The Dividend Cafe

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

Today's Post - https://bahnsen.co/3noFOMJ There is a lot today on Housing, which is a matter of practical significance to a lot of you, and there is a lot today on the banking mess and the Fed, which is also connected to Housing. So I think you’ll find today’s missive practical and interesting. After reports throughout the weekend that both First Citizens Bank and Valley National Bank were bidding with the FDIC to take over Silicon Valley Bank (both publicly traded, sub-$10bn market cap banks, the former out of North Carolina and the latter from New Jersey), the Monday morning announcement ended up being that First Citizens Bank would be the buyer. I don’t think the ownership of Silicon Valley Bank’s deposits, loans, brand, and locations is that important to markets overall, with the FDIC having already put unlimited depositor protection in place. The final resolution of their capital markets and securities business is more relevant to us at The Bahnsen Group, for a variety of portfolio-related reasons. And really the final resolution of what will happen with First Republic Bank is the most pressing issue across markets out of the wide array of contenders. Did you know the market closed at 32,254 the day of the Silicon Valley reports on Thursday, March 9, and closed at 32,238 on Friday, March 24, just two weeks later? In between there were ten days of extreme volatility and one day of light volatility, but from the start point to end point, it was dead. flat. in. the. market. And after today markets are UP since this soap opera began. Go figure. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3JF6mRh We are in a moment of “volatile Sundays” in the financial services industry. This is when market actors, policymakers, movers, and shakers have big news to announce on a Sunday in an effort to “beat markets opening”, or as Ben Bernanke once joked that his memoir would be called, “before Asia opens.” I lived through it in spades in 2008 – Fannie and Freddie’s conservatorship, Lehman’s bankruptcy, Wachovia into the arms of Wells Fargo, Morgan Stanley’s deal with Mitsubishi, and the government’s extended backstop of Citi – all on different Sunday afternoon/evenings in either September, October, or November of 2008. I can tell you where I was, what I was doing, the exact date, the exact time, and all the things. Good times. The last couple of Sundays have been a little adventurous, but for different reasons and with different catalysts. In a different environment, the news that UBS had done a “rescue acquisition” of Credit Suisse would have been the biggest news story of the entire year. I want to unpack it this week and share some thoughts on where it may be relevant for you, regular U.S. investors presumably with no direct exposure to either UBS or Credit Suisse, who normally just prefer to use your Sundays for church, family, rest, and sports. Let’s jump into the Dividend Cafe! Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TGllyM That the market gave up -500 points in fifteen minutes at the end of the day yesterday but then rebounded +500 points this morning is, to me, validation of my theory regarding yesterday: that it was a closing speculative trade. Fundamentally, the facts on the table (where they are known) are not really subject to much debate. So an interesting thing happened on the way home from processing the Fed’s announcement yesterday … Math. The Fed is now projecting a +0.4% real GDP growth rate this year, yet a +3.2% growth rate is currently showing in the Atlanta Fed model for Q1 (others have it at +2% and others at +2.5%). Regardless of whether or not Q1 comes in at +2% or +3% (and this always refers to an annualized quarterly number), you can’t get from there to +0.4% on the year without … wait for it … a recession. But the Fed is also showing a projection of no rate cuts this year. And Powell is talking about a credit crunch coming and the financial markets doing their tightening for them. And the first two years of the yield curve are entirely inverted. And the futures market expectation for the 3-month t-bill rate (currently 4.75%) is that in 18 months, it will be below 3.5%. So what should we make of this? Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TAGcni All that matters today is what the Fed did and said. And what they did was raise rates a quarter point. And what they said was that “financial conditions have tightened” (well, there you go). And he said that these tighter financial conditions and tougher lending criteria from banks will “factor into their policy decisions” (phew). As for a First Republic deal – the bank whose depositors basically now have a backstop from the FDIC but has now seen enough deposit withdrawals to warrant a deal with a bigger back to shore up its capital strength – the issue appears now to be what government backstop or assistance will be a part of any deal (something I predicted last week … any buyer in a position of strength knows the issue is systemic risk, and therefore has the leverage to ask for some sweeteners to come with the deal). Some of the items being discussed (per reports) are liability protection and/or relief on capital requirements and/or other regulatory relaxations. Keep your popcorn handy. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3JvZllP I imagine it is quite likely that the bond market has seen its highs in bond yields for quite some time to come (across the whole yield curve). The 10-year sits at 3.5%, down from 4.21%, and I will be surprised if it gets back up to that level. Likewise, the short end sits at 4.5%, down from over 5%, and I don’t see it getting back there, either. If I am wrong, I am wrong, but I don’t think I am here. China has bought $88 billion in oil, natural gas, and coal from Russia since the war began last year, up over $30 billion from the year prior and causing Russia to beat out Saudi Arabia as China’s leading supplier. The government is evaluating how they can increase FDIC deposit insurance levels above $250,000 without getting Congressional approval. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3LBs0Z8 For the second week in a row, I get to do hours upon hours of reading and writing over the weekend, only to have Sunday interventions make obsolete much of that reading and writing. Keep reading to understand more … There is no question that the major story in markets right now is sort of the only story, and that is the day-to-day perceptions of the banking system at home and abroad. Last week the market was down a hundred points Monday but had been up +350 in the middle of the day. Then Tuesday was up +350 before Wednesday was down -280 (but had been down -700 points). Thursday was then up +375 points, and Friday was down -380 points. So all in, from beginning to end, the market was dead flat on the week. Yep. Dead flat but with substantial movement each and every day. And then, today, we were up +383 points, basically the exact same level as Friday’s downturn. THIS is the type of market where people have a chance to act truly, truly foolish. It is also a prime-time example of directionless volatility. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42ftwpL In this week’s Dividend Cafe, I again decided not to limit myself to one topic but to take the recent avalanche of questions we have received and go through them all, one by one, creating quite a “multi-topic” Dividend Cafe for you. I think you will find the questions intriguing, and I hope you will find the answers satisfying. From questions about student loans to the Fed to depositor insurance to how to select a wealth advisor, we have it all this week (and then some). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3JHE8Wf Brian Szytel here with you today reviewing continued market volatility with today’s 700-point swing, albeit today to the upside, surrounding ongoing stress in the financial sector, along with a significant list of new economic data points. I have a full agenda in today’s video podcast link below with updates on employment, manufacturing, interest rates, and a deep dive into what is unfolding in the banking sector and what it may mean for you. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3leNG2y This is Trevor Cummings, and I am sitting in for David Bahnsen to bring you DC Today. There is a common idiom in the English language, “Wait until the dust settles.” This adage encourages one to be patient until they have more clarity. Investors crave clarity, and when things become too foggy or dusty, investor anxieties skyrocket. These anxieties surface as market volatility, which you are currently enduring. At this stage, everyone is still sifting through the rubble of SVB to separate substance from hysteria. I want to encourage you to read David Bahnsen’s special Silicon Valley Bank Dividend Cafe, which was published Monday. Our intent here at The Bahnsen Group is to keep you informed and guide you through the dust. David will even be writing a Dividend Cafe piece on Friday dedicated to the plethora of questions we’ve received this week – you won’t want to miss that. With that said, let’s talk about what happened around the markets today… TheDCToday.com DividendCafe.com TheBahnsenGroup.com