The Dividend Cafe - Market Outlook w/ David L. Bahnsen - Conference Call Replay - June 14, 2021

Episode Date: June 14, 2021

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

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, thank you, Erica, and thank you, Scott. I think to all those who have called in and especially who regularly participate in these calls, it's been a little while because two weeks ago, we had Memorial Day. And I think even the week before there was a travel day or something, either way, we're a little off our program. And so I'm glad to be back into the swing of things. We intend to kind of keep it going. And maybe today might go a little longer than

normal just because there's been a number of things that are kind of stacked up and we may choose to address. The only thing I'll say before I hand it over to Scott to lead the whole entire discussion is that you're welcome to send questions real time. I have my screen open right in front of me. So any questions that come in, I'll be able to send over to Scott as we're in the midst of this. And we'd love to hear anything on your mind that we can address. That's what we do the calls for. And thank you to those who already sent a couple of questions in. So questions at thebonsongroup.com and we'll get to them real time. Scott, with that said, let me turn it over to you and we'll embark upon this discussion. Well, David, thanks so much. Great to be with you. As always, a lot to discuss. We've got a

pretty important week for the markets with the Fed meeting this week, which we'll talk about in a moment. But I always like to start off with your general take on where things stand across the markets with stocks pretty close to record highs. Well, you know, the overall situation in the market has not changed much. And it candidly hasn't changed much all year. You kind of have, as we sit here now, the Dow is off a couple hundred points today, but it closed last week very near an all-time high, not quite at one. And the S&P did close at an all-time high. And so you basically just have markets that have done quite well. Anytime there have been sell-offs or any type of miniature little corrections, they've rather quickly come back from that.

They don't seem to me to be acting like they want to break out to all entirely new levels. And I don't really know how they could. I think that you're very likely right now to get additional return from stock picking, not from indexing, just in the sense that, you know, you can get a higher multiple, you can get higher valuations, but they're already quite high. And to get the whole index higher would just simply require even further valuation expansion, multiple expansion. So I think it's more likely to be selective that drives things any higher from here um and and overall my my feeling is that i i think people

ought to be cautious about the market in general not because i'm expecting some sort of big sell off but just because um markets have had an unbelievable run. I mean, this belongs in the history books. In the face of the things that have faced the economy, in the face of the sentiment challenges for the markets to have done this well and to have democratized it, this is not like the markets doing well in the summer of 2020 when the world was mostly still shut down. There was still an awful lot of ambiguity as to where we stood with COVID and yet markets were doing better. But when you looked under the hood, markets really weren't doing better. Just a very, very small number of technology stocks were bringing the whole index levels higher.

In this case now, you've pretty much spread the wealth. The most out of favor sectors of last year have caught up. And so the question becomes, given the baked-in-edness, I'm making up terms here now in real time, given the fact that these things are baked in, meaning that COVID is behind us, that the economy is recovering, that it turns out those who believe there was a lot of pent-up demand in the economy were right, that earnings are recovering to pre-COVID levels rapidly, and that all this is being done with a backdrop of highly accommodative monetary policy, you kind of have to ask yourself, what's another catalyst that might move things even higher? We spend so much time talking about what the headwinds may be, what impediments to more

market growth could be. And that's reasonable to do. But the market has really made mostly short order a lot of those impediments. It obviously went right through all those that were concerned about the election results and the various things that have come up this year. Legislatively, the market has either said they don't think those things are going to happen or they're not going to be market impacting. So I think that you've had a lot of good news and a lot of things, stars have aligned to create really wonderful returns for equity investors. And the notion

that you could get a pause from here, not only doesn't strike me as surprising, it doesn't really strike me as particularly problematic either. Well, and one of the headwinds we've been talking about lately, and it's pretty controversial, inflation. And that's the subject of a question we have from somebody writing in, basically acknowledging that there are really two camps on the inflation debate right now, one that says it's transitory, one that says it doesn't. And they want to know your take in terms of whether or not it's transitory. Does that make a difference for somebody's investing portfolio or their approach to investing? Yes. And I'm not sure if the idea that it's two camps comes from your commentary or from the

actual question itself. So forgive me. But what I would say is that it may not just be two camps, that there may be nuances within those. I'm looking right now, the 10-year as we're sitting here is at 1.5%. It's actually up three basis points on the day. It hit 144 last week at one point. But the first time that the inflation subject came up this year was in March. And the Biden administration, within about five weeks of the inauguration, had passed the third COVID stimulus bill, this one being about $2 trillion. It had a lot of

