The Dividend Cafe

I wrote this week’s Dividend Cafe on Thursday morning, something I haven’t done for a Friday publication in a long time. For virtually all of 2020 there was a huge focus on making the distributed commentary as “current” as possible before submitting. Markets were moving so quickly that if the focus of the commentary was on what was happening in the markets, any delay between submission and distribution was likely to result in some part of the message being “obsolete” by the time it got to you, the readers. Indeed, as I type this beautiful Thursday morning, I have no idea what the markets will do on Thursday, let alone Friday. But I don’t particularly care, for reasons I will explain inside the Dividend Cafe. I have been writing the weekly market commentary since the financial crisis, and a large portion of you know. I am grateful to all of you who have stuck with the reading of this for so long. It has really always been written “as I go” throughout the week, sometimes with a lot of weekend reading the week before driving some of the message, and almost always with bit by bit writing throughout the week leading to the eventual finished product. I may get inspired on a Monday morning about emerging markets and write something then, and find a development in rate policy on Tuesday and write more still, then. It has always been the culmination of many hours of reading and writing work throughout a week. Well that brings me to this week’s Dividend Cafe, and the topic of the here and now. Some reflections are in order, and I hope my reflections will resonate with you to some degree, and even provide some investment application that speaks to your situation. So without further adieu … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

November 3 has come and gone, and while the results may not yet be fully etched in stone, we have a pretty good feel for where things are headed. I suspect there are two camps of you who read the Dividend Cafe, and I do not refer to partisan leanings. What I mean is that I imagine many are excited to not hear about the election any longer, and then there are many who want to wrap their arms around everything as fully as possible (as far as what it all means to the economy and markets, etc.). I want to do a bit of both, personally. I want to accommodate that latter group today, providing as much useful analysis of where we go from here as possible, and then I look forward to having a lot less to say about the political implications of, well, most things. The fact of the matter is that the political dynamic (a) Always affects markets to some degree, not just in a week like this one; and (b) Always has much, much less of an impact than people believe it does. Policies matter. And there are impacts in both macro and micro parts of the economy and investment markets that stem from policy decisions. But many investors have been utterly confounded over the years (including this week) by markets seeming to respond differently than they expected in response to some political outcome. Investors who find themselves surprised by a market reaction to a particular political outcome that is different than they expected it to be can be forgiven since truth be told, market reactions confounding people’s expectations is the normal state of affairs. Much of it has to do with the ability of markets to have already priced in a certain outcome before it happens, meaning what seems to be a market response to something is really the market now adjusting to something else – that the market was ahead of the news headline. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Post Election Perspective on Markets with David L. Bahnsen and Scott Gamm Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I thought it appropriate to devote this weekend’s Dividend Cafe to the election, now that this long-awaited event is almost here. I thought about calling it an “Election Eve” edition, but considering 82,042,050 people have voted as of press time pre-market on Friday, which is about 64% of the total number of people who voted in all of 2016, it hardly feels like “election day” is “election day” … Hopefully it will just be the day they count the votes. One way or the other, we are well into voting (28.3 million people have voted early in-person; 53.6 million people have returned mail-in ballots; 36.7 million people have outstanding mail ballots; and then there are all those who vote on Tuesday). And we are getting closer to this year's election being over. It has been the strangest election season I can remember when all is said and done. But today in the Dividend Cafe we’ll make it a little more personal, a little more specific, and with apologies to those looking for me to throw punches, a lot less tribal. Opinionated? Yes. Fiduciary? Above all else. Objective and fair? To that end I work. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

There are a couple things going on right now at The Bahnsen Group that make this a very fun time of year, and a very fun edition of the Dividend Cafe. I wrote last week about the annual money manager due diligence trip I have done since 2006 and how important it is to our business (and to our clients). The meetings of the last couple weeks, this year, coincide with the launch of our “Operation Magnify,” the largest portfolio undertaking we have ever experienced at our firm. So today’s Dividend Cafe takes the reasons Operation Magnify became necessary, juxtaposes it with this COVID moment (what it supposedly means, what it most definitely does not mean, and what some think it may mean), and then applies lessons learned from our recent meetings and collaborations. I am aware the world is mostly focused on the election event coming up a week from Tuesday, November 3. There very well could be ample uncertainty and market volatility that comes as a result of the election (or the non-result). It would be difficult for me to devote much more attention to that subject than I have. But the topics I want to dive into today are leaps and bounds more relevant to investors, long-term, than whatever uncertainty volatility the election results create. And like many understandings of the connection between politics and our portfolios, I believe the topics I am addressing today are riddled with misunderstanding. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” (wrongly attributed to Mark Twain). Let’s jump into the Dividend Cafe! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

