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The Dividend Cafe
Author: The Bahnsen Group
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Description
The Dividend Cafe is your portal for market perspective that is virtually conflict-free, rooted in deep philosophical commitments about how capital should be managed, and understandable for all sorts of investors. Host David L. Bahnsen is a frequent guest on CNBC, Bloomberg, and Fox Business. He is the author of the books, Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (Post Hill Press), The Case for Dividend Growth: Investing in a Post-Crisis World (Post Hill Press), and Full-Time: Work and the Meaning of Life (Post Hill Press).
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Today's Post - https://bahnsen.co/3Q5001u
A mixed day of trading between positive and negative all morning and right into the market close with the Dow slightly higher and both the S&P 500 and Nasdaq just below fair value. Rates continue their move higher, with the 10-year up 4 bps and now at the 4.66% level. So aside from what so far has been a tougher start to the second quarter, a few things to keep in mind:
Rates and Fed futures have reset higher based just as much on stronger-than-expected good things in the economy, such as earnings growth, GDP, and employment, as they have on inflation expectations.
We are still only 4% from all-time highs in the S&P 500 when the historical intra-year drawdown is more like 14% on average.
So, yes, markets are down a little here, and volatility is up with higher rates, but keep in mind this is pretty run-of-the-mill market consolidation at most at this point.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3Q2J5g8
Against Doomsdayism
Where this Iran-Israel atrocity goes from here, what should and should not have been done, what and should not be done, what it will mean for markets and oil prices – all these things notwithstanding, the winner of the weekend appears to be anti-missile defense systems, first pursued by the Reagan administration in the 1980’s. The ability for this technology across multiple mediums to bat nearly a thousand in putting down missiles and drones coming in hot to do unspeakable damage is, well, vindicating. The specifics of the various technologies and strategies are fascinating, but for now, we celebrate those whose vision was to shoot down missiles and missiles, from ground and from air. Such military investment saves lives, and deserves our celebration.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3JfyXwQ
I cannot tell you how much fun it is for me to spend three hours on a Friday morning reading research. Reading when it is dark outside is the single activity that brings me the most joy, and I love the inspiration it fostered for today's Dividend Cafe
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3JfyXwQ
A modestly positive day in markets overall today on some better-than-expected PPI numbers following yesterday’s selloff on CPI. So what one-day taketh, another giveth back (well, not quite). The Producer Price Index numbers showed a gain of just .2% for the month on headline when .3% was expected, and the Core PPI only gained .1% for the month. The takeaway is PPI is just not confirming a reacceleration in inflation on the wholesale side, which is a positive.
We unpacked yesterday’s CPI numbers pretty well, I thought, but I am sharing this chart from our friends at Strategas with you below to show you where rate expectations have now moved since. My point here is that while they have moved meaningfully higher, I do believe this to be a good thing, contrary to what some may say. The economy, employment, and the markets have all digested these higher rate expectations and it’s simply far healthier for markets to focus and trade on the actual fundamentals of the economy and earnings versus solely on the hopes of looser monetary policy. Shown below, we came into the year expecting Fed funds at 3.5% by Christmas and have now priced in just two rate cuts and ending this year closer to 4.75%. The bar of Fed expectations has been reset to a level high enough that it is now more supportive for markets than the opposite at this point.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3PWoA4P
A down day in both stocks and bonds today following a disappointment on CPI numbers by one tenth on both Headline and Core, that sent the Dow down XXX points and the 10-year bond yield up .18XXbps. We expected .3% on both and got .4% instead to cause todays action, so on one hand a risk off day as higher rates were priced in on yields, and on the other, the difference of a tenth is far from dramatic in and of itself.
I do believe the Federal Reserve is an independent institution adhering to its employment and price stability mandates. I also believe they are aware of the Fiscal paradigm as well however (not driven by, but aware). Do I think a $2T budget deficit when we are at full employment with interest expense now accounting for 17% of tax revenue when our average termed government debt interest rate is only at 3.3% is on their radar in terms of Quantitative Tightening, yes I do. They can’t go until inflation gives them the OK sign (or gets close enough), but they are ready to reduce rates later this year as they’ve telegraphed, and from the Fed minutes released just today my point on reducing QT will come in to play sooner than later.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/4aKgDaL
We traded mostly lower the entire day today but then rallied back to fair value the last hour or so of trading. Tomorrow we have CPI out, and with a lack of other meaningful economic data today and right before earnings season heats up later this week, markets were mixed in anticipation. Bonds did rally across the curve giving back some of the back up in rates we have seen the past few sessions with the 10-year down 6bps.