controversial things in it. There wasn't much resistance legislatively. And at that point, then the inflation talk began. And you're right. The Fed is one camp saying, OK, yeah, we see some inflationary data, but we believe it's transitory. Then you see others that are saying, oh, no, this inflation is not only here, but it's going to stick. And then I think you have my camp, and I can't speak for who else is in the camp. I haven't sent out any membership cards or anything, although I'd love to do it because that would be an incredibly cool club of people. But I'll describe my own view. And if anyone wants to join my club, they're welcome to.

It's the belief that, of course, there's price inflation right now in certain areas. There's not price inflation in others. And that the price inflation that is likely to stick with us is not monetary, but subsidized inflation. And that when this recovery gets done, and the absorption of this money supply completes and falls into the low velocity trap, I think it will inevitably fall into, meaning the money stops turning over. I think we'll be back to the same more secular and structural pressures that we had pre-COVID, which were the post-financial crisis realities of living above our means, of excessive indebtedness in the sovereign sector, serving as a headwind to economic growth.

So the problem with the discussion, I've written about this so much, I know a lot of people are sick of it, but you've teed it up in a way that's really useful because I want to conclude by actually answering the person's question, which is what the investment implications are and are not. But in terms of the setup about these nuances, it does matter to the person buying gas for their car that gas is more expensive right now than it was a year ago. I don't think it affects people of higher income levels very much at all. And I think it affects people of lower income levels a lot. I think it's a little disingenuous to refer to it as higher gas prices

versus a year ago when gas prices reflected the reality that there was nobody flying and nobody traveling and there was an excessive global glut of oil and gas product. And so you had high supply and low demand. And now a year later, you have a rapidly growing demand and very low supply. So you expect to get prices reflated there, but nobody really believes that that dynamic is actual price inflation. Oil prices are back to where they were two years ago. Gas prices are back to where they were two years ago. None of it is even close to back to where it was seven, eight, nine, ten years ago.

Oil is the great anomaly whenever people talk about inflation there's barely anything that affects the fuel of inflation more than oil and gas prices and yet oil and gas prices can move for radical supply demand reasons and radical geopolitical reasons and not and often not purely because of monetary reasons so So that makes it tricky. But when you get to the thing about lumber prices, do I believe that we are suffering from deflation in lumber since they're down 35% in four weeks? Or do I think we're suffering from inflation in lumber

because it was up 100 and something percent for the year before? Or is it just obvious with those kind of radical moves up and down that there are idiosyncratic issues in supply that are creating it? When you look under the hood of the CPI number from last week, and you see food prices up about 2% over a year. And yet you see used car sales up, you know, double digits used car sale prices. There are issues related to imports. There are issues related to steel and, and, and whatnot.

And a bottleneck, I think the semiconductor thing is talked about ad nauseum. And so all of these things, just as I've done to our listeners last five minutes, all of these things are boring. But they're more honest and they're more thorough and they paint a more accurate picture than saying, hey, is it inflation or deflation? So then the fairness of the question is this. Okay. Well, we get through bottleneck. We get through base effect of low gas prices a

year ago. And at the end of the day, the government has created a ton of new money. Are we going to go into a period of rising inflation? And my answer is no. Unfortunately for the government, I think that they face a very diminishing return on what they've done both by way of fiscal and monetary policy and that you are likely to just see a still very low velocity of money that is almost perfectly correlated with very low loan demand because of the fact that we've already reflated, we've already levered in the corporate economy, and that's where most of the borrowing needs to come from. And there's not a lot of good borrowers left.

So therefore, you'll have a lot of money that sits on the shelf, and that is not inflationary. But the nuances and the exceptions with housing prices or healthcare costs for things, I think those things then become a whole separate subject that have to be discussed around the governmental policy causation that exists there, which is separate than this fear of the overall price level rising because of greater money supply. Now, the investment implications, this is an absolutely pivotal point that I would make. It does matter if we have a period of substantial inflation or a period of substantial deflation to bond investors. Those that had a crystal ball, which I do not have, and know that long bond rates are going to go lower would be very wise to just extend their maturities in their bond portfolio.

