The Dividend Cafe

Today I am going to do something an investment manager who writes about investing all the time ought to do more – I am going to talk about the market. Now maybe you think I do that all the time, and you’d be right. But truth be told, my investment writing is very purposely peppered with the stuff I think most matters to investors – behavioral practices, monetary policy, evergreen principles, foundational truths. The markets are to be found in and through all of it, but in Dividend Cafe, I rarely am just saying, “Hey, here’s the skinny on the stock market.” I do plenty of that day by day in the DC Today. What I want to do in the Dividend Cafe today is just look at the overall stock market – why we feel the way we do about it, why most people offering a short-term point of view are totally full of it, and how we view the present environment. I believe you will find these insights counter-cultural, and that ought to pique your interest. DividendCafe.com TheBahnsenGroup.com

I have always had a sort of unfair pet peeve with people talking about time moving either too fast or too slow. I think what I hate is the thoughtlessness of it – the sort of expected cliche when someone says, “wow, this year has flown by.” For one thing, it can’t possibly feel that way for everybody, yet it seems like everybody says it. Plus, it often times is just patently false – what people say they feel is the opposite of how I feel, and therefore I assume they must be wrong. I know, I know, but I already said it was unfair. The first half of 2021 did not “zoom by” and it also has not “dragged on” – for me. There are moments I can look back on and say “that feels like it was years ago” and there are other moments (perhaps more of these) that I do feel came and went quickly. At the end of the day, the holidays and the turn of the year were about six months ago. That much I know is true. As I do every year, I wrote a lengthy white paper between Christmas and the New Year to recap last year and to lay out our themes and perspectives for this year ahead. I prefer to wait for the next six months to do a deeper dive there, but I will check in this week on some of those perspectives. But primarily what I want to do in this week’s Dividend Cafe is give you a look at what has transpired so far this calendar year, and why. Accurately knowing what happened in financial markets is useful – and not to be taken for granted (remember, “what you know that just ain’t so” can be dangerous stuff). But I really want to explain today why things have played out how they have, and from there offer up a viewpoint on the future. Jump on into the Dividend Cafe … DividendCafe.com TheBahnsenGroup.com

David and Scott discuss the market matters of the day Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The weird week in the markets doesn't change what I want to be doing with each Dividend Cafe.  As of press time, the market is up ~1,000 points on the week, with pre-market futures on this Friday pointing to a +100 point open.  The day-to-day and week-by-week movements in the market are not the subject of the Dividend Cafe, but they are what we do each Monday through Thursday at The DC Today. This week it is tempting to dive more into the cluster of these infrastructure talks. On Thursday, there was a White House briefing that it was a done deal; on Friday, it appears to be falling apart; I can write about all this now, but I think by the time it hits your inbox, the deal may be back on, and by the time you are done reading it back off. Yet, in these "current events," there is, indeed, a "timeless principle" that warrants immediate application.  A week ago, markets were experiencing nearly irrelevant levels of volatility - and the media declared it the new apocalypse as they went about drooling on themselves in a sea of inaccuracies about what the Fed did, said, and meant.  A week later, markets have been rallying, and the new question is what to do about "investing at the top" (it is "new" in that the last time I heard this concern, was almost three weeks ago). So I want to dive this week into some fun history, some actionable application out of that history, and leave you with some crucial reminders about markets.  These things will be useful whether the market is down a thousand or up a thousand next week. Come on into the Dividend Cafe ... DividendCafe.com TheBahnsenGroup.com

We had an interesting week in financial markets … The Fed did exactly what they were expected to by any reasonable person – nothing more, nothing less. They acknowledged the economy is improving, they said they were “talking about talking about” slowing down their quantitative easing. And they indicated two years from now as a time where the fed funds rate may be 50 basis points higher than it is now (may it be so). And that was it. No actions, policies, or steps. No commitments, promises, or assurances. Just loose language around some policy measures that are (a) Brutally obvious, (b) Not remotely hawkish, and (c) Not nearly enough if the conditions people are saying they are worried about are actually present. So how did people respond? After three months of people saying “inflation is here” and the “Fed must act” – what happened? Commodities got hammered, and the yield curve flattened more than it has in ages. You can’t make this stuff up. But rather than re-hash what I think the Fed will do, or what they should do, or what is going on in the inflation ad nauseum discussions, I think this week’s Dividend Cafe needs to better unpack what the real, actual, accurate under-current is to all of this. More or less, every single topic being discussed right now has as its true foundation the reality of debt. The accumulation of debt. Concerns about debt. Plans for more debt. Questions about servicing of debt. The promise of debt. The fear of debt. The cost of debt. For a four-letter word where 25% of its letters are actually silent, this is a pretty potent word in 2021 economics. And it is the subject of this week’s Dividend Cafe. Let’s dive in. DividendCafe.com TheBahnsenGroup.com

