The Dividend Cafe

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The DC Today - Wednesday October 19, 2022 Oct 19, 2022

Show notes

Welcome to DC Today where I, Trevor Cummings, will be your guest host again on this fine Wednesday. Please join me for the video or podcast (links below), as there is quite a bit to cover and discuss today. David Bahnsen will be back on Friday with his normally scheduled program – Dividend Cafe

Dow: -98.54 (-0.32%) S&P: -0.66% Nasdaq: -0.85% 10-Year Treasury Yield: 4.131% (+13.3 basis points) Top-performing sector: Energy (+2.94%) Bottom-performing sector: Real Estate (-2.56%) WTI Crude Oil: $85.63/barrel (+3.39%) Key Economic Point of the Day:

Today we saw the published data for new housing starts and building permits

Housing starts came in at 1.4mm on an expectation of 1.47mm
- Down 8.1% seasonally adjusted and down 7.7% year-over-year in September
- Looking at the attribution, we see new homes fell 4.7% and new apartment construction fell 13.1%

Building permits came in at 1.56mm on an expectation of 1.5mm

Rising 1.4% in the month of September
Permits for new homes fell 3.1%, with apartment construction rising 8.2%

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

The DC Today - Tuesday, October 18, 2022 Oct 18, 2022

Show notes

This is Trevor Cummings joining you as your guest host on DC Today. You can find my weekly commentary at www.thoughtsonmoney.com. Also, please join me for the DC Today video and podcast – see below.

Market Action

Dow: +341.67 (1.13%) S&P: 1.16%% Nasdaq: 0.9% 10-Year Treasury Yield: 3.994% (+2 basis points) Top-performing sector: Industrials (+2.36%) Bottom-performing sector: Communication Services (+0.54%) WTI Crude Oil: $83.22/barrel (-2.6%) Key Economic Point of the Day: • Industrial production in September rose 0.4% which was a surprise to the upside – estimates were 0.1%. Additionally, August was revised slightly to the upside, as well; a revision from -0.2% to -0.1%. • The National Association of Home Builders’ (NAHB) monthly confidence fell 8 points to 38 in October, making 10 consecutive months of decline. Note, the index was at 80 last October and this 10-month decline tops the record of consecutive declining months set in ’06/’08.

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

The DC Today - Monday, October 17, 2022 Oct 17, 2022

Show notes

Greetings from the world’s greatest city where we kicked off money manager meeting week with significant discussions with the CIO, the taxable fixed income team, and the levered loan group at Voya, and this afternoon met with the real estate team, private equity group, and head real estate folks at Blackstone. It won’t be this many meetings every day this week (it better not be), but it was a great way to start off the week. My summary of the whole week will be prepared at the end of the week for public consumption.

Futures opened last night up +100 points and stayed positive throughout the night even as Japanese markets struggled. By bedtime, we were about +150 in overnight futures and at the crack of dawn this morning (now on eastern time zone), futures were pointing to a +300-point open.
The market opened up +500 points and got as high as +675 points, and stayed very level throughout the day.
The Dow closed up +550 points (+1.86%) with the S&P 500 up +2.65% and the Nasdaq up a massive +3.43%.
UK bonds rallied violently this morning as yields collapsed, no doubt the key correlative event to the U.S. stock market rally overnight. The 30-year and 20-year dropped by a stunning 40 basis points, and each point on the yield curve from three years up to ten years was down by almost the same. Anyone who bought British bonds last week made about two years’ worth of return in about 24 hours.
The ten-year bond yield closed today at 4.01%, up less than a basis point on the day
I am not sure what to think about the measurement of bond returns in 1721 when churning butter was the most profound technological advancement of the decade, but I do know this: 2022 is going in the history books for global sovereign bond returns

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

The Bond Market Cares About You Even if You Don't Care About It Oct 14, 2022

Show notes

I hear often from investors who are focused on the “fun” parts of risk-asset investing that they “don’t care” about the bond market. Truth be told, it doesn’t do a lot to excite me, either. Most professional bond managers I know seem to be borderline Communists (just kidding), and the bond market itself lacks the human action that I believe is embedded in things like operating enterprises.

But the bond market cares about us whether or not we care about it, and that is the subject of today’s Dividend Cafe. It is a message I like a lot, and I believe if you jump into today’s Dividend Cafe, you will come out more enlightened about economic growth, stock market pricing, interest rates, and the decisions we face as investors.

So let’s do just that.

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

The DC Today - Thursday, October 13, 2022 Oct 13, 2022

Show notes

Okay, so one of the largest intra-day market moves on record (from down -550 to up +950 – a 1,500 bottom-to-top move today). So there is market action AND inflation/economic action to unpack, and you have come to the right place:

MARKET ACTION

Dow: Up +828 points (+2.83%) – was down -550 points at the low S&P: +2.60% Nasdaq: 2.23% 10-Year Treasury Yield: 3.95% (+5 basis points) Top-performing sector: Financials (+4.14%) – I am not going to take the time to look it up, but I will safely guess that this is the best day in years for Financials; in fact, I bet HALF of this would be the best day of 2022 for financials … NOTE: Energy was right behind it at +4.08% Bottom-performing sector: Consumer Discretionary (+0.98%) WTI Crude Oil: $89.25/barrel (+2.27%) Key Economic Point of the Day:

