The Dividend Cafe

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It's the Income, Stupid! Nov 18, 2022

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I actually hate the title this week, because the word “stupid” really is pretty mean. I try not to be mean because I think it is wrong to be mean (I can elaborate if needed). However, in this case, when James Carville famously said, “it’s the economy, stupid,” in the context of what voters cared about in the 1992 election, he basically created a new adage for how we say that a particular thing is really the thing.

And that is the topic of this week’s Dividend Cafe – the thing in dividend growth investing, and clarifying some important terminology and concepts around the thing. And as you shall see today, the thing is growth of income.

Let’s jump into the Dividend Cafe!

DividendCafe.com TheBahnsenGroup.com

The DC Today - Thursday, November 17, 2022 Nov 17, 2022

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Another volatile day with the Dow closing flat after being down nearly -400 points. More to say here:

MARKET ACTION Dow: -7 points (-0.02%) – had been down over -300 points at the low and -400 pre-market S&P: -0.31% Nasdaq: -0.35% 10-Year Treasury Yield: 3.76% (+7 basis points) Top-performing sector: Technology (+0.21%) and Energy (+0.12%) Bottom-performing sector: Utilities (-1.79%) WTI Crude Oil: $81.94/barrel (-4.26%) Key Economic Points of the Day:

Weekly initial jobless claims came in at 222,000 – not a big move from the week before or variance from expectations Single-family starts in new housing construction dropped to 855,000, down -6% on the month and -35% from post-COVID highs

ASK DAVID “What do you think the impact would be on the stock and bond market if the Fed formally changed their inflation target from 2% to 3%? I assume it would be risk on for equities?”

~ Mike S.

Yes, it would be. But they won’t. And they don’t need to – they basically already did in 2020 with their adjustment to the 2% standard (that is, they no longer target 2%, but rather an “average” of 2%, meaning they can let things run hot in perpetuity to “blend” to 2% depending on how the math before or after works. In other words, they gave themselves “flexibility.”

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

The DC Today - Wednesday, November 16, 2022 Nov 17, 2022

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It was a very choppy (up-down) day in markets, to say the least. The chart itself is testimony to how much the market could not make its mind up today. A few nuggets to chew on here …

MARKET ACTION

Dow: -39 points (-0.12%) S&P: -0.83% Nasdaq: -1.54% 10-Year Treasury Yield: 3.69% (-11 basis points) Top-performing sector: Utilities (+0.87%) – only other sector up was Consumer Staples Bottom-performing sector: Energy (-2.15%) WTI Crude Oil: $85.32/barrel (-0.32%) Key Economic Points of the Day:

Core retail sales were up +6.5% year-over-year in October and up 0.7% on the month (double what was expected). Industrial Production declined -0.1% in October, with mining and utilities output leading the way lower

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

The DC Today - Tuesday, November 15, 2022 Nov 15, 2022

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MARKET ACTION Dow: Up +56 points (+0.17%) S&P: +0.87% Nasdaq: 1.45% 10-Year Treasury Yield: 3.76% (- 10 basis points) Top-performing sector: Communication Services (+1.78%) Bottom-performing sector: Materials (-0.11%) WTI Crude Oil: $86.86/barrel (+1.15%) Key Economic Point of the Day:

The Producer Price Index only rose +0.2% in October, half of the +0.4% monthly increase that had been anticipated. And much of that lower figure came from a decline of -0.1% in services, the first decline in wholesale services costs in two years

ASK DAVID** “Is purchasing gold and/or silver a good investment?”

~ Cindy W.

My view has been for quite some time that it is a non-productive investment. What I mean by then is that it does not generate any cash flow and does not have any internal earnings stream, so the value becomes a matter of speculation or supply/demand around use. But gold is not really owned much for industrial use, and even its cosmetic use is somewhat limited, so those who own gold or silver for investment purposes must defend the notion of gold being a sort of inflation hedge or currency proxy. And maybe it will be that someday, but that day is not the last 42 years, where gold is down by -50% relative to inflation – a stunning and shocking fact to all who hear it. I will also point out that the most common thing I have been told over the years is that gold gives us a hedge or substitute against crazy unstable monetary policy. Well, trillions of printed QE dollars since 2012 later, gold is lower than it was a decade ago. This should have been the golden age for gold; instead, it has many wondering what exactly the thesis is.

At the end of the day, gold can go up a lot, and it can go down a lot, but it rarely does what people seem to want it to do when they want it to do it.

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

The DC Today - Monday, November 14, 2022 Nov 15, 2022

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Today’s DC Today is monstrous and requires you to listen to the whole thing. Election aftermath. Fed expectations. Inflation changes. Huge rally days. So much updating.

TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The State of Big Tech Nov 11, 2022

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Greetings from Nashville, Tennessee, where I will be necessarily giving you a shorter Dividend Cafe today, but one you may find quite interesting nonetheless.

I am sure some of you would prefer we just stay out here in Nashville. But alas, we live in crazy times.

And speaking of crazy, I want to talk today through a few charts, quickly, that cover the subject of energy investing and technology investing. The angle is a bit different than many choose to take.