With earnings season set to start this Friday, a quick recap of where expectations lie: 3% revenue growth, 5% earnings growth on the quarter with a big up tick in Utility (believe it or not) earnings growth up 18%. For the year we are still looking at roughly $243 per share on the SP500 or about 10% growth from the previous year. Sectors where the bar on expectations is set fairly high at this point are in technology and communications, with Energy and Materials the opposite so it will be interesting to see where markets price the actual results in comparison.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/4aMHEug
Economic Front
The primary news of the weekend was the 303k new jobs created in March, up by 89k over expectations. A full 232k of that came from the private sector. The two prior months were revised upwards by 22k. The household survey was up huge, as well. The unemployment rate fell to 3.8%.
Construction was solid (39k new j
obs), and leisure and hospitality led the way, with private education and health care strong as well.
The annual gain in wages is +4.1%, and the average hours worked went up to 34.4 (had been 34.3).
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post -
The stock market dropped this week and it has given me a chance to write a Dividend Cafe about one of my favorite topics – the crucial importance of predicting the future, reading the tea leaves, and all that good stuff. I have strong opinions about people’s talent in such projections and the relevance of such to one’s long-term financial success. So today we are going to just have at it and talk about this week’s market volatility and what it means to you.
Some of you are going to be really, really disappointed (if I did my job right).
Jump on in, to the Dividend Cafe.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post -
Our morning rally in stocks turned decisively negative midday. There was geo-political tension with Iran threatening action after Israel’s strike on Syria and then some mixed messaging from different Fed presidents today that seemed to both contribute to today’s decline. That said, there really wasn’t a whole lot to warrant such a large 750-point swing from top to bottom on the day, so some strange market action with volatility picking up.
While the overall labor force participation rate has come up recently, it’s still on the lower end of the historical norm at about 62.5%. It’s interesting to see the bifurcation of what’s driving it. The participation rate amongst the largest cohort of working 25-54 year olds is actually the highest it has ever been in this country at 83.5%, while the 54+ is basically at the lowest level it has ever been at about 38.5%. Read into that what you will, but the charts seem to shift just following the pandemic with a greater gap between the two cohorts. Younger folks with fewer assets had less wealth effects from rising prices, while the opposite was more prevalent in the older is my take.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3U2mBhF
A modestly positive trading day today in markets with both stocks a little higher and the VIX lower following a few down days. ADP payroll numbers for March came in quite strong at 184k, although the actual employment report this Friday will get more attention. Powell had comments out today that reiterated their patient approach on lowering rates which is really just more of the same with Fed futures unchanged. Sort of a quiet day really all around.
As the office REIT space recovers, earnings revisions for next year have brought the average estimate from -1.8% to now 12.2% for 2025. Healthcare REIT’s have also seen a huge revision from -17.2% to now 6.9% for next year EPS estimates. In fact of all 10 industries in the SP500 with upward revisions for next year, 6 of them are in the REIT space overall. Now, I imagine if interest rates don’t move lower as much as expected the shine may wear off for these analysts, but interesting nonetheless.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3JnoIqp
Although off the lows for the day, stocks closed down for a second day to start off the new quarter. 10-Year yields have now moved back towards the high end of their four-month range at 4.35%, which is about the level where we have seen markets start to pay more attention which is what today was about. Fed futures are still at 50/50 for a June cut and roughly 70% for July, and what’s being repriced into markets is rates that may stay a little higher this year.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/4cDHCqg
There is a lot of good stuff in the podcast today and, as always, we welcome your questions and curiosities.
Dividend Cafe looked at a number of things around the Fed, market valuation, inflation, and more on Friday.
We have some very exciting things in the works about our plans for daily and weekly content delivery, with even more additions and refinements coming. Meetings are underway and nothing will be ready to announce imminently but we are excited to bring what we are doing to another level.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/4cDi2Sq
The first quarter of 2024 is in the history books (both because it is done, so therefore now history – and because it was a big quarter with a lot of surprises for market pundits). As you go into your Easter Weekend and enjoy the market holiday that is Good Friday, take a trip around the horn as we look at history, market valuations, passive investing, credit, money supply, financial conditions, and more.