CPI (headline) increased +0.4% for the month where +0.3% had been expected. Headline inflation is up +8.2% on the year vs. a peak of +8.9% several months back. Core CPI (ex food and energy) was up +0.6% in September. Energy prices fell -2.1% but food prices increased +0.8%. It is all about food inflation in the aggregate data. Services is the source of increased inflation. Rents were up +0.8% on the month and primary residence impact is up +7.2% year-over-year. This is simply not true in the present tense but the lag effect is the driver here as we shall all see in a couple months’ time. The Fed has NO influence on this, but Health insurance prices were up a staggering 2.1% on the month and are up +28% on the year Airfare is up 43% on the year (base effect from limited travel a year ago) Goods prices were FLAT – slowest year-over-year increase since May 2021 (+6.6%) Used car prices down -1.1% on the month Clothing down -0.3%

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

The DC Today - Wednesday, October 12, 2022 Oct 12, 2022

Show notes

The market zigged and zagged all day and was down -100 and up +200 before closing down a tad in the final minutes of trading. Lots to say about the Bank of England in today’s podcast …

MARKET ACTION

Dow: -28 points (-0.10%) S&P: -0.33% Nasdaq: 0.09% 10-Year Treasury Yield: 3.89% (- 4 basis points) Top-performing sector: Energy (+0.75%) Bottom-performing sector: Utilities (-3.42%) – the collapse in this sector in the last month is absolutely unprecedented WTI Crude Oil: $87.09/barrel (-2.53%) Key Economic Point of the Day:

Core PPI (ex-food and energy) came in exactly in line at +0.3%. August’s PPI was revised downwards. September’s PPI headline read (w/ food and energy) was +0.4%. The year-over-year headline PPI is +8.5% vs. +8.7% last month. Processed goods prices fell for the third month in a row. Prices for transportation and storage fell -0.2%. Goods down, services up.

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

The DC Today - Tuesday, October 11, 2022 Oct 11, 2022

Show notes

An odd day (old school) as the Dow started down a bit, rallied way higher (up +400 points at one point), fell into negative territory, then closed up +36 as old-guard defensive sectors did very well (Real Estate, Consumer Staples, Health Care) and the cool stuff got hit. More to say on everything here.

MARKET ACTION

Dow: +36 points (+0.12%) S&P: -0.65% Nasdaq: -1.10% 10-Year Treasury Yield: 3.937% (+5 basis points) Top-performing sector: Real Estate (+1.02%) and Consumer Staples (+0.93%) Bottom-performing sector: Communication Services (-1.63%) and Technology (-1.52%) WTI Crude Oil: $88.68/barrel (-2.73%)

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

The DC Today - Monday October 10, 2022 Oct 10, 2022

Show notes

I am not sure I have complained enough about the absurdity of having a day when the stock market is open and the bond market is not. Columbus Day is this odd anomaly where they honored the great explorer in financial markets in the most convoluted way possible – by taking away banking transactions and bond activity but by having stock exchanges open (for those who have not read my prior writings on such a thing, it is highly distortive to markets, as many financial actors function in both spaces at once, so lose use of the left hand while they continue to use their right hand). That said, today was such an absurd day.

I did write a Dividend Cafe Friday with more information about the bear market in which we find ourselves, and the historical lessons that may be useful as we proceed through this. The video is here with the same comments on podcast here.

I was on CNBC this morning giving my feedback to comments the media was running with from Jamie Dimon (the CEO of JP Morgan). My first comment was spot on. My second comment was spot on. And my third comment was about to hit the ball out of the park, when all of a sudden …. (you’ll have to see).

Off we go …

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

History Has Spoken Oct 07, 2022

Show notes

I wouldn’t say that I like this, but I would say that I understand it. But last week’s Dividend Cafe was, in just a few days, the most widely read Dividend Cafe I have ever written. I hope that is because clients and readers flocked to the philosophical takeaways of a deeper reflection on bear markets like the one we are in now. But I know that the ratings of financial TV networks skyrocket higher in bad times and that it has a lot more to do with the reality of human nature than anything else. Fear gets clicks and views.

I don’t do fearmongering. My Dividend Cafe last week was actually the opposite of fearmongering. I sought to present the highly rational case for a real glory in the aftermath of bear markets for investors who behave well. Nevertheless, I can understand that the general interest in the topic is largely related to the fear and emotion that goes with the uncertainty of the moment.

This week I am keeping the topic alive, partially because the current bear market did not end in the last five days but also because there is more to be said about the history of all this and the future. And I believe you will find both illuminating in the uncertainty of the moment.

So let’s jump into the Dividend Cafe.

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

The DC Today - Thursday October 6, 2022 Oct 06, 2022

Show notes

A little market move down today – nothing to write home about. But more information on big picture you will want to listen to right here …

MARKET ACTION

Dow: -347 points (-1.15%) S&P: -1.02% Nasdaq: -0.68% 10-Year Treasury Yield: 3.83% (+7 basis points) Top-performing sector: Energy (+1.82%) – fourth day in a row Bottom-performing sector: Utilities (-3.30%) – second day in a row; rare and nasty WTI Crude Oil: $88.90/barrel (+1.26%) Key Economic Point of the Day:

Initial jobless claims came in at 219k, higher than the 203k expected (though continuing claims came in a tad less than expected) Mortgage rates at 16-year high … (6.75%)

ASK DAVID “Given the tight labor market and recognizing the number of people that left the workforce over the past 2+ years, is it reasonable to expect a decrease in unemployment numbers any time soon? If it’s not reasonable to expect a decrease in unemployment numbers, do you think the Fed should use this criteria as a benchmark for monetary policy?”

~ Ed D.

Unfortunately, I do believe unemployment will go higher, and I do believe it will be relevant to Fed policy. Technically their dual mandate includes full employment, so if they pursue a monetary policy that increases joblessness I believe they will reverse course. I don’t think it is the benchmark they say it is, but I do think right now it gives them cover in non-effective monetary tightening (if anyone still believes the Fed Funds rate is causing inflation I have a bridge to sell them, assuming I can get the parts and labor).

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

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