The Dividend Cafe

Today's Post - https://bahnsen.co/3muBoUs Today was a highly anticipated day, as we were set to get the latest look at inflation data. This data came in lower than expected, which appeased markets at first glance but lost its luster throughout the trading day. Some pointed to the FOMC minutes and the glooming use of the word recession that took the wind out of the market’s sails, yet this was not “new” news (more in the post). Perhaps now, everyone will shift their focus and attention to Friday as we start to gather another season of earnings reports. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3moAxo7 Days like today tend to be pretty boring because stock and bond markets are limited in what they are likely to do a day ahead of a news announcement like tomorrow’s CPI reading. The fed funds futures have a 70% chance right now for a quarter-point rate hike next month, and we will see how markets respond to the CPI tomorrow. In the meantime, I tried to make some stuff up today to keep you interested. =) I’ll put it here instead of down below, but the NFIB Small Business Optimism Index has stayed at a low level in March, February, and January. Now, it hasn’t gone much lower from each of those months, but it has stayed level at a spot that is pretty near where it was ten years ago. Their access to capital (particularly from banks) has dropped substantially, and the confidence one would deduce from hiring plans and capex plans is just not there. It isn’t collapsing, but it isn’t good. The number one issue cited: uncertainty over the economy. It will be interesting to see if the Fed wants to resolve their uncertainty the hard way. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3GAu2FF I hope everyone had a wonderful Easter weekend and are feeling excited for the week ahead. Markets should be pretty weird this week, but now I just say that every week because I have such a high chance of being right when I use the word “weird.” Today didn’t do anything to embarrass me in this prediction (more below). Dividend Cafe last week was my earnest effort to unpack the current state of oil markets and all their economic, geopolitical, and monetary implications Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3Ui1J4z Last weekend’s news was not a Lehman bankruptcy, a Silicon Valley depositor backstop, or a Credit Suisse acquisition.  It was not even driven by U.S. forces, let alone the usual cast of characters in the Fed, Treasury, or FDIC.  Rather, it was OPEC+ making an announcement of production cuts in oil.  It didn’t crash markets – in fact, it caused a big rally in the energy sector.  But it is a big deal, and it warrants its own special Dividend Cafe. I would never dare spend a Dividend Cafe pontificating on where the price of oil is going.  I do not know, and neither does anyone who trades or tracks oil for a living.  Commodity prices are inherently unknowable, and oil is at the top of that list.  Getting premises right is no surefire way to the right conclusion, and that applies to oil prices in spades. But what I will spend this Dividend Cafe doing is pleading with you to see the non-oil ramifications of this oil move.  And by “this oil move,” I really mean a lot more than “this” oil move – I mean an entire set of events and conditions that, taken together, represent a significant change in global geopolitics and, with that, investment implications. So let’s jump into the Dividend Cafe and digest all that is happening. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/40EOqh5 First of all, congratulations to the Huskies of the great state of Connecticut (where some of TBG’s favorite clients reside) on their NCAA championship. I assure you it was the news story today that deserved the most press coverage. It was a pretty boring day in the market, and all the news wanted to talk about was the Trump court appearance and such. Bonds rallied quite a bit. Stocks had their first down day in a week. The Q&A’s below dig into a key issue of understanding the stress in the banking system right now and a key issue about the Fed. Scroll down if interested. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3ZFg4ZY So congratulations to the San Diego State Aztecs and the UConn Huskies, who will go head to head tonight for the NCAA college basketball championship. It has been a tournament to remember – thrilling upsets and last-second shots – and enough investment lessons to generate a whole Dividend Cafe! The written is here, the video is here, and the podcast here. Yes, a March Madness Dividend Cafe, indeed. I got coaxed into talking about the Trump indictment on Varney Friday, along with some refreshing reminders about investing in the energy sector. You will find a little market review and a little of everything else in this very special Monday edition DC Today, with a whole whole whole lot of ENERGY and OIL in the aftermath of this weekend’s shocking news. Off we go … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/40OgHkJ Any time I use some sort of sports analogy in the Dividend Cafe I get a lot of emails from people who connect to it and say they love it, and then I get emails saying, “come on, I don’t care about sports – please just stick to the market!” I am never offended or bothered – Abraham Lincoln had a line about pleasing people once – but I am also not swayed. If I think there is a real investment or economic lesson that can be told with a sports analogy, I am going to mix that chocolate and peanut butter. And I promise you, today’s broad takeaway for investors is worth it even for your tortured souls who hate sports. So jump on in to the Dividend Cafe … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3G3Vdsa So the market went up again today, went negative in the middle of the day, then rallied back in the second half of the day (see chart below). The FDIC is looking to move the cost of the recent bank failures to the banks that didn’t fail (read: to their customers), Sen. Joe Manchin has decided he regrets his support of the “Inflation Reduction Act” atrocity, I wrote of extraordinary bond market volatility two days ago, and then we went two days in a row with bonds frozen in time, and Dr. Anthony Fauci has himself a speaking gig (not sure if it will be virtual or not?). I remain convinced that the key issue adding to profitability in the energy sector going forward is constrained supply, much of which is a decision and some of which is circumstantially forced. Sen. Manchin’s op-ed mentioned above may reflect a sitting U.S. Senator shocked – shocked! – to discover that many do not want to facilitate U.S. energy independence, but it is not a shock at all. And what it does is make the sector even more attractive as it pertains to legacy and incumbent assets, pipelines, and producers. The sector is capital constrained, which boosts expected rates of return for the capital that comes in. It is supply constrained, which boosts prices and margins for the supply that comes online. And it is sentiment constrained, which boosts risk premium around as a contrarian reality. It will ebb and flow, no doubt, but what the opponents of our U.S. energy sector never understand is that all the bad things are actually good things for investors. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3JRB2yV I read an interesting line from an analyst I read daily in my morning research this morning … “if the bulls are to reclaim control of this market, beta likely needs to reassert itself; hasn’t happened yet.” Of course, this sort of begs the question – bulls of what? Well, if one means “the market index,” then they have essentially said, “if those bullish for beta are to get what they want, beta needs to do well.” I think we call that a tautology. “If I am to eat ice cream I like, I will first have to eat ice cream that I like” is not a super profound observation. But I am not picking on this analyst or the comment – I am pointing out the premise hidden in the statement – that a “bull” means the “index” (beta just measures the portion of a return that is really index/market oriented). It highlighted for me how differently we think at TBG – that one can be agnostic about a broad market index (which is neither bullish nor bearish) yet still bullish on an investment strategy that is not remotely connected to beta … Indeed, to that end we work. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TNPuMZ There are two things I think I have amply covered over the last few weeks: (1) Equity market volatility; and (2) the Bond market rally. Both things are true – equities have been all over the map, up and down, even as they are mostly flat (or actually slightly up) since all this banking commotion began. And bonds are indeed up a great deal, with the 1-year yield down a stunning 75 basis points since this began just three weeks ago and the longer end of the curve itself down 50 basis points. But what is not covered in there is bond market volatility. The swings we have seen in bond yields in the last month are not like anything we have seen since Lehman in 2008. The “VIX” for bonds has elevated beyond what it did during COVID and beyond what it did during the taper tantrum of 2013. This is despite all the quantitative easing that has been done and the general “flight to safety” government bonds represent. Now, much like equities (if not more so), one could argue these “day to day” swings in bond yields (and therefore in bond prices) really do not matter, and that would be true if all we were talking about was the investment return of one holding these underlying government bonds. But I bring it up because I think it speaks to something more than an expected return in a given asset class, but rather a deeper uncertainty, unpredictability, and general directionlessness that is perhaps permeating more than people understand. The policy milieu is not coherent right now, and rip-roaring bond market volatility says so. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com