Those that know interest rates are going to be going much higher because of inflationary pressures, would be very wise to go just accept the almost no coupon from the short end of the curve and allow rates to go higher behind these inflationary pressures versus the negative impact that would happen if rates move much higher and they were long duration in their bond portfolio. that would happen if rates move much higher and they were long duration in their bond portfolio. Now I think there's a couple of things investors on this fixed income side can

do about the risk of being wrong, whether it's inflation or deflation, they can have a lower weighting into bonds to begin with. We've done that. They can have a lower duration in their bond portfolio to kind of mitigate some of the risks. They can meet in the middle and maybe not go totally short, not go totally long. The yield curve widened enough that there's some opportunity in doing that. Or they can mix some of their duration-sensitive holdings, what we call boring bonds.

What we call boring bonds. They can mix some of those with credit instruments if they mostly have a favorable view of the economy, but are just simply worried about interest rates. So there's things on the bond side one can do. believe that bond yields are going higher, if you believe inflation's coming higher, then it could very well mean a lower multiple in the equity market. And in those stocks that rely upon a high PE, you're more vulnerable. Could you get the 10-year to go from 1.5% to 3% and not have the high growth PE stocks get hit, I don't think that's remotely possible. I don't think it's mathematically possible. I don't think it's spiritually possible. I don't think it's cosmically possible. But I don't think the tenure is going to 3%. So my relative bearishness on a lot of the high PE growth parts of the market is not based on that view. It's based on the view that the valuations are just simply already so high and that the risk reward is unfavorable. But when you come down to someone who's invested in dividend growth equities, which is what we favor at the Bonson Group, I'm encouraging

people to think through what could go wrong. If I'm wrong that the United States faces 10 years of challenges or more and Japanification type themes around the effectiveness of fiscal monetary policy. If I'm wrong about that, you get more economic growth. You get higher stock prices. You get a little bit of higher inflation. But you have dividend growth equities that are absorbing that. They're passing on that impact on both a relative and absolute basis.

I don't believe anyone will be worse off. Now, that assumes you get more inflation than I expect, but not hyperinflation. So what if you get hyperinflation? Well, that's a pretty dangerous thing to bet on. But if you get hyperinflation, you're going to get pummeled in most assets, most risk assets. You're going to have to have been short or you're going to have to, you can't even say commodity prices will be a great place to be because a lot of commodity prices have not gone higher in hyperinflation and you get complexity as to how you take on that position with the nature of the forward curve and so forth.

It's not so simple just to go out and buy commodities. So I don't think that anyone wants to go reorganize their portfolio around a hyperinflation thesis, which invites a lot of really, really specific and measurable risks, a lot of really, really specific and measurable risks, all with only one dynamic paying them in the end, only one potential reward, which is a scenario that has been incredibly elusive, pretty much for most of our country's history. You could argue we had a miniature hyperinflation in our own country in the 1970s for a couple of years, even that I would argue was absolutely hyper idiosyncratic around a couple of circumstances that can't repeat themselves. So therefore, if you don't believe it's going to be hyperinflation, but you believe it's going to be

rising inflation, I think dividend growth equities are going to prove to be a very effective place to be on a relative basis and on an absolute basis. And then what if the scenario is right that I believe, which is that we have a sub-trendline economic growth as we did post-financial crisis after COVID exacerbated by the fact that we have added so much to national debt and live above our means as a society, then I would think that all the more so. Companies that are in a position to grow their dividend from rising free cash flow therefore have healthier balance sheets. And if you get rising deflation or if you get sub-trendline growth where you're not easily going to grow your way out of excessive debt, then you absolutely want more credit-worthy equities, more balance sheet health, and more free cash flow generation.

