Bond Market Flips to 'Higher for Longer' — What That Means for Every Asset Class

SPEAKER_1 (0:01)

This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

Justin Klein (0:16)

Good afternoon, fellow investors, and welcome back to InvestTalk. This is our Tuesday, September 29th, 2026 edition of InvestTalk, and we are excited. I'm excited solo today, just me. You'll get Luke later on in the week, but I'm excited to be a part of your next hour. To answer your finance and investment questions, bring you data and perspective, develop over 25 years of investment experience, and help you take that next step. That's what each show is really. It's help you keep the right mindset to learn lessons, so you avoid pitfalls and you capitalize on opportunities better. And ultimately, when you do that, you do that consistently, you will have great outcomes with your money. So that's what we do every day. And in addition, we are adding on what we used to do a long time ago, pre-COVID, which was in-person events. We're getting back to them.

It's coming up in about three weeks, a little over three weeks. October 24th, it will be our InvestTalk Retirement Summit.

It's your chance to join the KPP team and some guest experts for our in-person retirement summit in Irvine, California. The event is free of charge, but seating is limited, limited, very limited. We only have about 50 spots, and I think over half of them are taken already. So you must pre-register by heading over to investtalk.com. Now, in just a bit, we'll talk about today's marked performance and run down the show topics. But first, let's tackle this color question.

SPEAKER_3 (2:00)

Hi, Justin, Luke got another question for you about Comcast period. I think I know what you're going to say, but I wonder if you think this is a value play at this level period.

I think you're building up some fiber and they have some good free cashflow. So I'm thinking this could be a time to make a purchase. What are your thoughts? Thanks again for everything.

Justin Klein (2:21)

All right. Looking at Comcast, Cmcsa. It's a name that's been down, but the question is, is it down for a good enough reason? Now, the main reason is certainly the debt load. The debt load is high. It's about $76 billion market cap. They have, what's that? About $84 billion in net debt, which is a lot. It's a lot. But their free cash flow is also very strong. So $17.8 billion. And if you go look at their maturity schedule, it's not like they are, they don't have a ton of refinancing going forward. Their debt is termed out 10 plus years. I think Luke and I actually looked at this recently, because we do own this for clients. So we want to double check, which you remember correctly. And that's the case, is that, yes, they have some debt, but it's fixed.

They don't have a lot of exposure to high rates, because their refinancing is only going to be about, if I remember, a billion dollars, let me just pull it up here, about a billion dollars or so plus a year for the next decade, which they produce $17.8 billion in free cash flow.

Yeah, this year, it's like $2.5 billion. Next year, it's $3.4 billion. The year after that, it's $3.5 billion. So like I said, it's about 20% of their free cash flow. They could just go and pay off that debt that's maturing. So that's not really an issue. And the free cash flow is near an all-time high. It's certainly in an uptrend over the last 10 years. Turn equity is 11%. Good, but not amazing. But that yield, 6.6%, is pretty nice. So what I'm seeing or we're seeing and why we actually, I believe we own this in one of our smaller accounts, one of our smaller strategies, so to say, is a dividend that is sustainable. Their pay ratio is only 42%.

Like I said, their debt level is sustainable. And this is why it's nuanced. This is why you want data points or data feeds like Faxed or Bloomberg, something like that, where you can see how far out is there, is their debt turned out to. So to me, we actually think this is a good value. So to earn $3.56 next year, that's 20 on a $21 stock. Like I said, a lot of that free cash flow is just going to go towards paying down debt. Let's see, are they buying back shares? Yeah, they're buying back shares. So I think that the debt levels are just a little bit over embellished, or at least the worry of them. And I actually think it's a good buy. They were at a great show yesterday. We looked into this story, LifeMaxing, the trap why 72% of Americans are risking their financial future. A new SoFi survey revealed that nearly two-thirds, sorry, three-quarters of Americans say they'd slow their financial progress to enjoy life today, a trend they call life maxing. So we dig into that story, a term Luke didn't love very much. We also answered a list of questions on V&Q, about the Vanguard Real Estate Index Fund. If you happen to miss it, go check it out. The best way to get every show is to follow InvestTalk wherever you get your podcast. Now, we have a lot of ground to cover over the next 45 minutes or so. In time for many, we're going to get to all of it. And the main focus point today concerns this story. Bond market flips to higher for longer. What does this mean for every asset class and how to eventually rebalance your portfolio, the implications for stocks, real estate, retirement portfolios, etc.