The Dividend Cafe

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The DC Today - Tuesday, January 24, 2023 Jan 24, 2023

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Futures opened last night about even give or take 20 points, and stayed that way until early morning when we began moving lower and then notably so pointing to a down -150 point open. We opened down about -170 points but were down north of -250 after the first 20 minutes of trading. Around 1145 EST we had slightly better than expected PMI data released and fully recovered the morning losses trading sideways with a small upwards bias the remainder of the trading day. We closed positive on the Dow but slightly negative on both the SP500 and Nasdaq.

Dow: +104.41 (+.31%) S&P: -.07% Nasdaq: -.27% 10-Year Treasury Yield: 3.46%, down -5.6bps on the day Top-performing sector: Industrials up +.65% Bottom-performing sector: Communication Services -.69% WTI Crude Oil: $80.16/barrel, down -1.79% Key Economic Point of the Day:

A flash read today on US Composite PMI data showed a slight improvement over December, although still handily in contraction territory and the slowest since last October at 46.6 from 45 the month prior. Manufacturing PMI was little changed at 46.8 up from 46.2 with Services PMI at 46.6 from 44.7. Could the data in the chart below pick back up above 50 into positive territory before we end up registering an official recession this year, of course, but that economic margin is about as thin as it gets right now. For what its worth, this PMI data point is what led to markets recovering after the mornings initial sell off and was a ‘less bad’ read following December – not so bad that we fear recession is immanent, but cool enough to back the ‘Fed will pause soon’ narrative. Interestingly enough, the flash PMI read today from the Eurozone actually showed it barely bump back into expansion territory from 49.3 last month to 50.2, although not sure I would call that robust.

Links mentioned in this episode: [TheDCToday.com] https://bahnsen.co/3RbWe5R DividendCafe.com TheBahnsenGroup.com

The DC Today - Monday, January 23, 2023 Jan 23, 2023

Show notes

Futures opened last night pretty close to flat (down -20 points) and stayed right there into the evening. This morning futures pointed to a dead flat open pre-market when I first woke up. The market opened flat but moved up from there and stayed up with a few zigs and zags along the way (see chart below) The Dow closed up +254 points (+0.76%), with the S&P 500 up +1.19% and the Nasdaq up +2%

The worst performers of 2022 are so far the best performers into 2023, partially as tax loss selling leads to re-buying post-wash sale rules. The “dividend payers” outperformed the “non-payers” in the S&P 500 by 23% last year. Dividends paid in the S&P 500 last year were $563 billion, the highest amount in history. Dividends were 26% of the return of the market in the 2010s and the 1990s but 100% of the return in the 2000s (when the market had a negative price return). Prior to that, dividends had averaged between 40% and 70% of the market return every decade for fifty years. The current dividend payout ratio of the S&P 500 is 33%; it has averaged 48% for nearly a hundred years but has not gotten back to that average since the financial crisis. Selectivity is crucial. The ten-year bond yield closed today at 3.52%, up 3.7 basis points on the day. Top-performing sector for the day: Technology (+2.28%) Bottom-performing sector for the day: Energy (-0.20%) TIP spreads show implied inflation for ten years at 2.1% now, down from over 3% less than a year ago. Shorter term inflation expectations (5-year) evidenced in the TIPS market (treasury inflation-protected securities) has gone from 3.6% at the high to 2.1% now. Whether 10-year or 5-year, the bond market has seen a collapse in inflation expectations in recent months.

Links mentioned in this episode: [TheDCToday.com] https://bahnsen.co/3QZ6Y7w DividendCafe.com TheBahnsenGroup.com

An Updated State of Housing Jan 20, 2023

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FOR ACCESS to CHARTs described in this episode, click here - https://bahnsen.co/3DnVULR

I wrote a piece for the Dividend Cafe in May last year about the subject of housing and having re-read it this morning, I wouldn’t change a word. But those more evergreen principles don’t take away the appetite many have for the current state of affairs. Economic conversation right now largely centers around recession questions, and discussions about financial markets are understandably focused on the stock market. Yet right in the Venn diagram of both the economy and the market is the state of housing, and almost every person I know lives somewhere. So this topic is perhaps more relevant in a practical sense than many of the others that garner our attention.