Jump on in to the Dividend Cafe …
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3TT4Scl
Another generally positive day in markets with today marking the 99th consecutive trading day that the SP500 closed above its 50 day moving average. This has happened many times in history believe it or not, and certainly isn’t even half way to 1995’s run of 257 (back when I was graduating high school), but its impressive none the less.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3TTReFO
Markets traded positively for most of the day, although ended up closing slightly down by 31 points. This is the 10th time since 1950 that the SP500 has been up for 5 months in a row, so it certainly has happened enough before, but interesting that when I looked at those time periods 12 months following, they were also all in positive territory as well. All that said, earnings and fundamentals are going to have to pull their weight for that to happen an 11th time from these valuations (see David’s comments below).
Historically speaking, it’s also rare to see markets top when there is such broad participation in new 52-week highs. Typically, that internal breadth starts to show cracks before the overall market reaches its cycle peak and turns lower, and that is not what we are seeing today. Energy, by the way, has reaccelerated, with now 80% of the sector at 3-month highs, as that market rotation and broadening of sector returns continues.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/49cizrs
Greetings from Dallas, Texas where I am the next two days before then getting to Houston on Wednesday and then to the TBG offices in Austin and doing three events there for a couple of days before returning to NYC on Friday. Today’s DCT is housing-heavy with plenty else in the mix to make it worth your time.
Dividend Cafe looked further into the time-tested wisdom of dividend growth investing, the historical factors that involved over the past few decades, and the lay of the land in the years ahead.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/4924jl3
Predictions are fun. They are not, though, at the heart of the investment business. They can be very important in the methodology and process of some speculators, and they can even be marginally additive for some investors. But “predictions” are not quite the same as “calculations,” and they are categorically different from “belief systems.” At the core of all good investors lies a philosophy. I find it an unimprovable joy in life to study the investing philosophies of great investors. I never, ever, ever find one who relies on “feel” or “just has that Midas touch.” That very thinking is for simpletons and know-nothings. Great investors execute well off of a cogent philosophy. Bad investors either fail to execute or have an improperly formed philosophy (or, worst of all, options; they have no discernable philosophy at all).
The Bahnsen Group embraces being defined by our investment philosophy, and we embrace being known by the role dividend growth plays within that philosophy. Dividend growth is not new. In fact, what is [relatively] new is NOT viewing the receipt of cash flow from the risk investments you make as a key objective in your investing and a significant part of your anticipated return. In today’s Dividend Cafe, we address the history of investor distraction from dividend monetization and the reorientation that we believe is about to shift the focus back to where it belongs. We are not talking a “new normal” but rather a “return to normal normal.”
So jump on in to a very normal Dividend Cafe …
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3vpQejx
Markets built on yesterdays rally today closing higher for a third straight session. For the markets, the porridge-is-just-right narrative around the balance of strong economic and employment backdrop combined with disinflation and a Fed that is now talking about slowing QT and accepting PCE at 2.6% this year (vs 2%) before they would begin cutting interest rates. Today we also had jobless claims and existing home sales both positive and supportive of that narrative as well. Keep in mind please, that markets are a forward looking pricing mechanism, and a lot of soft-landing narrative at this point is fully baked in. The question will be on fundamentals keeping up with those higher valuations names from here, and I still suspect there will be the haves vs. have-nots in that regard and the time for being selective here is very important.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/43pRAau
Generally, a pretty market-friendly statement from the Fed, with some upgrading on the economy with GDP estimates moving up from 1.4% to 2.0%, they lowered their unemployment rate forecasts from 4.1% to 4% and raised the Core PCE forecasts by two-tenths to 2.6% for the year (and we are already at 2.8% now mind you).
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
Today's Post - https://bahnsen.co/3ViQThg
Markets built on gains quite nicely throughout the day today, with the Dow up 320 points, on an uncharacteristically consistent trading day heading into tomorrow’s FOMC decision and statement. The back up in rates we have seen the past two weeks eased a little today as well, with 10s down three basis points, which also supported our generally positive day. We are still in the range I mentioned on the 10-year, just at the higher end of it with 4.35%, the high watermark on the year so far.
Links mentioned in this episode:
TheDCToday.com
DividendCafe.com
TheBahnsenGroup.com
After hearing David on The World and Everything In It, I decided to Google him and came across some great additional sources to hear him... including this gem of a podcast!
David's logical brillance makes all of his afternoon missives easy to listen to and understand. On a personal note David's commentary gives me confidence as a client of the Bahnsen Group.
great breakdown of the situation in simple layman terms. always come out feeling better about things after listening to David.
came to this podcast via Radio Free California. awesome commentary, makes complicated stuff seem simple.
Best podcast on economic and financial matters that I have yet discovered.
Amazing podcast. I suggest you market this podcast more. Ive been looking for a informative podcast on the markets and found this podcast on my last try.