The Dividend Cafe

So when I launched The DC Today, it freed me up to use Dividend Cafe to be more “singular topic” focused, and I really do believe that makes for a better commentary. I have mostly not used this weekly commentary for “ad hoc” market discussion or current events, and I think this approach has enabled me to go a little deeper into topics that I believe are essential in their relevance. I plan to continue this approach until I get inspired otherwise (or overwhelmed with hate mail, whichever comes first). This week, though, I do a little bit of both. The “singular topic” is a really important one – and that is seeking a better understanding of what really drives asset prices over time. There is a need for improved knowledge here, not just amongst mom and pop investors but apparently amongst the professional class as well. But I have been in New York City away from my family all week, which means one thing about my evenings back at my apartment – instead of hanging out with my wife and kids, I am just sitting there, unrepentantly (and some would say pathetically) reading more and more research. And this leads to one thing – more fodder and inspiration for the Dividend Cafe. Ergo, I cover a few “odds and ends” this week as well. Whether it is the discussion of market forces or the tidbits covering a healthy array of other topics, I truly hope you will enjoy today’s edition of the Dividend Cafe. Let’s dive in … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

David L. Bahnsen joined by Scott Gamm to discuss the market happenings of the day. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I think there is some “economic vocabulary” in today’s Dividend Cafe that might – might! – be a turn-off to some, but will be overcome easily if you bear with it. And more importantly, there is a practical takeaway through it all that I hope you will find very rewarding. I can see myself taking a more “multi-topic” approach to Dividend Cafe in the weeks ahead as opposed to the last several that have purposely “drilled down” into a particular theme that warranted special focus. That said, I find that five or six different topics seem to have a lot of overlap these days. I can think I am talking about government spending one paragraph and economic growth another, and voila, the third paragraph is talking about how government spending impacts economic growth. Economic and market commentary these days is one giant Venn diagram. Such is the case with so many things I cover today. I prefer writing where all the dots are connected by the end, and maybe you will think I pulled that off by the end. But what we have today is a lot of charts, a good amount of information, some perspective that I confidently believe will aid your understanding as an investor, and maybe, just maybe, some cohesion to it all that adds sensibility when said and done. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I do some fun things today in the Dividend Cafe. We dive deep into the dilemma facing income investors, those who want and need cash flow from their portfolio. It is a conversation that can (and does) go in a number of different directions. I hope you find it riveting. And we talk a bit about bubbles, about history, about market fads and market risk … And of course, we look at the present economy and make some bets on where things are going. I hope it will prove informative for you. A lot of topics that somehow are all loosely connected to one another, in this week’s Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Your hosts David L. Bahnsen and Scott Gamm tackle the important finance and economic news of the day. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Last week, I wrote about investors’ reality (especially professional investors) being a by-product of the era in which they came to be. The intent was to set the table for how much of my investment worldview was formed. I live with a deep fear of excess valuations, and I live with a deep cynicism of the madness of crowds. Both of these things come from years and years of abundant research. But at the foundation of that research was the experience of living through something that provoked such impulses. I won’t re-hash all of it this week. What I want to do this week is go beyond those two topics (i.e., valuations and crowd madness). We will look at these two things and seek to understand something about both concepts, but more importantly, we will seek to apply what it may mean to the present investing landscape and what it doesn’t mean. This week’s Dividend Cafe wants to analyze a handful of present investing landscape realities, consider the lessons of history, assess where certain things are clearly different right now, and apply what it ought to prudently mean for real-life investors with real-life goals and real-life emotions, right now. It is, indeed, our thesis that a rotation is in motion within investment markets. But I believe that means something very different than what many are saying it means. This week’s Dividend Cafe seeks to provide clarity around what is a truly important subject in 2021. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

It is appropriate and perhaps entirely ironic that the subject of this week’s Dividend Cafe comes in a week where we have seen some of the most bizarre, insane, and silly market activity, ever, and that this bizarre, insane, and silly activity is accompanied by totally incoherent commentary from various pundits, politicians, and “pros.” Whoever said investing was all math and science is an idiot. But the drama of this week’s market, and even the circumstances around the big headline story of the week (which has actually morphed into a multi-faceted story), really do serve as a reinforcement of the major principles, beliefs, and applications I want to highlight in this week’s commentary. I began writing this Dividend Cafe last weekend, and had conceptualized my thesis well before the drama hit the tape into the week. And I haven’t altered that thesis or even the way I unpack it at all. To the extent some of this week’s Dividend Cafe connects dots with other news stories, great. But my purpose in this week’s commentary is not to make sense of a four-day story, but a four-decade story. And I really hope it will help you in your journey and understanding as an investor. I have long believed that all professional investors are irreversibly shaped by the era in which they grew up as an investor. This is more true of the lessons learned in that era that proved to be negative lessons than positive ones. Put differently, the major events that damage us in our formative years teach lessons that don’t go away easily. I want to do a little history this week, talk a little investment biography, and ultimately, offer some lessons about my outlook on the present investing era that ought to transcend anything you will find in a chat room, on social media, or in the madness of the moment. It’s a low bar. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Strong discussion on the market happenings shaping the lives of investors with David Bahnsen, Managing Director and CIO of The Bahnsen Group and Scott Gamm of Strategy Voice and Associates Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In this episode, the point I am making is more than just “politics is overrated in evaluating market conditions” (even though that is very true). I not only believe this subject of Inflation vs. Deflation is more important than anything else in understanding the 3-year, 5-year, and 10-year state of financial markets, I also believe it is a welcome reprieve from what is just overdone, over-covered, over-saturated, and ready for a break. Inflation vs. Deflation Part II – jump on in to the Dividend Cafe. DividendCafe.com TheBahnsenGroup.com

The Crux of the Matter If you believed that interest rates were going to be 0-2% would you invest capital differently than if you believed they would be 5-7%? If you believed that inflation would run 1-3%, would you invest differently than if you believed it would run 4-6%? Does one’s view on interest rates and forward-inflation impact their expectations for P/E ratios (market valuations)? If credit is going to tighten (ease of access to capital and cost of capital), would that alter one’s allocation to corporate credit, private equity, public equity, and a host of other risk asset classes? Would one’s view on the U.S. dollar potentially influence their allocation to domestic vs. foreign assets? And regardless of how one’s views on interest rates, inflation, credit, and currency impacts the decisions, they make on investment decisions, will all of these things impact the expected return on all asset classes (whether or not it alters your weightings in such asset classes)? And if these things impact expected returns in various asset classes, does that have practical significance to one’s financial planning, accumulation goals, withdrawal goals, and other such tangible dimensions of wealth management? The answer to every question above is YES, and pretty much all emphatically so, which means that every person reading this has a real dog in the hunt when it comes to the great economic debate of our time: Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com