With the key market insights of the season, David L. Bahnsen takes questions from the public. Hosted by Scott Gamm of Strategy Associates. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

We had a reasonably boring week in the markets (as of press time, which is after the market open on Friday, the Dow is modestly down on the week but no up or down day this week was particularly significant), but it was somewhat less boring in economic news. What I want to do today is look at the variety of economic news circulating and apply a market perspective to it.  My view is very simple as to the dangers around most conventional methods of receiving that news and most conventional methods of applying that news to investment practices: The news itself is prone to sensationalism, and the application of the news is prone to over-reactionism. Put differently, the incentive structure behind how most people receive their news is flawed (and in this case, I am talking about economic news, but my statements here are true in all forms of news).  And the incentive structure in how investment applications are delivered is substantially flawed, not to mention divorced from personal financial reality. I unpack all of that this week, and do a look at the current news, and provide wise investment applications for you - within our framework - where the incentives are right, the temperature is moderate, the perspective is sober, and the culture is fiduciary. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

For now (even from my spot out of the country), I do keep my weekly streak alive with the Dividend Cafe. Going back to the week of Lehman’s bankruptcy in September 2008 I have missed just one weekly commentary, and this weekly podcast really is one of the things I love most about my job. Today’s may be a little shorter than normal, and it is primarily Fed-oriented, but I am quite happy with some of the subject matter covered and hope you find it simple, readable, and useful. If it turns out that this week’s Dividend Cafe speaks to you more than normal, perhaps I will have to open an office in the spot I have recorded it so that the magic can be repeated. DividendCafe.com TheBahnsenGroup.com

There is no shortage of investment symposiums to attend in my business. Whether it be events put on by the big firms I have worked for over the years (UBS, Morgan Stanley), or symposiums sponsored by various money managers and asset management firms, or just independent groups putting on their own show, I am quite sure I have attended over a hundred such events in the last two decades or so, and probably spoken at a couple of dozen myself. While there is always something to be learned at every event, some are surely better than others. The quality of the events, the quality of the speakers, and the candor of the speakers in the message they deliver can vary a great deal. I consider myself an incorrigible consumer of information and perspective and have been obsessed with growing my capacity for investment and economic thought since the turn of the century. These events can be a waste, or they can be utterly thought-provoking or somewhere in between. One develops an instinct over the years for which events and organizations and speakers will be worthwhile and which will not. And this brings me to the subject of this week’s Dividend Café … I have already revealed where I am going with this the last couple of weeks, so there’s no need to hide the ball. The Mauldin Strategic Investment Conference took place (virtually) in mid-May, and it most certainly represents one of the truly spectacular conferences I have ever been a part of in terms of content, speaker quality, and diversity of thought. I chose to turn my major takeaways from the conference into a Dividend Café because I basically think Dividend Café exists for me to share what is most on my mind with our clients … And I assure you these takeaways from the conference are what is taking up most of my headspace these days. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I thought I would do something really fun with this week’s Dividend Cafe, but just as soon as I typed that I realized that, like beauty, fun is in the eye of the beholder. But what “fun” thing I was going to do was write a full recap of the recent Mauldin Strategic Investor Conference that took place from May 5 through May 14, and use that recap to capture some of the profoundly important takeaways that I want to share with readers of the Dividend Cafe. However, for that to be “fun” for me I need to do it thoroughly, and this week was a hysterically insane week here in the California office between projects, portfolio work, client meetings, morning research, DC Today, and all the normal things. I also got inspired by another few things this morning, and so I am going to call an audible and use next week’s Dividend Cafe as my Mauldin SIC recap, and use this week’s for a whole different kind of fun. Now, I kind of lied. I said that I was saving my Mauldin SIC recap for next week (and I am). But the truth is that some of the things I get into this week are itches that were somewhat scratched at the conference. So consider this a tease into next week, and I promise I will make it all worthwhile next week. I disagree with a lot of what I heard at the conference. I agreed with a lot more. Anyone who agrees with everything that everyone says is a compass-less fool. But that conference did for me what I earnestly want the Dividend Cafe to do for you every single week – foster thought and consideration. The conclusions that come out of that? Well, to that end we work. DividendCafe.com TheBahnsenGroup.com