The Dividend Cafe - Market Outlook w/ David L. Bahnsen - Conference Call Replay - July 19, 2021

Episode Date: July 19, 2021

Hosted by David L. Bahnsen, Founder, Managing Partner, and CIO of The Bahnsen Group and Scott Gamm of Strategy Voice Communications. DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Thank you, Scott, for once again joining us and thank you all of you who have joined us for having a pretty exciting market day. I actually made myself come do the call today from the studio as opposed to sitting at my desk because if I were being distracted by everything that I can promise you is happening at my desk right now, it would not make for a very good call. So we're going to jump into it. I'm going to turn it over to Scott who's going to guide our

discussion, but I'll encourage you to send questions directly right now throughout the call. And we'll get them to Scott and hopefully have time to cover them real time in the next 45 minutes. And that's questions at the Bonson group dot com. With that, let me once again welcome Scott Gamm. Thank you, Scott. And let's do this. Well, David, thank you so much. A pleasure to be with you as always. And obviously a very notable market day, the worst day of the year for at least the Dow Jones Industrial Average. But David, I think we should start maybe with some of the more

nuanced parts of the market, particularly the 10-year treasury yield, which continues to fall. Because when you think about the stock market, and you would agreeyear treasury yield, which continues to fall? Because when you think about the stock market, and you would agree with this, right? I mean, we're really back to where we were a month ago. So while the move today is notable in the stock market, we're not too far off from record highs still. But what do you make of the falling 10-year treasury yield? Is that at the center of all the market moves we're seeing today, in your view? at the center of all the market moves we're seeing today, in your view? Absolutely. It's all one story. It isn't a separate story. By the way, the Dow was 500 points lower 30 days ago. The S&P was lower 30 days ago as well. That isn't true of most

risk assets after today and most market indices. Italy's down about 5% in the last month, Spain is down 8%, France is down 4%, Japan is down 5%. And a good portion, in some cases, about half of that drop is literally in the last 24 hours. But even with today's drop, which as of the time I sat in my chair here, the Dow was down over 900 points and is right at that level right now as well. These market indices are actually up over the last 30 days. So it's really important to take that into context. The last time we had a 6% correction in the markets, which is roughly half of what the average annual market peak to trough entry year move is, which is around 12 or 13%. The last time we even had a 6% drop was in late October in the few days in advance of the election. So when you ask about the 10-year treasury, which has dropped 24 basis points in the last 30 days, which is absolutely surreal. Now, if you have a 5% treasury, it goes to 475. That's not so surreal. But when you have 150, 1.5% and it comes to 1.25, just the math of it is remarkably different.

That's what's happened in the last 30 days. It's accelerated here in recent days. And now today you see this market move. I say, Scott, it's one story is because this is a simultaneous trade that's taking place of those who were long, and I'm quite certain levered long, into a reflation trade that would have been short bonds, meaning expecting yields to go higher and expecting bonds to go lower. So they were shorting the underlying value of the bonds, betting on yields going up instead of down, and then long on the reflationary stock trade, which has been very good most of this year. stocks that had suffered in the midst of the height of pandemic, stocks that would benefit from inflationary pressures, materials and energy, those types of things. I think that those trades are being unwound. And we're just simply seeing the technical pressures of that taking place.

And so that is why I say those two stories are correlated, because money is being sold out of stocks, bought into bonds, either through short covering or new long positions. And that's pushing yields lower and stock prices lower. And you bring up inflation. We've got some questions on that. But I want to continue with your commentary on the 10-year yield, because there's a couple of schools of thought that falling yields, more broadly speaking, is good for stocks because that phenomenon, there is no alternative. And then on the other hand, falling yields could signal that the bond market, at least, is worried about economic growth in the coming months. And maybe that's not good for stock. So what's your take on those two sides of the coin? And where

do you stand? Or is that an even valid point to be making on a day like today? Yeah, the bond market is not worried about growth in the next couple of months. The bond market is worried about growth in the next couple of decades. And that's a point I make over and over again at Dividend Cafe. The long end of the curve has come up a little bit. It's the long end feeling this pressure in the bond market. And that's where people are making bets that have to do with much longer term maturities that reflect a longer term perspective than just the next couple of months. And so I very much think that you're seeing the downward pressure based on concerns about long-term growth. And I think that's part of the secular trend that I'm kind of obsessed with,