We look at the state of the markets with the election a couple weeks away, what we mean by “post-COVID” market realities, and spend time reviewing some of the major takeaways of our recent meetings with New York City portfolio managers. Links mentioned in this episode: DividendCafe.com TheDCToday.com TheBahnsenGroup.com

Late in 2006 I was running a practice at UBS Wealth Management and using their equity management team out of Chicago for a lot of my equity management services. I would go to Chicago and meet with them at least a couple of times a year and found the process collaborative, informative, and intellectually engaging. But all of my other money manager relationships were in New York City, so when UBS asked me to go to speak to their new advisor class in November that year (in Weehawken, NJ, where their operational headquarters are that they inherited from the old Paine Webber), I decided to schedule a few meetings with other portfolio relationships. I was only overseeing $100 million at the time, 4% of the assets we manage now, yet it never occurred to me that I may have a hard time scheduling appointments. As a pure aside, this trip double-dipped as a recruiting trip for another major Wall Street firm who was pushing me to join them in the opening of a new Newport Beach office for their firm. I met with their legendary CEO, a fellow named Ace Greenberg, and heavily considered their extremely flattering offer. The name of that firm … Bear Stearns. In March 2008, they would be dead and gone, sold to the loving arms of JP Morgan for $2 per share (from over $150). Suffice it to say, I didn’t join them after those enticing meetings. God was watching. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I did something today I have not done with Dividend Cafe, ever. I just wrote it. I just sat down and started typing, and wrote it, all the way through. I didn’t cover ten or fifteen or twenty topics like I usually do. And I didn’t write some parts on a Saturday and other parts on a Tuesday, adjusting for new market action on Wednesday, etc. I wrote in one sitting an entire treatise on what I believe is the great paradigm to understand in the years to come for investors. Don’t worry, I went back and added some sub-titles to “break it up” a bit, but it really is one topic all the way through. I really hope it will inform you, guide you, challenge you, and to some degree, edify you. I also hope it will provoke you to reach out with any questions you may have. We invest for the world that is, not the one we want. And some years, the delta between those two seems wider than other years. Jump on in, to the Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I wrote the majority of this week’s Dividend Cafe before the news had broken that President Trump and First Lady Melania had tested positive for COVID. We wish them a speedy recovery, of course, but don’t have much to say about “market implications” of such, other than the obvious – more uncertainty, more volatility. I will hold off on political and market implications for a few days, for obvious reasons. There are lessons from the COVID era that will stick with us forever. Most of them, mind you, if not all, were not new lessons - they were reminders - reaffirmations of timeless lessons and principles. I am not sure the way we were reminded of some of these lessons felt familiar. Markets do not often drop 36% in 31 days. But these general principles all held true, in spades. In this week's very important Dividend Cafe, I am going to write about some of those lessons (not all of them), and transition that into an opportunity to MAGNIFY what we believe at The Bahnsen Group, what we are doing now, and how we are using the COVID moment to optimize client portfolios for the years to come, all by just MAGNIFYING what we have always believed. This Operation Magnify that we have been developing for months is both a proactive and reactive process. We want to take new realities to their logical conclusions and apply them into an investor's portfolio, and we want to create an entirely consistent process and infrastructure by which we assess and administer this on behalf of our clients. If you are not a client of ours, it really doesn't matter. The moment you are living in is a moment of paradigmatic change for investors. Viruses and the risk of viruses have always existed. "Tail risk" events that shock and awe markets have certainly always existed (and always will). But there are fundamental realities that have changed - many of which were well under way pre-COVID, I assure you - and the discussion in Dividend Cafe today is useful even for those not under our care. The same is true of your approach to investing, and that is where we are going in today's Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

It is a bittersweet moment for me to present my last ever missive of COVID and Markets. Okay, it is a lot more sweet than bitter. I truly believe the essence of the markets lesson from COVID has been learned, and that the ongoing story of economic recovery, policy response, and all the various implications of things will live in for some time to come. But included in that essence is the reality of living with COVID, protecting the most vulnerable, and engaging trade-offs around reasonable safety measures for public health vs. the existential and economic need to have a functioning society. There are a lot of resources out there producing a truly intelligent, sober, and informed perspective on COVID medically, which really do seek to neutralize the panic-porn sensationalism so many have fallen into. This can’t be one of those resources. I don’t have the expertise or bandwidth to fully dedicate myself to COVID/medical information. It has been integrated with my work for six months, and I am proud of what I have learned and what I have presented, but it was always, always, always intended to be a part of the broader economic and markets story. I am a markets guy, with every ounce of breath in my body. And the COVID part of COVID & Markets is no longer on my front page, and shouldn’t be on yours either. So I have to be honest. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com