The Dividend Cafe

The fog of war continues in Ukraine with the entire world watching. The path to some immediate resolution has mostly closed, and expectations are for a complicated and extended process. Prayers are for minimal bloodshed and certainly for a limited scope to where the conflict goes. But few analysts are able to formulate a scenario where this ends well. The dollar is rallying. The Euro is collapsing. Oil is skyrocketing. U.S. equity markets are experiencing significant gyrations up and down day by day. I believe those five sentences summarize the five most important themes in financial markets right now (the collapse of the ruble and the Russian equity markets does not make the list, because who cares). I could certainly provide commentary today on the history of how markets have responded to various geopolitical distresses over the years, and maybe that will be needed in the weeks to come. But I believe longtime readers of Dividend Cafe know that I believe a properly constructed asset allocation is supposed to account for the inevitability of, well, distress. It could be geopolitical, or medical, or monetary, or economic, but distress is not new – only the specific reasons for the various particular distresses that come at different times. Today we are going to look at the reality of addressing distress in one’s portfolio through asset allocation – what it means in the current moment, how some elements of this have changed, and why it hasn’t stopped mattering. I wouldn’t say this is a specifically Ukraine-focused Dividend Cafe, but I would say that it may feel like it if it is understood correctly. We hold principles for the purpose of applying them during times of distress. The Ukraine event is a time of distress. Today’s Dividend Cafe is about the principles that exist before, during, and after such. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I have pretty much written each Friday’s Dividend Cafe on the Friday morning of the day you receive it every single week for over a year now. If there is an exception to that over the last 12+ months I do not remember it. I used to write the Dividend Cafe in bits and pieces throughout the week and then “pull it all together” on Friday mornings, but a little over a year ago I changed my approach and I have been happy with the results. Well, this week taking advantage of the Monday holiday and some extra peace and quiet in the very early morning hours of a day that the market was closed, I wrote what would maybe be half of a Dividend Cafe on the subject of capital, liquidity, and interest rates. I loved where it was going and felt it was a good base for a needed Dividend Cafe on a crucial subject at this point in time. And yet, here I am on a Friday morning, with images of Russian rockets striking all over the Ukrainian capital of Kyiv on my television set, and I am not even opening the draft of that work from Monday morning. Yes, I will be able to use it next week (or at some future date), but this is certainly one of those rare weeks where Dividend Cafe warrants a nod to current events. Markets have experienced volatility in the build-up to events of this week and in the events themselves, though I would argue it has been much less volatile than I would have expected. The mere presence of market volatility is not the reason to devote a Dividend Cafe to this week’s subject. I don’t much care about market volatility other than the frustration I feel when we don’t get enough of it. So welcome to a Dividend Cafe devoted to Russia/Ukraine, and may your investor knowledge and appreciation of global affairs grow as a result. To that end we work. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

There was plenty of talk about Russia/Ukraine in DC Today this week as well in the unreliable news cycle, and there really isn’t any “new news” to report. I am not sure we will be talking about Russia/Ukraine in six months, but I am very sure we will be talking about inflation, the Fed, and interest rates in six months. I want to do my best to make those six months (and more) of conversations be as worthwhile as possible. The Dividend Cafe is here to help that effort. We are going to look at what some of the right questions are to ask today and let it go from there. I believe this discussion will give you some better information then you might find elsewhere, but it also puts me out on a limb with some actual forecasts. The very concept of forecasting bothers me, usually because those who do it are charlatans and grifters. But I have nothing to gain in these forecasts; rather I am trying to point us towards a context and understanding that will likely not prove exactly right in the details, but I think more helpful than thinking about 2021’s battles during 2023’s war. Jump on in to the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Long-time readers know that I have strong opinions about the Fed, about monetary policy, about its relevance to economic conditions, and of course about its implications for investment decision-making. Today we have enough misinformation out there about the Fed that it may be a chance to actually use that word appropriately. And this misinformation comes in a period of elevated interest. The stakes are high. This week in the Dividend Cafe we are going to see if we can’t make more sense of what the risks are and are not around current Fed actions. And in so doing it will allow us (force us?) to touch on a handful of peripheral subjects that matter. It’s an easy read, digestible, and actionable. So jump on in to the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