flow generation. So I think that on the margin of both inflation and deflation outcomes, the dividend growth equity solution makes an awful lot of sense. And that is by far the longest answer I've ever given to a single question you have asked me. It's okay, but it's a great answer. And David, I think on that note, we should also talk about the job market because there's an inflation connection there as well via wage inflation. And I'm just wondering your take on just various reports and data that we've seen suggesting that there's more jobs open now than pre-pandemic. And even articles suggesting that folks are increasingly quitting their jobs, looking for other jobs for whatever reason, perhaps in favor of more flexibility, higher pay, basically a lot of uncertainty in the job market right now. Not

necessarily because there's not enough jobs, but because workers are just, you know, they have a lot of options. They're trying to make up their minds. So what is your take on that? And two, does that have any inflation effect or deflation effect? It would really be impossible to measure the potential of wage inflation right now while we're in the midst of this policy debacle of the federal unemployment subsidy that passed through September. if those higher wages that are necessary right now to try to get lower skilled people back to work stick after September when that policy goes away then you get some data and you get a macro economic circumstance that requires more measurement and more analysis. But right now, the Occam's razor of this is obviously to assume that rising pressures and wages stem from the inability of employers to get people back to work. That's a measurable dynamic you described. It's not speculative. We set the all-time record at 8.1

million unfilled job openings last month, And then we beat that record by a stunning million job openings this month, over 9 million. And so what we have is to some degree a mismatch of job openings and job skills. And on the other hand, what we have is clearly a pretty substantial incentive around folks who got three rounds of direct money unrelated to unemployment. By definition, the income level of people who were unemployed, almost virtually guaranteed that they were the ones eligible for the $2,000 payment that went out last year, then the $600 payment that went out at the very beginning of this year, and then the $1,400 payment that went out a month or so after that. So there was something around $4,000 of money that went out. And then on top of that the very substantial supplement to unemployment that people who did not have a job or who lost their job were eligible to receive

through these different iterations of congressional action the last one being the one in march and so if you ignore the direct payments, which like I said, total $4,000, if you ignore that, if you don't count it, you still end up right now with state unemployment and the federal subsidy offering people something in the range very close to about $20 an hour to not work. And that will last through the month of September. And so when I see an employer who would be offering $15 an hour and now is offering $18 an hour, I don't see that as inflation. I see that as a countermeasure against the policy incentive they're fighting against. Most of us have the stories now, anecdotally,

that there is a ton of evidence of stores and restaurants and coffee shops and things putting up help wanted signs. And I've seen it in many places inia and new york and then there are people in the midwest and south telling the exact same stories and so we kind of have an idea that this is pretty national in its scope what will be interesting scott now is that 25 states have opted out of the federal subsidy most over half of those very recently. And so it's going to take some time to see some data where that federal subsidy is not factored into their unemployment distribution. But I think you're going to be able to get some sort of an effect going into July and

the later part of July and into early August as to how much of the normalcy in both wages and job openings comes back into the marketplace as a result of this policy wearing off. And then it wears off entirely come September. So I do want to answer the question as to what wage inflation will mean to the economy. And obviously, it represents generally a period of declining profit margins. Right now, companies are back to pre-pandemic margins. So we're not seeing that yet. You actually saw really significantly increased margins out of the last five recessions because a lot of people who were laid off during the recession, companies sort of normalized their operations without them, and they didn't refill the jobs as quickly as revenues came back up. And so they operated

with higher margins for a while. We may not have that happen this time if there is higher wage inflation. But we're going to have to watch all of that and see if it ends up impacting corporate profits. And, you know, do you think that's more of a later in 2021 type of story? We've got second quarter earnings season starting in about a month. But perhaps it's too early to your point for that kind of phenomenon to be evident in some of the reports that we might get starting in a month. to be evident in some of the reports that we might get starting in a month.

Yeah, I do think that being able to do thoughtful analysis on wage inflation is definitely a second half of 21. And even if there's some interesting data points in the third quarter of 21, it's the later portion of the fourth quarter of 21 that you'll get to see some pro forma wage expectation after that government policy is expired. You know, out of the financial crisis, I believe that they expanded the unemployment federal subsidy that was part of the stimulus bill in early 09. I think they expanded it 99 weeks. They're not going to expand this one. I mean, I guess you can't ever say never, but I don't believe that they could possibly expand this thing now. And so I think you'll get a chance to get clear data later in the year.