I sometimes avoid this topic because that relevance is so misunderstood and misapplied (i.e. “if I could just know what would happen to house prices in the next few months, I would know if I should buy or rent” – or worse – “if I just knew what would happen to house prices in the next few months I could resume my foolproof home-flipping plans”). But as you shall see in today’s Dividend Cafe, our interest in the topic of housing is for a different application altogether.

Let’s jump into housing yet again, in the Dividend Cafe …

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

The DC Today - Thursday, January 19, 2023 Jan 19, 2023

Show notes

I, Trevor Cummings, am honored to be filling in for David Bahnsen today. I hope you will join me for the video and/or podcast, as I provide you with the daily happenings around markets. Please don’t miss out on the “Ask David” section below, as we’ve fielded this same or similar question quite a few times recently.

Without further ado, off we go…

Dow: -252.26(-0.76%) S&P: -0.76% Nasdaq: -0.96% 10-Year Treasury Yield: 3.395% (+2 basis points) Top-performing sector: Energy (+1.11%) Bottom-performing sector: Industrials (-2.08%) WTI Crude Oil: $80.47/barrel (+1.25%)

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

The DC Today - Wednesday, January 18, 2023 Jan 18, 2023

Show notes

Dow: -614 points (-1.81%) S&P: -1.56% Nasdaq: -1.24% 10-Year Treasury Yield: 3.37% (-16 basis points) Top-performing sector: Communication Services (-0.93%) Bottom-performing sector: Consumer Staples (-2.65%) WTI Crude Oil: $79.25/barrel (-1.16%) Key Economic Points of the Day:

The Producer Price Index (PPI) saw outright (and rather significant) DEFLATION in December, with prices dropping on the month -0.5%, well more than the -0.1% expected. November’s number was adjusted downwards by -0.2% as well. The 7.4% year-over-year number came down to 6.2%. The CORE number is down to 5.5%. Wholesale gas prices dropping -13.4% helped the cause, as did the food index’s -1.2% decline. Energy/gas prices have helped downward pressure in recent months, and that could/likely will reverse in months ahead even as other inflationary data see more downward pressure. I expect the core vs. headline reads to potentially diverge significantly in the months ahead. Industrial Production fell -0.7% in December and was actually down -1% when you factor in downward revisions from past months. Manufacturing led the way down. This was the largest monthly decline in more than a year. On an annualized basis, Industrial Production is down -5.2% in the last three months. Microsoft joined the fray of huge tech companies performing massive layoffs as they announced plans to lay off 10,000 employees (5% of their workforce) Retail sales fell -1.1% in December, mostly in line with the level of disinflation of gasoline prices we saw last month.

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

The DC Today - Tuesday, January 17, 2023 Jan 17, 2023

Show notes

Futures opened last night pretty flat (down a pinch) and dropped to down -50 points or into the evening as the Cowboys were having their way with Tom Brady. This morning futures pointed to a down -50 point open pre-market and that went a bit lower after results from Goldman Sachs. The market opened down close to -200 points and fell further in the next two hours before leveling around that low throughout the day. The reason for the Dow’s much worse result than the other two is that really the Dow’s drop was led by just two financial names. The Dow closed down -392 points (-1.14%), with the S&P down -0.20% and the Nasdaq +0.14%.

The year is off to an interesting start – with just nine days of trading behind us (due to two Monday holidays so far), a lot of “shinies” are up on the year, and yet market breadth has been very strong with the highest percentage of stocks in a 10-day advance since 2020. As good as some of the shinies have done, the equal-weight (average stock) is still doing better than the index itself (cap-weight). The ten-year bond yield closed today at 3.55%, up four basis points on the day A pivotally important fact – yes, bond yields are all down, BUT they are down proportionately (essentially, the 2-year has dropped 30bps AND the 10-year and has dropped 30bps, meaning the yield curve inversion has NOT improved) Top-performing sector for the day: Technology (+0.44%) Bottom-performing sector for the day: Materials (-1.07%) I want to make sure I consistently reiterate my theme with data around the history of growth-value rotations (primarily, that they are secular decade-type rotations, not quarterly or annual ones) Links mentioned in this episode: [TheDCToday.com]https://bahnsen.co/3IUuwbA DividendCafe.com TheBahnsenGroup.com