to be quite frank. I'm sorry, Scott, I forget the first part of your question. Just about how we should be thinking about the 10-year yield. Are lower yields, does that mean it's better for stocks because there is no alternative? Yeah. So it's a really important question because, and you could ask the same thing when yields are going higher as well. Are bond yields going up good for stocks or bad for stocks? Are bond yields going down good for stocks or bad for stocks? And I've actually been writing about this for well over 10 years. I've been writing about this since I first began doing a weekly commentary back at Morgan Stanley out of the financial crisis. The answer is it depends.

That it's never about lower bond yields are good or lower bond yields are bad and vice versa with higher yields. It's always about the reason for yield changes. higher yields, it's always about the reason for yield changes. So if you get higher bond yields because of higher growth expectations, higher growth is a good thing. Higher growth in the economy should mean higher profits in the corporate economy. Stocks should respond favorably. And that has been, whenever we've had a move higher in yields, which we haven't had a lot, but which we did certainly have back in late 2015, excuse me, 2016, 2017. A lot of people thought that there was going to be the sort of resurgence of economic growth. We got 3% GDP growth versus 1.5%. We had the tax stimulus through supply-side

tax cuts. There was at least the hope, it never surfaced or materialized, but the hope that there would be this sort of infrastructure package under President Trump. There was a lot of business optimism. Bond yields went way higher. It didn't hurt stocks. It helped stocks immensely. It was all very pro-growth. Throughout the 1980s, you had certain periods where bond yields fell a lot. And then when bond yields would come up through economic growth, stocks were doing just fine. But then when you have inflationary periods of bond yields moving higher, it can crush stocks and it can crush stocks through P.E. ratios coming down. So the higher P.E. stocks tend to suffer the most in those periods of rising inflation expectations. Inversely, when bond yields are dropping, which is the period

we're living through now, it depends on the why. Shortterm bond yields are lately such a slave to Federal Reserve policy that it's not a market reaction. It's not the reaction function of markets is, frankly, neutered. On the longer end of the curve, right now, I think we're seeing a lot of technical selling around the dynamic, basically trade covering, trade rotation that I talked about a moment ago. But I think that it's going to settle somewhere around 150. I don't think it's going back down to 1%, like a recessionary condition. And I don't think, as I've been saying all year, we're going back to 2.5% or 3%, where I'd like us to be because of great growth

expectations. I think that both the inflation reality and growth reality, which I consider to be two separate things, are muted enough that the 10-year is kind of stuck with a one handle. And the best we could hope for would be a low two handle. And you say, well, why do you say the best we could hope for? Wouldn't that be terrible? But it would not because it could only happen. You cannot get a 2% 10-year from where we are now without people having more confidence in longer-term growth expectations. That's reflationary. That would be what you'd want to see out of an economic resurgence, and it would push stocks higher. So right now, you're seeing stocks sell off because of the reason for bond yields coming down,

which is neutered reflation expectations, neutered growth expectations. It comes down from a timeline standpoint to exactly what I talked about earlier in the year. We had a COVID moment. We had a post-COVID moment, but that markets now have to look to the post-post-COVID moment. That's what I think you're seeing right now is people saying, OK, is the growth really going to push that higher? Now, I don't think the market, by the way, has decided it's not. I don't think the market is saying we're going to get disappointing GDP growth in 2022. I just think that the market right now had been very lopsided on the reflationary side. And right now, you're seeing a technical resizing of those trades. You're seeing money come out of that side of

the boat and tipping it back over the other way. And there's a big TBD around how a lot of that stuff will ultimately settle. The manufacturing, the industrial production, eventually the real GDP number, which will matter once we're off of the base effect of where we were a year ago and all of the GDP deterioration that took place in the lockdowns. Eventually, we're going to get economic judge and jury to kind of come indicate where things are headed. economic judge and jury to kind of come indicate where things are headed. But right now, the bond market is indicating very muted growth. And I think that in terms of how this plays out with the stock market, you can never let a period of time where there's obviously a lot of rotation taking place be indicative of a longer term trend. And then if someone says, well, yeah, you can, that's what's happening right now. People are betting that the next 10 years are going to be awful. I would just simply say, that's a pretty weak conviction bet that the market is down less than 3%

