The Dividend Cafe

Dow: +269 points (+0.81%) S&P: +1.28% Nasdaq: +1.76% 10-Year Treasury Yield: 3.54% (-7.6 basis points) Top-performing sector: Real Estate (+3.60%) Bottom-performing sector: Consumer Staples (+0.06%) WTI Crude Oil: $77.71/barrel (+3.45%) ASK DAVID “The US government has stated that it will purchase crude oil to replenish the strategic reserve once the price hits $70. In effect, this seems to indicate that the government will purchase millions of barrels at $70. Does this function as a price floor? And, if so, what impact does a government-created price floor have on markets?” ~ Keith So just by way of clarification, they have indicated they want that to be the rough price level at which they will transact, but their rough and very ambiguous guidance on the subject would indicate the intent of more a floor than a ceiling and yet, if the price does not go (or stay) there, it may not be a price at which much transacts. The government cannot make the market cooperate. But to the extent the market expects that level to be a rough “floor,” I suppose one could assume in their economic calculation that some of the left tail risks of various price collapses are less likely. The problem is that they can change their mind, and any number of events could happen (upside or downside) that alter the economics here. What market actors ultimately know is that there is a forced buyer in the marketplace, and supply calculations, profit expectations, and a number of numerical considerations around production can be performed with that intervening fact lingering. It does suggest a certain backstop in matters which provide a bit of an asymmetrical risk/reward (in the producers’ favor). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Dow: +269 points (+0.81%) S&P: +1.28% Nasdaq: +1.76% 10-Year Treasury Yield: 3.54% (-7.6 basis points) Top-performing sector: Real Estate (+3.60%) Bottom-performing sector: Consumer Staples (+0.06%) WTI Crude Oil: $77.71/barrel (+3.45%) ASK DAVID “The US government has stated that it will purchase crude oil to replenish the strategic reserve once the price hits $70. In effect, this seems to indicate that the government will purchase millions of barrels at $70. Does this function as a price floor? And, if so, what impact does a government-created price floor have on markets?” ~ Keith So just by way of clarification, they have indicated they want that to be the rough price level at which they will transact, but their rough and very ambiguous guidance on the subject would indicate the intent of more a floor than a ceiling and yet, if the price does not go (or stay) there, it may not be a price at which much transacts. The government cannot make the market cooperate. But to the extent the market expects that level to be a rough “floor,” I suppose one could assume in their economic calculation that some of the left tail risks of various price collapses are less likely. The problem is that they can change their mind, and any number of events could happen (upside or downside) that alter the economics here. What market actors ultimately know is that there is a forced buyer in the marketplace, and supply calculations, profit expectations, and a number of numerical considerations around production can be performed with that intervening fact lingering. It does suggest a certain backstop in matters which provide a bit of an asymmetrical risk/reward (in the producers’ favor). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

A little early morning volatility but then a small rally on the day in markets. Read below, listen, watch – the choice is yours! MARKET ACTION Dow: +186 points (+0.56%) S&P: 0.70% Nasdaq: 1.01% 10-Year Treasury Yield: 3.62% (+10 basis points) Top-performing sector: Communication Svcs (+1.29%) and Consumer Discretionary (+1.26%) Bottom-performing sector: Consumer Staples (-0.16%) WTI Crude Oil: $74.66/barrel (flat) Key Economic Points of the Day: Used Car Prices dropped -15% year-over-year in 2022 (from where they ended 2021), the largest single-year drop on record. This came, of course, off of large increases in 2021. The Fannie Mae Home Purchase Sentiment Index was up in December versus November but basically right at the all-time low set in October. 21% of people surveyed said they believed it to be a good time to buy. The NFIB Small Business Optimism Index dropped to 89.8 from 91.9 in December, the lowest since June of last year. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Futures opened last night up +40 points and were up over +80 points by bedtime. This morning futures pointed to a +100-point open pre-market. The market opened up +150 points and got up over +300 points before falling just over -100 points. A 450-point delta between the high and low levels today … The Dow closed down -113 points (-0.34%) with the S&P 500 down -0.08%, and the Nasdaq up +0.63% as Tesla and the chip sector rallied substantially. The massive rally Friday saw 7-to-1 advancers to decliners, fairly solid breadth. The top 20% of companies paying out cash dividends as their primary cash outlet were down -2.7% last year compared to the top 20% of companies doing the highest stock buybacks (which were down -13.3%). This is comparing apples-to-apples – top performers compared to top performers by their primary cash outlet vehicle. The ten-year bond yield closed today at 3.53%, down 4 basis points on the day. Top-performing sector for the day: Technology (+1.09%) Bottom-performing sector for the day: Health Care (-1.66%) Revenue growth is expected this year in each sector of the S&P besides Utilities and Materials (and a very slight top-line revenue decline is expected in Technology). The more significant factor will be margins and where overall profit levels come in, though if earnings are revised downwards as time goes on, I suspect it will have more to do with lesser-than-expected revenues than it will have lesser-than-expected margins. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Dividend Cafe Link - https://bahnsen.co/3Z98Le5 I’ve lost count of how many years now we’ve done this, but it is a lot, and it is one of my favorite projects every year. I thoroughly enjoy the research that goes into it, the writing that creates it, and the accountability that comes out of it. I will refrain from the temptation to start waxing and waning now and just say that I hope you find this year’s Year Behind, Year Ahead white paper profitable. It’s going to be a wild year. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