There's a Different Kind of Bernie on Every Corner Jan 13, 2023

Show notes

Last weekend I watched a new documentary series on Netflix called Madoff: The Monster of Wall Street. Some of you know I am a bit of a geek for all things Wall Street history, and I seriously doubt you would believe me if you knew how many documentaries, fictionalized movies and TV shows, not to mention real books, I have taken in over the years covering various elements of Wall Street history. Many of them have a protagonist (at least from my perspective), and many cover the escapades of either the evil or the incompetent. This latest Madoff series manages to do both – cover the evil and the incompetent.

But the entire Bernie Madoff saga also reinforces one of the most important and actionable realities of investing, universally applicable and relevant to all. And it really has very little to do with the red flags to avoid when it comes to international Ponzi schemes. Don’t get me wrong – I remain earnestly opposed to Ponzi schemes. =) But there is another lesson in the Madoff saga that transcends even that, and it applies to the core of human nature. And that is the subject of today’s Dividend Cafe …

Links mentioned in this episode: [Episode Blog Post] (https://bahnsen.co/3QCrOcE) TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Thursday, January 12, 2023 Jan 12, 2023

Show notes

Dow: +269 points (+0.81%) S&P: +1.28% Nasdaq: +1.76% 10-Year Treasury Yield: 3.54% (-7.6 basis points) Top-performing sector: Real Estate (+3.60%) Bottom-performing sector: Consumer Staples (+0.06%) WTI Crude Oil: $77.71/barrel (+3.45%)

ASK DAVID “The US government has stated that it will purchase crude oil to replenish the strategic reserve once the price hits $70. In effect, this seems to indicate that the government will purchase millions of barrels at $70.

Does this function as a price floor? And, if so, what impact does a government-created price floor have on markets?”

~ Keith

So just by way of clarification, they have indicated they want that to be the rough price level at which they will transact, but their rough and very ambiguous guidance on the subject would indicate the intent of more a floor than a ceiling and yet, if the price does not go (or stay) there, it may not be a price at which much transacts. The government cannot make the market cooperate. But to the extent the market expects that level to be a rough “floor,” I suppose one could assume in their economic calculation that some of the left tail risks of various price collapses are less likely. The problem is that they can change their mind, and any number of events could happen (upside or downside) that alter the economics here. What market actors ultimately know is that there is a forced buyer in the marketplace, and supply calculations, profit expectations, and a number of numerical considerations around production can be performed with that intervening fact lingering. It does suggest a certain backstop in matters which provide a bit of an asymmetrical risk/reward (in the producers’ favor). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The DC Today - Wednesday, January 11, 2023 Jan 11, 2023

Show notes

Does this function as a price floor? And, if so, what impact does a government-created price floor have on markets?”

~ Keith

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

The DC Today - Tuesday, January 10, 2023 Jan 10, 2023

Show notes

A little early morning volatility but then a small rally on the day in markets. Read below, listen, watch – the choice is yours!

MARKET ACTION

Dow: +186 points (+0.56%) S&P: 0.70% Nasdaq: 1.01% 10-Year Treasury Yield: 3.62% (+10 basis points) Top-performing sector: Communication Svcs (+1.29%) and Consumer Discretionary (+1.26%) Bottom-performing sector: Consumer Staples (-0.16%) WTI Crude Oil: $74.66/barrel (flat) Key Economic Points of the Day:

Used Car Prices dropped -15% year-over-year in 2022 (from where they ended 2021), the largest single-year drop on record. This came, of course, off of large increases in 2021. The Fannie Mae Home Purchase Sentiment Index was up in December versus November but basically right at the all-time low set in October. 21% of people surveyed said they believed it to be a good time to buy. The NFIB Small Business Optimism Index dropped to 89.8 from 91.9 in December, the lowest since June of last year.

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

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