and is low, excuse me, higher than it was 30 days ago. So as of right now, I'm quite convinced that this is a temporary resizing, repricing of some of these trade convictions. And I think over time, we'll get a better indication of where some of this organic economic activity is going. Well, and David, this is such an important point, because when you talk about the reversal of a popular trade, like you were talking about now spilling into the broader markets, I mean, that's not the first time in history that we've seen this, right? I mean, I think back to February of 2018, you had a lot of investors were, you know, in these volatility trades, right, they were short volatility, and that trade unwound and sparked, you know, a correction in the broader markets. Is that a,

would you draw parallels to that situation? Is that a, you know, an accurate thing to kind of compare this to? To from what to the broader market in February of 18, you had not only a ton of algorithmic high frequency trading as rates were moving dramatically higher. And at that point, there was questions about inflation expectations. But then it will always be a subject of debate, not crystal clear clarity, because it was also the moment at which President Trump introduced his trade war. And so when you put two catalysts out there at once, the likely answer is that market volatility that period was caused by the combination of both. the combination of both. But you always have people that will say it was the trade side disrupting markets, or it was the volatility in the rate market and Fed and indications of Federal Reserve tightening. And it's impossible to really, it's non-falsifiable one way or the other. So February of 18 was a very unique time because you had a couple of catalysts. It's similar, by the way, Scott, to the end of 2018, where you also had kind of uncertainty still around where this phase one trade China deal was going to go.

But then markets were tightening quite a bit. There were questions about the trade deal. But you had the Fed indicating they had accelerated their quantitative tightening, and they were still indicating four more rate hikes to go, and they had already gotten up to 250 basis points in the federal funds rate. Now, they took all that off, but markets really had kind of tolerated a certain degree of monetary tightening throughout 2017, 2018. And then it hit a point where the market, particularly credit markets, high yield bond spreads, just said enough's enough. And the Fed said, okay, we got you. And they capitulated. So we're obviously in very different conditions right now where

monetary policy is not tightening. It is hyper accommodative. And right now, economically, we're talking about COVID reopening, not the trade war tensions that were the primary extrinsic factor in markets in 2018. And David, maybe another catalyst or another factor to think about today, the decline in oil prices down almost 8%, at least for West Texas Intermediate, that's the US benchmark for crude. And we know that we just saw a deal from OPEC Plus to reverse some of those production cuts that we saw. I guess, what role does oil play in all these market movements? How important is that in your view? And how do you see the price of oil moving

over the next six months? Yeah, I'm pulling something up on the screen right now I want to point out. Oil right now is down 8%. And that is $5.76 per barrel. It's down to $66, still higher than where it started the year. This is not speculation on my part. This is not conjecture. This is the reality of being inside financial markets. Right now today, there are traders who had positioned themselves for the right tail possibility of $100 oil. What I mean by right tail is not it crashing lower, but it crashing higher, so to speak, and had put trades on to that effect because we certainly were pressing $75 to $77, $78. We briefly hit $78.97. I was there to watch it happen. It was about three something in the morning, two weeks ago. Since then, we've steadily eased back down. But the right supply demand crux for oil was never around $80. $80 oil is very punitive to consumers.

It's very economically contractionary. And the reason it was getting there is demand was picking up quite a bit. Supply was on the lower side. U.S. producers are still playing things very conservative. And OPEC Plus had this uncertainty about what their supply commitments were going to be. So traders kind of tilted more the other way. Now traders are having to come off and it's pulled prices back down. From my vantage point, as someone invested in a couple, they're integrated companies, but they have upstream exposure. Oil at $66, $68. Let's say we settled between $65 and $75. Let's say it's lower than that, $65 and $70. That is an incredibly profitable number for the U.S. oil market and the US shale industry has to be worried is $37 oil.