Let’s jump into the Dividend Cafe …

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

The DC Today - Tuesday November 8, 2022 Nov 08, 2022

Show notes

MARKET ACTION

Dow: +334 points (+1.02%) S&P: +0.56% Nasdaq: +0.49% 10-Year Treasury Yield: 4.13% (-8.4 basis points) Top-performing sector: Materials (+1.68%) Bottom-performing sector: Consumer Discretionary (-0.30%) – only negative sector WTI Crude Oil: $88.55/barrel (-3.53%)

Key Economic Point of the Day: The October NFIB Small Business Optimism Index fell from 92.1 to 91.3

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

The DC Today - Monday November 7, 2022 Nov 07, 2022

Show notes

Market Action

Futures opened down nearly -200 points last night but got back nearly to the flat line by bedtime as Japan and Hong Kong markets were rallying. Then this morning, futures pointed to a +170-point open pre-market. The market opened +80 points and went steadily higher throughout the day. The Dow closed up +424 points (+1.31%), with the S&P 500 up +0.96% and the Nasdaq up +0.85%.

It would be malpractice not to start with this chart. One thing I have said over and over is that I believe equity volatility does not stabilize until the ascendant dollar reverses. Friday’s drop in the DXY was the worst day for the dollar since 2015 and the second worst day since the financial crisis (h/t Jim Bianco). Now, the dollar was still UP on the week – we are hardly in a trend of dollar reversal. Volatility is still the story, not a weakening dollar. For now.

We are up to 85% of companies reported for the quarter now (Q3 results), and revenue growth looks to be +11% year-over-year with earnings growth of +4.3%. And the earnings outlook for 2023 has only come down from $252/share for the S&P 500 to $233, meaning either this will end up being a very, very mild recession, or else there is more room to go for downward revisions of 2023 profits. The ten-year bond yield closed today at 4.22%, up six basis points on the day Top-performing sector for the day: Communication Services (+1.83%) and Energy (+1.73%) Bottom-performing sector for the day: Utilities (-1.94%) I am not sure that the ESG movement is proving to be much about ideology. It is apparently a lot more about performance, after all. As ESG-popular FAANG stocks have gotten hammered and ESG-hated energy stocks have thrived, new money into ESG products has evaporated.

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

One of These Things is not like the Other Nov 04, 2022

Show notes

I appreciated the very kind words I received about last week’s lengthy Dividend Café, and hope the message coming out of that annual week of meetings was clear and useful for readers. I struggled with where to take Dividend Café this week as last week’s covered so many topics, the Fed’s announcement this week was no real surprise at all, and I desire to write less about the Fed in the Dividend Café. On that last part, it isn’t going to happen – and that’s not merely because of my not-so-secret obsession with monetary economics. I may believe (and I assure you, I do) that the Fed policy framework of this era has given a way higher role to the Fed in modern economics than is appropriate, but believing it shouldn’t be is different than believing it isn’t such. So yes, the Fed is going to be a heavy theme in Dividend Café for years to come (whether I like it or not).

But if there is one thing I am obsessed about more than monetary economics, it is dividend-growth investing. And I think you will find some observations about dividend equity investing to be very relevant to the paradigm in which we find ourselves.

So today is not quite Fed-free, but it is rich in dividends, the very rewards I want for investing clients. Let’s jump into the Dividend Café …

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

The DC Today - Thursday November 3, 2022 Nov 03, 2022

Show notes

MARKET ACTION

Dow: -146 points (-0.46%) S&P: -1.06% Nasdaq: -1.73% 10-Year Treasury Yield: 4.15% (+9 basis points) Top-performing sector: Energy (+2.04 xxx%) Bottom-performing sector: Technology (-3.00%) and Communication Services -2.83% WTI Crude Oil: $87.95/barrel (-2.29%) Key Economic Point of the Day:

1.485 million continuing claims (up 47k, most since March) ISM Services came in at 54.4 – still expansionary but a point lower than expected, and with New Orders dropping 4 points ASK DAVID “I enjoy listening to your podcasts – thank you for the insights!

I am sitting on cash – about 75% of my investable assets. What would be a good philosophy of when to get back into the market and how? I am a believer in dividend based investing.”

~ Adrian

One first has to start with the basic principles – not getting invested in a dividend equity portfolio with cash is a riskier than getting invested in one. The reason not to invest immediately is either (a) A belief about market timing that is not grounded in reality, or (b) A desire to not invest all at once at an inopportune time (that being revealed to you in hindsight, not in advance). I reject reason A and am sympathetic to reason B, as long as one does the needed self-assessment to see that reason B is psychological and emotional, not financial or rational. So then if the desire to mitigate timing risk is psychologically helpful, I advise deploying no less than 50% at once, and then the rest either over a period of time periodically (say, 1/10th of the remainder each month for ten months), or tactically (each “bad” down day in markets deploying more).

I have no statistical or empirical argument for one over the other as it pertains to how to deploy the second 50%, but feel strongly about getting 50% of uninvested cash at once.

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

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