The Dividend Cafe

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The DC Today - Monday, January 29, 2024 Jan 29, 2024

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Today's Post - https://bahnsen.co/48OKdeA

Ask David “What is the best argument for why the distributed independent decisions of individuals, families, and businesses create more beneficial outcomes for most people than the top-down, centralized decisions of government, especially the federal government?” ~ David K.

My argument is one of incentives and one of knowledge. These are two different arguments, even if they do overlap at points. Fundamentally, I believe better outcomes take place when the decision-makers reap benefits from their decisions and when decision-makers feel pain from bad decisions. I do not believe “disinterested third parties” (Thomas Sowell’s term) have the incentives to allocate and adjudicate risk and reward the way those with “skin in the game” do.

But beyond the classical incentive argument, I am very much a believer in what Friedrich Hayek referred to as the “knowledge problem.” Knowledge is widely dispersed throughout a society and no central entity possesses the knowledge needed to properly steward the affairs of a diverse economy. I read the masterful essay, The Use of Knowledge in Society, by Friedrich Hayek while in high school. It was the beginning of a lifetime journey for me through Hayekian thought, particularly around Hayek’s thesis of the “fatal conceit” of central planners.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Bite-sized Nuggets Jan 26, 2024

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Today's Post - https://bahnsen.co/3OkKhL0

I did something fun today … I just picked random topics from various things on my mind, in my daily reading, or across my research feed – sort of stream of consciousness – and wrote about them. Therefore, I suspect there will be a little something for everyone today. Hopefully, each portion is “bite-sized” enough to make it all succinct and readable, and I certainly appreciate any feedback you have to offer. In fact, I am considering something like this in the daily DC Today (where I would write my own piece every day on whatever topic I am so inspired by that day, and let Brian run with the daily data recap). It's all a work in progress and your comments are welcome.

And in the meantime, let's jump into the Dividend Cafe - bite-sized variety and all ...

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Thursday, January 25, 2024 Jan 25, 2024

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Today's Post - https://bahnsen.co/48LulK1

An overall positive trading day without a lot of volatility behind what was a pretty decent batch of economic data. The Dow was up well over 200 points, and the S&P 500 notched a sixth day of gains. We had the first read on Q4 GDP come in significantly higher than expected at 3.3%, with the consumer powering almost two percent of it. Both durable goods orders and jobless claims came in just enough below expectations that bonds also rallied, with the 10 YR down six basis points.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Wednesday, January 24, 2024 Jan 24, 2024

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Today's Post - https://bahnsen.co/48MsRiD

We experienced positive market sentiment throughout the morning until approximately 10:30 AM, driven by better-than-expected PMI data in both services and manufacturing. It’s noteworthy that typically, indications of economic expansion don’t lead to a decline in stocks. However, despite four days of gains on the Dow, the news of improving economic data led to a loss of some early morning momentum. This occurred on a day of relatively uneventful trading as interest rates edged slightly higher.

One key metric closely monitored by the Federal Reserve, The Taylor Rule, suggests that the Fed Funds Rate should currently be approximately 1% lower at 4.5%. Looking ahead, futures indicate a balanced probability for a rate cut in March. However, there is a significant amount of economic data expected between now and then that could influence this outlook. As previously mentioned, it wouldn’t be surprising if there were more discussions in March about the conclusion of Quantitative Tightening (QT), potentially easing financial conditions and essentially resembling a rate cut.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Tuesday, January 23, 2024 Jan 23, 2024

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Today's Post - https://bahnsen.co/47R5iUm

A short and sweet market recap today as earnings season launches further.

Small cap seems to have bounced well since its rough patch to start the year. Bitcoin has dropped -20% since its peak in the midst of ETF approval.

I was on set at Fox this morning with the chair of the House Ways and Means Committee, Jason Smith. The 40-3 vote on this tax bill was shocking to me, and it sure seems to foreshadow a comeback of some of the most stimulative parts of the Trump tax bill that previously went away.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Monday, January 22, 2024 Jan 22, 2024

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Today's Post - https://bahnsen.co/42bAxYY

Earnings seasons gets a lot more intense this week (and next). All the info around the horn on the normal categories is here in today’s DC Today.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Now that is a really good question! Jan 19, 2024

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Today's Post - https://bahnsen.co/3O8BRpX

I love these “question and answer” editions of the Dividend Cafe. I should say that 100% of the questions that appear are always completely real, from actual readers, reflecting different things on your mind across a variety of topics related to markets and the economy. Today, we get to talk about what it means for markets to “price things in,” about gold, about government debt, about dividend growth, and so much more. It is digestible, succinct, easy, comprehensible, and it is about as much fun as one can have in weekend reading.

Let’s jump into the Dividend Cafe …

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Thursday, January 18, 2024 Jan 18, 2024

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Today's Post - https://bahnsen.co/3vIRb6n

A positive morning of trading in markets gave way to losses mid-day, only to gain it all back and then some as we headed towards the close, ending up 200 points. Interestingly, the correlation between rates and stocks today actually moved together with both rising, where the opposite has been the case much of this year. 10’s are moving further into four handle territory up to 4.14% as rates crept back up today with a stronger jobless claim number. We are at about a 54% chance on futures for a March rate cut at this point.

We are still early in earnings season, but it has been notable that while 92% of companies reported thus far have exceeded expectations, 58% of them have actually traded lower on the news. A combination of some exuberance over lower rates this year coming out of markets and just some general consolidation after the year-end run-up seems to be at play. I find this consolidation healthy, and with an advance decline ratio only back to -3:1, I doubt we have seen the last of it. More in the link below.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Wednesday, January 17, 2024 Jan 17, 2024

Show notes

Today's Post - https://bahnsen.co/47HzpgS

Markets have stayed in what is pretty much a buyer’s strike this month, as no violent sell-off has been forthcoming, but down days have piled up in advance of the heart of earnings season and with several Fed governors trying to modestly re-frame expectations. Odds of a March rate hike have come down a bit but still remain the most likely view in futures markets. This noise was, if you recall, a highly predictable and overrated theme as discussed in our Year Ahead piece for 2024.

China’s economy grew +5.2% annualized in Q4 vs. +5.3% expected. The jobless rate sits around +5.1%. Most importantly, they indicated their third consecutive quarter of consumer price deflation (longest streak in 25 years). Did I mention this, too, was a huge theme in our Year Ahead piece for 2024?

I was intrigued to see this morning that about 60% of BB and B+ rated high yield bonds are now trading above par value (it was around 20% just six months ago). That is an extraordinary rally in credit that is clearly a by-product of improved financial conditions (i.e. expectations for greater liquidity and easier access to and cost of capital).

Retail sales for December exceeded expectations (shocked!) as core sales jumped +0.8% month-over-month. Online sales closed the year up +7% from the year prior, and across food/beverage/clothing there was meaningful increase on the month and year, even above what had been forecast.

I expect the biggest public policy issue over the next thirty days to be a Ukraine deal tied to U.S. border security and likely tied to Israel support funds as well. The challenges to getting this done are immense.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Tuesday, January 16, 2024 Jan 16, 2024

Show notes

Today's Post - https://bahnsen.co/3vEgA0Y

Ask David “What is your view about investing in the Indian economy since it appears to have the potential for considerable growth and is not hampered by the regulations of the CCP?” ~ Al

On one hand, India is the highest country allocation in our emerging markets strategy. On the other hand, that is not really “investing in the Indian economy” as much as it is investing in “companies that happen to be based in India.” The domestic market strength is a huge factor, but it is really more of a bottom-up than top-down decision. We are not looking for good countries but rather good companies.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

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