But even if oil had gone to $87 and everyone would think, oh, that's a good thing for the US companies, it's not a good thing if they're not churning up the production. The higher prices provide higher margin, but they're not making up for it with greater market share. And so really, at the end of the day, it's a very complicated subject. But one I think is very important is the U.S. angle of increasing market share is not about 55, 65 or 80. It's about their production capacity coming back online. And that story is the one that is not a trader's story of from three in the morning to three in the afternoon. It's a much bigger macroeconomic tale. So right now, I think that oil coming lower, depending on where it

settles, it's absolutely a byproduct of traders that were long on the right side, the right tail of oil prices having to peel back those trades. Ultimately, the demand side is going to answer where things go in the next three, six, nine months. I think that OPEC Plus's agreement they came to is still very limiting of production. It's showing a certain supply discipline out of Russia, Saudi Arabia, and some of the other cartel countries in the Middle East. They threw a bone to UAE, the United Arab Emirates, to allow them to participate in this, UAE, the United Arab Emirates, to allow them to participate in this. But they did end up coming to a deal. So now you've seen where things go. When they go for a week delaying getting a deal

done, oil almost hit $80. They announced they got to a deal. Oil settled here in the 66s. And it's largely a huge, long covering trade, if you will. And so my guess is it settles the high 60s. I don't think that's anything for us to be concerned about. And it's frankly on the high side of where American consumers would like it to be. But David, sort of to your point, maybe that range of price is sort of the sweet spot in that. Sort of to your point, maybe that range of price is sort of the sweet spot in that. I guess when you look at it from an investor's point of view, good for the energy companies, maybe not great for consumers, but certainly better than, to your point, 80 or 100 dollar barrel oil. That's right. Eighty dollar to one hundred dollar oil would be totally untenable right now. would be totally untenable right now.

And obviously there are some production, some shale companies, highly levered players that would probably love to have seen it real temporarily. But the more mainstream names, it's not sustainable. And I think that there's the beauty of the laws of supply and demand. The laws of supply and demand get very elastic with oil prices because of the geopolitical ramifications. But I definitely agree that you're going to find a more middle ground here that is probably more palatable to both producers and consumers. And David, you talked about resetting of inflation expectations. We just talked about oil.

Let's talk more about inflation, because obviously there's this whole debate of transitory, not transitory. And we've talked about this a lot. But you say that the story is much more nuanced than just grouping inflation and categorizing it as transitory or not transitory. You know, unpack that again for us, especially when you look under the hood at, say, you know, housing inflation and then perhaps parts of the economy that are seeing inflation largely because of a chip shortage and a shortage of goods, things like that. Yeah, I think that the simplest way for me to say it right now, beyond the whole point I've been making throughout the years, is the role that the bond market was playing in kind of doing our work for us and giving you the indication from that, I call the judge and jury of the bond market about where longer term inflation expectations were coming.

But again, to the extent that a lot of commodity prices have moved significantly higher, and especially in that month or so where lumber prices, lumber shortages were so severe, it was having a really big impact through other parts of the economy. And I think it's just one of the great confusions of our day that when somebody says these price increases are transitory, meaning they're related to a supply disruption and the prices should be expected to come down when the supply disruption is corrected, the great confusion is someone saying those things and that being interpreted as if they're saying something, everything is okay, or everything is rosy. The supply disruptions are very disruptive. They are very problematic.

So my hobby on this subject, and hobby is probably the wrong word because it makes it sound like it's sort of something I have to touch in my free time. This is incredibly important to our overall macroeconomic thesis. I believe that all of the increased supply disruptions that have led to increased prices are inflationary in the moment. And I believe the lion's share of those things get corrected over time, but that these things have to be separated from monetary inflation. Monetary inflation is more of a secular and embedded structural concept,

whereby you have a sustained period of time where you don't have enough goods and services in your economy and you have too much liquidity, too much money floating around in the economy, and that pushes the price level higher. I don't think it's good that we can't get enough semiconductors. I don't think it's good that there is such an unbelievable inefficiency in our used car sales and what that has meant for rental cars, overall auto sale prices, the disruptions we saw with timber supply and then getting lumber into the marketplace. So pointing out the differences between what are moving prices higher in different periods of time and for different products and service sets