And in the meantime, as far as more significant economic data points and market data that will impact markets prior to the wage inflation, you will have earnings season. As you point out, you will have forward guidance of earnings season to get an idea of what companies are anticipating later in the year. But you're also just going to get all of the normal leading indicators. The laggards are irrelevant. I almost feel guilty. And you're going to see it as a bullet point today because consumer confidence came out on Friday. But in my daily DC Today market commentary, when I'm putting in numbers like the consumer confidence figure, I almost feel guilty because it is utterly worthless. It's completely backward

looking. It's a lagging indicator. And it really has very little to do with anything anyways. And I felt this way for a long, long time. But the leading indicator is once you get on the other side of COVID recovery, you know, is industrial production going to stay higher? Is the ISM, both services and goods index is going to continue growing? Are we going to get manufacturing expansion? And then the thing that has really been quite quiet for some time, will there be a geopolitical story that drives markets? You know, it does not appear to me that Secretary Blinken is really all that interested in a whole lot of kissy face with China. I think a lot of people thought that the tensions with China and the prior administration were problematic in the way the prior administration handled it. I think even more people now believe that the aggravations in the relationship with China are because of China. And so those types of things to me, which I would point out, are just things that I don't hear barely anyone talking about, are far more likely to end up being a catalyst in market movement this year.

And that's a rule of thumb I believe in all the time. You and I have talked about it before, Scott, and I want to reiterate it, especially for our own clients. My view is that this is kind of an eternal truism, that if you list me 10 stories that are kind of equally significant in potential market impact, and you want me to say which ones bother me and which ones bother me less, I would be going straight to how much they're respectively talked about. And the ones that are more heavily talked

about bother me less. And the ones that are less talked about would potentially bother me more because markets respond to surprises, not to known news. David, I want to shift to maybe a more broader philosophical topic, which is the subject of a question that we received along the lines of the role of capital in markets, essentially your take on the supply and demand of capital and kind of what that dynamic says about our economy. and kind of what that dynamic says about our economy. Yes, I read the question last night. It was sent by a client who sent it to one of our advisors who passed it on to me.

He sent it to his advisor who passed it on to me. It's a pretty elaborate question, but I thought it was a very good one. There's a premise in the question I'm going to unpack here, which is basically are we living through different times now? Because now you see people competing over capital. There's so much liquidity. There's so much access to credit. And so this kind of just is a changing of the guard versus past times.

And before you get into kind of what the concern in the question is, I want to adjust that basic premise because it is very philosophical. And this is actually highlighting the single thing that Michael Milken was so instrumental in teaching me, which is that it is never true that capital is the scarce resource. That essentially, in modernized capital markets, the profit motive has made it such that there is nothing resourceful or scarce about access to capital, whether it be debt or equity. Capital can cost more. There's a cost to capital, whether it be debt or equity. Capital can cost more. There's a cost to capital. And right now, capital is very cheap. It can become less cheap.

It needs to become less cheap at some point to avoid more and more distortion in markets. But my philosophy of wealth creation and of productivity and of value creation is that the scarce resource is human ingenuity. The scarce resource is virtue. The scarce resource is human talent applied to the problems that we have that are in search of a solution. And that capital is a readily available tool that plays into that process. But where you get real wealth creation is in the innovation and in the scarcity of human ingenuity.

And so I don't think it's new that we have an awful lot of access to capital right now. I think you've mostly had a lot of access to capital for about 40 years. And even prior to things like the high yield bond market, as one example, if one in our country had an investable idea and management and execution and track record, all the different things that would go into it, and all they needed was capital, there's been very few periods where people couldn't get the capital. You know, we've had liquidity pinches. Liquidity pinches are very short. And you've had high cost of capital in periods of high interest rates. But we really right now

do not suffer from a problem of too much capital or certainly a problem of not enough capital, as the person asking the question was stating. the reason I bring this up is to make clear that this is not new. Capital is always readily available There are things that are new right now we face, but almost excessive access to capital is not one of them. The things that I think are new are that debt to GDP was a very concerning 60%, and then 70%, and then 90%, and now it's 120%. and then 70%, and then 90%, and now it's 120%. Now, we did have that for a very brief period of time after World War II, but we're now ready to not make it a brief period of time, but an extended period of time, and we're ready to make it more than the World War II peak at 120%, 130%.