We are living in interesting times for equity investors, and I have no reason to believe those times will get any less interesting any time soon. But one thing I would love for clients of The Bahnsen Group, and to a lesser extent, all readers of the Dividend Cafe is for there to be an understanding of what equity investors are really after. We all know “buy low, sell high” – and I even wrote a book once on how I think investors ultimately best monetize their participation in the stock market. But I think a little more understanding of what one is paying for when one buys a stock may be useful (which of course, also implies a definition for what they are selling when they sell one). And if I do this right, maybe, just maybe, we will gain a better understanding of how to navigate the next phase of markets. To that end, we work. Jump on into the Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

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

I understand it may seem odd to devote a Dividend Cafe to the particular subject of the Energy sector in a week of surreal market volatility and media obsession over the Fed. But in fairness, I write about the Fed almost every week, plus four days a week in The DC Today, and the entire subject of monetary theory underlies all that we do in capital allocation at The Bahnsen Group. Our nuanced views on the role the Fed currently has in financial markets are known, and to co-opt my planned Dividend Cafe subject yet again to cover the thrilling story of the Fed moving interest rates exactly how we knew they would, is not going to happen. But the Fed was not the only story (non-story) this week. Markets are in a pattern of daily incoherence as traders, algorithms, novice investors, speculators, and other such inconveniences work through the challenges of a paradigm shift. What the futures say at night has nothing to do with what they will say in the morning which has nothing to do with what they will say at the open which is fully disconnected from intra-day activity which then leads to a totally unpredictable market close. Then, rinse and repeat. So I’ve written about our low opinion of “shiny object” investing, and the avoidance of such has a lot to do with the way our January has (thus far!!??) gone. But the energy sector is up +18% this month as of press time in a YTD market that has a Nasdaq down -15% and S&P 500 down -10%. We need to look at that. Is Energy becoming a new “shiny object”? Is the sector a trade or a long-term opportunity? What aspects of energy investing appeal to us right now? Where do environmental, political, and macroeconomic concerns fit in? These subjects all deserve their own Dividend Cafe, and that day is today. So jump on into the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I telegraphed last week a special Dividend Cafe on energy today, and I reiterated that plan several times in DC Today this last week. But as I began pulling it all together in my hotel room here in Washington D.C. at 4:00 this morning, it occurred to me that we appear to be living through a market doing much of what I have been talking about for a very long time, and that I have an obligation to make Dividend Cafe as current and relevant as possible. The treatment on the Energy sector I want to present must be written, but it can wait one more week. That topic is no less significant, but from a timeliness standpoint, the market events of the week (and really of all 2022 thus far) provide a golden opportunity to reinforce some more practical investment lessons right now. As a general rule I do not like the idea of making Dividend Cafe a weekly response to headlines or market circumstances, and have mostly avoided doing so for quite some time now. But this week’s Dividend Cafe is not a mere “this week in markets” play. Rather, I want to use the obviously predominant story in financial markets to illuminate a few key elements of our thinking at The Bahnsen Group. In other words, the inspiration is some current market action, but the lesson is far, far more evergreen. And I think it is going to really surprise you. So jump on in to the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

2022 is just two weeks underway, other people are joining me in no longer saying Happy New Year, the NFL playoffs are finally starting (a week later than ever before), and the college football champion has been declared. Coming into the new year was the time to forecast what we expected for the year – but now, we are actually in it. And speaking of those forecasts, I will keep the white paper in front of you here. But I think we are due for a little update on a few big macro issues, so update you we will. From the glorious spot of the 2022 TBG offsite where our entire team has spent the last day and a half meticulously working on improving our business (in some really significant ways, I will add), today’s Dividend Cafe covers a lot of bases. I have written ad nauseum about the fact that much of what we discuss when we discuss macroeconomic outlook is really about the state of debt in our economy. Much of what we think and ponder about the Fed comes down to debt considerations. There is much to evaluate on the periphery, but debt levels sit at the middle of a lot of these peripheral concerns, and I will tell you that I am seeing more and more people make truly faulty assumptions that I believe are headed to a bad place. This is a topic that will illuminate and inform your understanding of many things, and the only place I know to do it is in the Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Topics discussed: Tech Reckoning Sector Positioning for 2022 (Tech, Energy) Tax implications for 2022 Inflation in 2022 Dividend growth investing in 2022 Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com