is in no way a statement about it being a good thing, bad thing, what have you. It's just trying to further define it, understand it. So I don't think that this ought to be looked at through a political lens, and I just don't look at it through a political lens. I don't blame some of my Republican friends for wanting to try to make hay of this as a political issue. I'm quite sure if the shoe was on the other foot, the other side would want to do the same, but I don't think it's the most thoughtful analysis. The thoughtful analysis to me looks at the entire economic portfolio of circumstances and sees a lot of bad things after identified and cured and fixed. And the notion that all of it is just pure inflation brought about from Fed activity or excessive government spending, I think is inaccurate. Now, with that said, I do believe that there is a price inflation taking place in one particular part of the economy that is highly

problematic and highly correlated to policy failure, and that is housing. And yet, I'm quite certain that most of the people listening on the call right now, unless they're getting ready to go buy a house for their kid, actually like it. They think this movement higher in home prices is a good thing. And this is just a disagreement I have with the way most people think about this. I certainly understand why anyone would think that way if they're getting ready to sell a home, but I don't agree with it just for those of us who actually live in our homes. And so what I think is happening is we're getting a really unaffordable price level in the economy and housing. And that equates to rent equivalents and then those making mortgage payments,

where right now, and you're going to see some data on this today with charts in DC Today, where we have effectively the lowest interest rates in the mortgage market in history and the highest house payments in history as a percentage of median income. It's a totally unacceptable combination of circumstances. Average house payments with interest rates this low should be lower. And yet because prices have come up so much, even with the very low interest rate, Because prices have come up so much, even with the very low interest rate, the average monthly payment is at now an all-time record high. And why is that a problem? Growing housing prices, a wonderful thing. Well, first of all, they're a totally immaterial thing unless someone is selling. material thing unless someone is selling. But even apart from that, the higher the house payment for a new person entering, the less money they have to be buying goods and services. So it exacerbates

inflation in the housing sector and it's disinflationary in the consumer portion of the economy. There is less disposable income for people that actually have a monthly budget and segment out a certain amount of their money for a portion for rent or house payment and others for spending and vacations and toys and food and entertainment and other things like that. So this is why I'm concerned. Now, again, I'm going on and on, but this topic is one I'm very passionate about. on, but this topic is one I'm very passionate about. I view overly priced housing as problematic for the economy, yet I am not describing that or meaning that in the same way that I would describe the 2005, 6, 7 housing bubble that resulted in 08. The damage done from those exorbitant housing prices in 2005, 6, 7 was not in the same category we're describing now

because what it was there was a credit bubble that burst and there was inadequate equity. And we had a housing market that was riddled with moral hazard of people that were spec buyers. All of them go away. You end up with this massive amount of excess inventory. The banks completely quit lending and voila, you have the great financial crisis and the great recession. Right now, there is no reason for banks to not be motivated to lend. And in fact, you have, if anything, a hard time getting borrowers to borrow. But there is more protective equity, and there's enough underwriting taking place that we aren't exposed to the same insanity we were

from 05, 06, 07. So I see the housing prices right now as a negative, but for some reason, and it's not for some reason, I totally understand it. The PTSD, the economic psychology. But people constantly then say the next question, oh, do you think we're headed to another 08? And I do not. That is not the category what I'm talking about. But do I think that national housing prices have gotten to be 10 to 15 percent higher and perhaps more than that than where they ought to be for optimal economic health. I do. Who am I to say what the right price level should be for housing? Fair enough. However, who are the people who are setting interest rates to say, and who are the people who are holding supply down to say? So at the end of the day, I'm not saying it because I think I am transcended to

the market. I'm saying the market is not being allowed to right-size housing prices. And I think that leads to spillover effects and other parts of the economy. Well, and that was something I was going to ask, the market not being allowed to sort of right-size housing prices, I guess, what would cause housing prices to correct, to come down to a level that's more affordable for buyers? So I guess both sides can meet in the middle so that housing actually contributes to the economy, so to speak. Well, trust me, they will. The cure for high prices is always high prices. Cure for low prices is always low prices. That at some point prices get so high, the buyers stop buying and then prices have to go lower.

