yield 6.5%, and even outpaces many riskier junk bond portfolios, all while state and local credit quality sits at some of the strongest levels in modern history.
00:31:31.440 --> 00:31:43.680
David Hammer, who runs the Muni portfolio management team at PIMCO, says this municipal credit is in the best shape of his career, backed by record tax revenues and ample financial resources.
00:31:43.680 --> 00:31:47.119
Of course, navigating this market isn't without its traps.
00:31:47.119 --> 00:32:02.400
Long-term bonds carry interest rate risk, and many come with call provisions of about 10 years for new issues, meaning if interest rates drop, the issuer can call the bond back early, giving you the upside of a 10-year bond, but the downside volatility of a 30-year bond.
00:32:02.400 --> 00:32:08.559
Because of this, many smart institutional and retail investors aren't just buying 30-year paper blindly.
00:32:08.559 --> 00:32:19.920
They are looking at intermediate maturities, bonds maturing between 10 and 15 years yielding around 4.5%, or actively using exchange traded funds to build laddered portfolios.
00:32:19.920 --> 00:32:26.960
Firms like PIMCO, BlackRock, and Fidelity are seeing significant inflows as investors figure out how to structure their holdings.
00:32:26.960 --> 00:32:36.559
Tom Kozlak, who is head of municipal strategy at Hilltop Securities in this Barron's article, noted, I wouldn't be dipping my toe in the water, I would be jumping in.
00:32:36.559 --> 00:32:40.480
These are some of the best yields we've seen in a generation.
00:32:40.480 --> 00:32:51.039
So with inflation hovering around 3%, locking in a tax-free yield of 4.5% to 5%, comfortably above inflation, is something we haven't seen for quite some time.
00:32:51.039 --> 00:32:59.680
So whether you're a seasoned fixed income veteran or an equity investor looking to diversify, muties are worth a fresh look.
00:32:59.680 --> 00:33:01.200
That's everything I've got.
00:33:01.299 --> 00:33:03.039
Thank you for listening to Mr.
00:33:03.039 --> 00:33:04.079
Keith Lantern.
00:33:04.079 --> 00:33:10.799
This podcast is available on most platforms, including Apple Podcasts and Spotify.
00:33:10.799 --> 00:33:18.880
For more information, please visit our website at www.heroldlantern.com.
00:33:14.730 --> 00:33:18.880
Opinions expressed herein are subject to change and not necessarily the opinion of the firm. Best performance is no guarantee of future results. The information presented herein is for informational purposes only and is not intended to provide personal investment advice. It is important that you consider your tolerance for risk and investment and making investment investment. Investing in security is not important for entity and the potential of losing money. The material doesn't come to research investment advice or trade recommendations.