A solid day for the energy sector and some key blue chip companies but downside across most market sectors. Dow: -340 points (-1.02%) S&P: -1.16% Nasdaq: -1.47% 10-Year Treasury Yield: 3.72% (+1 basis point) Top-performing sector: Energy (+1.99%) Bottom-performing sector: Real Estate (-2.89%) WTI Crude Oil: $73.80/barrel (+1.32%) Key Economic Point of the Day: The ADP jobs number for the private sector came in at 235k for December, well above the 150k projected. Naturally, futures went down on the news. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

The new wing of the TBG offices in Newport is now open. We are excited for you to come see it. I believe it is now 28 out of our 50 people that are based in Newport, soon to be 30 out of 52 (we are hiring two new Tax Services people this month). The new space gives us extra space we needed for our Solutions Department from last year’s growth, more space for additional future growth, new offices for key partner-advisors, additional space for our growing Tax Services Department, and additional client conference room meeting space. Come visit any time! Today’s market action was up and down but mostly up … Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

I began writing this from Dallas, Texas this morning, where yesterday USC suffered a heartbreaking loss in what was one of the most exciting Cotton Bowl games ever. I am back in Newport now, where tomorrow morning we reveal the new large office expansion to our team (same floor, same building). It has been a labor of love, I assure you. We have added new advisor offices (we have a new advisor starting in Newport Beach and another new one starting in Nashville next week), but mostly the Newport expansion houses new members of our Tax Department, Planning Department, Research, and Trading. It is really beautiful space. Today’s DC Today is the normal Monday format of DC Today and, obviously, the kick-off to 2023! There is a 27-page white paper coming Friday in the Dividend Cafe providing the most comprehensive recap of 2022 and forecasts for 2023 we think you will find anywhere. I hope you find it to be a labor of love, too. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

https://bahnsen.co/3uYu6c0 Virtually everything going on in markets right now (or so it would seem) has to do with what central banks are doing (or are projected to do). It certainly is not true in reality – the things happening today that will ultimately determine investment outcomes in years to come will have far less to do with the cost of capital and far more to do with human action – but in the day-to-day volatility of market price levels, I have no choice but to pretend. Well, “pretend” is not actually the right word – it is more an acknowledgment that the world we are living in gives a lot – and I mean a lot – of attention to the Fed in one’s outlook on financial asset pricing and economic health. The current obsession with the Fed (as in the immediate 2022 and soon-to-be 2023 period) revolves around inflation. We have had a cult-like obsession with the Fed for over 25 years, so it is not inflation that created the Fed’s place in our hearts and our wallets. But right now, inflation is the cause du jour – the rationalization for 24/7 coverage of the Fed, and certainly the Fed’s stated rationale of heavy activity in financial markets. Much of this is with good reason. Much of it is so misguided that I don’t really believe I am hearing what I hear some days from people I know [used to?] know better. But all the talk about the Fed right now is tied up with all the talk about inflation, and therefore a re-visit on the inflation subject is in order. Jump on into the Dividend Cafe, and may our investigation of the state of the nation when it comes to inflation bring some revelation about the Fed’s imagination in matters of monetary administration as we pursue our goal of wealth creation. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

So the Dow gave back Monday’s gain today and a tad more, but with today’s -764 point day in the Dow, the market finds itself a couple of hundred points off where it was just last Friday. And the bond market rally continued again today as yields fell again. All of this is carefully dissected in today’s podcast and video … Dow: down -764 points (-2.25%) S&P: down -2.49% Nasdaq: down -3.23% 10-Year Treasury Yield: 3.45% (-5 basis points) Top-performing sector: Energy (-0.53%) Bottom-performing sector: Technology (-3.78%) and Communication Services (-3.84%) WTI Crude Oil: $76.20/barrel (-1.38%) Key Economic Points of the Day: Retail Sales fell -0.6% in November, and even ex-autos were down -0.2%. Much of this was related to the strong number of October, off of which this drop is based. Nominal GDP expectations for Q4 will come down if consumer activity is less than expected. Industrial Production fell -0.2% vs. expectations of a +0.1% increase. Initial jobless claims were down 20k to 211k. Continuing claims are at their highest level since February (at 1.67 million). Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com