And prices sometimes get so low that the buyers say, hey, I can't resist. I got to buy. And then it pushes prices higher. And so that is ultimately where things would go. Now, what could be allowed to expedite the process to make it happen more naturally, to make it happen with less pain along the way? Most certainly, it would be a proper cost of capital. Okay, houses are the most levered asset on God's green earth. Nobody walks around buying things with four or five times borrowed

money except for their house. And the cost of capital has a levered effect on the price of the underlying real estate. And so for rates to be a bit higher than they are would have an impact on median home prices. It's not necessarily pertinent to the very expensive part of the market, but for the average American, it would have a big effect. And then the other thing that could really be a great boost to the economy and right size pricing and bring back affordability is an increase in supply. And that increase in supply take a bit of time. There's been obviously supply chain related issues in just the overall construction. There's a regulatory apparatus that is difficult around zoning and approval and whatnot. But there's quite a bit of housing stock in the country that's in need of being replaced.

And that process, I expect to play out and eventually will right-size housing. But what is hurting the process right now is the very artificially and manipulated low cost of capital that is feeding the housing market. So, David, given everything we've talked about, housing, inflation, bond yields, what does all this mean for the dividend growth stock philosophy? I guess, how do all these factors, if at all, affect dividend growth investing? You know, it's something I've really tried to talk about quite a bit through my weekly Dividend Cafes. And by the way, just as we get ready to wrap up the next 10 minutes, send any questions. I'm sitting here looking, as you may have noticed from the introduction, our office manager, Erica, who normally hosts this, is not in today. And so the incoming questions, I want to be able to get to Scott, and she's not there to pass them on. So I'll forward

those over as you send them. The dividend growth model is meant to be incredibly agnostic about macroeconomic trends. For the notion of the dividend growth equities to fail to perform as expected, for the philosophy to fail, you would have to have a full breakdown of free enterprise because what I'm referring to is the presupposition that the profit motive works and the great operators go and generate profits. And so where dividend growth becomes unique versus other public equities is just simply in the idea of what to do with those profits. And so there's a significant part of the stock market that people are profit agnostic in what they're buying. They're looking for the stock price to move higher, not the profits to move higher. And why are those two things separate?

Because you're looking for multiple expansion. If you want your's going up 25% a year and profits are going to be going up less than that, you're banking on the PE ratio moving higher. It's a valuation arbitrage. And that's a very different philosophy than the one we have. In our case, I think going into a Japanification will be challenging for the U.S. economy, but it will be in an almost sort of sadistic and unfair way, very beneficial to incumbent managers, incumbent operators, incumbent assets. The equity of legacy U.S. companies, U.S. operating enterprises is boosted higher by Japanification because you get less competition. You get less new innovation. You get less new players that come in and can represent a threat to market share. And so ultimately, the economy's pain could end up being a lot of older companies gain.

Now, in the meantime, our expectation is our companies will continue to innovate, continue to grow, continue to build and develop. vantage point where that income yield is already multiples higher than the dividend yield out of competing equities, such as the S&P 500. And the S&P 500 actually has a dividend yield. It's a significantly better yield than out of, let's say, a small cap or NASDAQ type index, where there's either no or very low yield at all. Because the majority of investors are cash flow generative, they're in need of some periodic cash return, retirees, pension funds, endowments, things like that. There is a match of an asset and a liability that results in a need for a steady withdrawal pace. We think that the market and demand in a deflationary period for companies such as the great dividend growers that we strive to own is enhanced.

So we have seen periods of deflation in America and we have seen periods of inflation. With severe deflation, like the Great Depression, it does not matter what you own. It's all getting walloped. For a longer term period where there is a more mild disinflation, and in this case, the better term is Japanification, which in fact does not actually have a smaller economy now than it did 30 years ago. It just simply hasn't had a growing economy. So that low, slow, no growth kind of triage of scenarios in U.S. economic growth going forward, I think the dividend growers will perform quite well. But let's say they perform less well than they otherwise would have. My argument then relative is compared to what?

