The Dividend Cafe

CIO and Managing Partner - David L. Bahnsen Deputy Managing Partner - Brian Szytel Deputy CIO and COO - Deiya Pernas Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Markets followed up their monstrous week by dropping a bit to start this week, then rallying back to even mid-week, to sit somewhere between flat on the week and down ~100 points or so as I prepare to go to press. The Nasdaq, though, didn’t fare so well on the week, dropping -600 points (-4%) as of press time and warranting a distinction in this week’s Dividend Cafe on how one may want to think about their assets in the Fed regime ahead. This one week aside, and the never-ending obsession with the Federal Reserve well-baked into our societal financial fabric, there is a lot to say about a changing of the guard at the Fed, and this week’s Dividend Cafe is devoted to just that. Some things are, no doubt, changing, but other things, as you will soon see, are not changing at all. Understanding all this may be the best Christmas gift I can offer you this glorious holiday season. Slide down the chimney into this week’s Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

As I type on Friday morning well before the market will open for the day, the Dow is up ~1,200 points on the week, basically right back to where it was the day before the Omicron news and market sell-off, and the futures are pointing upwards for today as well (of course, anything can happen on that front). A week ago, I devoted the Dividend Cafe to discussing why I felt the Omicron story was a bad joke of a market mover, and we walked through a little COVID Market history. But I didn’t end on a sanguine note – I reminded you that there are vulnerabilities in the markets and that chief among them was the anti-fragilities created by excessive monetary interventions, and of course, basic valuation concerns where some euphoria may be overflowing. Today we’ll leave Omicron in the rearview mirror where it belongs and where the media has conveniently left it just 10 days or so after dramatically different assertions. But we’ll dig deeper into a couple of things that warrant our understanding – an understanding that is not the same as concern or worry. Come on into the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Topics discussed: Volatility The Fed Energy Omicron Variant Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

It has been a wild week in the markets, with the -900 point drop of last Friday (Thanksgiving weekend) followed by a +235 point gain Monday, a -650 point drop on Tuesday, a -460 point drop Wednesday (after being up +500 points earlier in the day), and then a +620 point increase Thursday. As I type Friday, we are down -120 points, having been up +160 points earlier, so currently (at press time) reflecting a -330 point drop on the week. Now that’s a lot of ups and downs for -330 points, don’t you think? But market ups and downs are not a problem for real investors, so why do I mention this volatility at all? Don’t people invested in the stock market (and more specifically, in the earnings streams of the great companies that make up the market) know that markets do this, and in fact, normally experience much more volatility than we have seen this year? I would hope so. I know our clients do (how could they not?). But the subject of today’s Dividend Cafe is not the mere reality of market volatility, especially when such volatility is a mere 3% or so off of market highs. I mean, really. No, the subject of today’s Dividend Cafe is those who may be unfazed by market valuations and euphoric concerns, but go hysterical over the omicron variant. In other words, we want to look at that which does not play into our thinking, and that which does, and why we think the media and so much general investor consciousness have their fears and non-fears exactly backward. So jump on in to the Dividend Cafe. It will be worth your time. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I know it is not the edition some of you look forward to most each year, devoid of such enticing topics as monetary policy and market valuations, but it is one I genuinely enjoy writing each year. Today’s Dividend Cafe captures some Thanksgiving reflections from yours truly, the author of each week’s Dividend Cafe but also the Founder and Managing Partner of this firm. I remain in a daily state of overwhelming gratitude for so, so much, that this Dividend Cafe Thanksgiving reflection is just a cake walk to write. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

This week I did something a little unique. I dedicate the Dividend Cafe to the topics du jour in the space of prices, labor, production, and the Fed – basically, all the stuff everyone is talking about (and should be talking about). But rather than it seeming like a single, monolithic essay on it all, I think I have it broken up into bite-sized pieces that will be easier to understand and take in. We live in interesting times, and if this week’s Dividend Cafe helps you to understand these times better than you did before reading it, I will be a happy man. Let’s dive in and see if that happens. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Market movers and shakers discussed in today's episode. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

There is a lot of anxiety in the economy right now even though the unemployment rate is incredibly low, and nearly every metric on the planet is looking good (besides elevated price indexes). We went month after month last year with people telling us (and many of them seemed to really, really enjoy saying so, mostly because they are awful human beings) that no one would ever shop again, fly again, or “demand” again. The consumption side of the economy was dead behind a brutal pandemic, they said. And we would all be wise to stop paying our office leases, buy some comfortable couch clothes, order food delivery, get an exercise bike delivered, and sit around the house binge-watching TV and just waiting for it all to end. But now the tune has changed, a lot. Not that drama and intensity – that is the exact same. It’s just the culprit is now the opposite. Now things are too hot, too much activity, too much demand, and prices are too high. That we are supposed to take advice now from the people who zealously told us the opposite 12-18 months ago is odd to me. But I digress. Pricing pressures exist in the economy and when folks are not talking about Congressional legislation or Fed policy, they are rightly focused on that. Today I want to explain why they are focused on the right thing (price inflation), but for the wrong reason, and more importantly, with the wrong solution. And yes, with an eye towards the right conclusion in your portfolio. Off we go … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Most of the attention in the markets this week was on the Fed’s announcements Wednesday – (a) That interest rates aren’t being changed any time soon, and (b) the quantitative easing program launched 20 months ago will start to be slowly eased back later this month with a goal of no additional bond purchases in roughly nine months). But very little attention is ever paid to why these policies exist, and what their impact is to the various things we investors care about. In the Dividend Cafe today, we will look at the state of monetary policy, the fiscal policy that has necessitated it (yes, those two things are married right now), and what investment lessons we can extract. Earnings season is preparing to wrap and it was a solid one. Congress is continuing to bat around legislative things that have not gone the way most people anticipated (or even close). There was huge election news this week that speak to the current political landscape. And yet through it all, the major investment story of the week may be the one least discussed. Come on in to the Dividend Cafe. DividendCafe.com TheBahnsenGroup.com