Compared to treasury bonds that are yielding one and a half percent, compared to high PE stocks that see that PE come down. My view would be that even if the overall neighborhood gets a little less attractive, dividend growth will still be one of the better houses in the neighborhood. And David, to your point, I mean, a lot of the companies that you're focused on have a multi-decade track record of growing dividends, right? And you think about over the past 40, 50 years, how many scares we've had, how many crises we've had, and yet the dividend growth continues.

That's exactly right. And even with the whole entire S&P 500, which is riddled with a high amount of companies that pay no dividend at all, and a very, very high amount of companies that don't have any priority on dividend growth. Even with the S&P 500, you've had, I think it is seven years in the last like 60, where the dividend level of one year went down versus the year before. So that in the vast majority of years where the S&P 500 is down, its overall dividend has still gone higher. All we've done is try to only focus on those names that are in fact still growing those dividends and doing so

less cyclically. In periods of recession, we expect our dividend growth to be less than it would be in trend line. But that's different than it being negative. And so we're trying to get some growth of income every single year, no matter what. And that takes a lot of active management, takes a very research intensive process. It takes the elimination of mistakes. You know, one big dividend cutter can throw that off quite a bit. Then you got to get lucky with superlative dividend growth from other names to make up for. That's why a lot of these indexes of dividend growth have really struggled because they've

allowed dividend cutters to stay in the portfolio that then offset some of the really wonderful dividend growth they were getting elsewhere. So there's a lot that goes into the process that we're obviously very married to. And yet I believe that in periods of economic growth, periods of economic stagnation, and periods of economic contraction, dividend growth has proven to be a more sustainable way of getting exposed to the market. The one exception where dividend growth is disappointing is when one is comparing it to an alternative set of something that is a hot dot. And that is something I'll forevermore recognize, that there should always be something hotter going on than dividend growth. The difference is that thing will be a new thing very periodically. And I lack the arrogance to believe that I'll be constantly guessing what the next hot thing is. Yeah, well said.

I didn't used to lack that arrogance. It got beaten out of me. I didn't used to lack that arrogance. It got beaten out of me. Well, look, I don't want to make assumptions on what hot thing you're talking about, whether it's Fang or the meme stocks or maybe all the above. Maybe. All right, David, I think that's a great place to leave our conversation for right now. An important market day and great insights as always. And I look forward to our next call. Well, thank you very much, Scott, as always. And we haven't really moved the market here up or

down kind of where it was when we started talking. I'm going to go back to my desk now. We welcome any other questions that you want addressed. There's a DC Today coming out today that will be unpacking more of this exciting time in the market. And we very much believe there's a lot of noise taking place right now that is a byproduct of some of these repositionings taking place in the oil market, the rates market, and in equities. And as soon as some of that dust settles, we'll see. We may have all this dust settle and markets are only down peak to try 5%. And in a way, I'm going to be disappointed if that's the case, because I really think the market needs a bit of a correction. And if it doesn't happen right now,

it just simply means it's kind of waiting to happen again, waiting to happen later. So root for it however you want, rooting for something that you have a very long-term goal on within a three-day, three-week, or three-month horizon isn't really the way we approach things, but I understand the psychology behind it. best things that could happen for equity investors is that this thing before it shakes out actually does fully correct so that then there's not only the purging of some of the overweighted trades that needed to be kind of right sized, but also the markets let enough euphoria out that it can kind of reset and then have a bit cleaner slate in front of it going forward. I don't know that that will happen. But like I said, as Scott and I wrap up this call, we're sitting here today in the down 900 point day. Markets are down 300 Friday. And yet we're sitting here at a higher price level in the market than we were one month ago. So with that said, thanks for chiming in. I'll go back to

my desk. I'll wait for you to reach out to me with any questions. Those of you that are clients of the Bonson Group, please reach out to your advisor if you have any questions. You're obviously welcome to reach out to me as well. We work as a team at TBG and we're here to make sure you feel good about what's going on in your portfolio. and we're here to make sure you feel good about what's going on in your portfolio. With that, I'll let it go. But instead of saying, Erica, take us away, I'm just going to get up and walk away now. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, with Hightower Advisors LLC, a registered investment advisor with the SEC. Securities are offered through Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment

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