I think that the debt-to-GDP is the new phenomena, just in the sense that it's gone even higher and then i think that the central bank as the the savior and all these things is definitely very new now it was true after the financial crisis it's just gotten more true it's gotten more um uh present and more innovative in the way it manifests itself but i do believe in um the idea that there's nothing new under the sun and and when people go in search of looking for things that are kind of new they usually can find new manifestations of old concepts old principles old dynamics uh because for the most part,

these things have existed before, but they play themselves out in different ways. Well, and certainly the point about the Fed was definitely illustrated pretty vividly over the past 15 months with, you know, the Federal Reserve's response to a health crisis really, right? Well, and to a financial crisis 13 years ago. And so if one believes, as I do, that the central bank has a very important function, and it's to be a lender of last resort, the Fed has shown

a willingness and a capacity and a talent for being a lender of last resort. If one believes, as I do, that they're not necessarily there to be the smoother of the business cycle, then there's disappointment because I think the Fed now does believe that they are. They are. And David, as we move to the end of our conversation, give us a little preview of what's coming up in today's DC Today, which is your daily market commentary. There's a big focus today on some additional COVID information, more COVID data, addition of a new vaccine that will now be entering the fray. Has not received its level three approval yet,

but had really, really positive results out of its late stage trials. There is an update on where things stand in the infrastructure bill discussions and the possibility of a bipartisan bill there. So more on the public policy side. And of course, we'll kind of see where the market ends up on the day. It looks to be kind of a mixed bag, although we still have a couple hours to go. But I think that the D.C. today continues to be one of the most enjoyable parts of my day every

day. And from the Fed to COVID to energy, housing and mortgage, you know, we try to cover all the categories. And today is no exception. There's a lot of fun stuff in there today. And it started as a COVID and markets related commentary and obviously evolved into something much broader and bigger. Yeah. Yeah. And I've appreciated all the encouragement we've gotten. I'm always really interested in hearing people's feedback on what they'd like it to be, you know, where that I could be different and other things that could be covered or whatnot. I mean, everyone's feedback is actually very useful, but regardless of whether or not other people enjoy reading it, I certainly do enjoy writing it and all the research that goes into creating it.

And now we're just trying to cover all those bases because I think on a daily basis, you really do have impacting markets, impacting news cycle, something happening in the realm of the Fed, the realm of housing and interest rates and mortgages, and in the realm of just broad economic data. I really want to take the COVID piece out. I do believe that we're past COVID as a moment in the country. But until the final policymakers that are kind of keeping it around have finished their mea culpa and thrown in the towel. I want to keep writing just so I can continue piling on with my own information and data that I think are useful for readers. Well, and David, just as a final question, when we talk about the state of COVID right now,

I mean, from the business leaders you talk to, from folks you interact with, what's the consensus just about sort of the return to normal, so to speak? You know, just kind of what are people telling you? Yeah, it is a little different. I'm trying my best to not allow my impressions to be fully informed by the two coasts I live on, because I'm really critical when others do that. And I don't want to be guilty of it. But of course, you know, I live half the time in New York city and I live half the time in Newport beach, California. And I'm not sure that those are the two best cities to provide a

representative sample for what the lay of the land may be across the whole country. And not just because they're pretty affluent cities, but even just culturally and sociologically, if someone only got their information on what was happening in the economy in certain towns in Florida over the last six months versus if they only got it from certain towns in Michigan or New York or Massachusetts,

they may have just two totally different opposite understandings of what's kind of going on in the economy. And so I'm trying to study the data nationally, but then regionally. And believe me, there's really useful data to see some of the discrepancies between hotels and restaurants and air traffic and normalization data in some parts of the country versus others. But all parts of the country are trending towards the upside. You don't have much more economic normalization to take place in some parts of the country because they had a four-month head start. But in terms of what business leaders really, I think, are seeing and are planning for, all the talk about people feeling liability concern about getting their people back to work,

I think I don't hear much about that anymore. That was a concern a year ago. It was a concern nine, 10 months ago. I think right now most people do feel pretty unanimously ready to have everyone back to work. But they're having to think through logistics as to what they want to be the case versus what they don't want to be the case. I don't think it's driven by fear of liability. Ultimately, there doesn't seem to be much dispute anymore about the pent-up demand thesis. Those who are skeptical that America wanted to go back to shop and go back to eat and go back to travel, I don't think they have that skepticism anymore. Americans are back to living. Well, it'll be an interesting couple months.

And David, I think that's where we'll leave our conversation today. And I'll toss it back to you. But great insights as always, and great to be with you. I hope it kind of scratched some of the itches you may have had. And I'll just close off with that comment. When you look to the construction of a portfolio that is designed intelligently to specifically deliver an outcome that a given investor needs, whether it's income, growth, short-term, long-term, all the different elements that play into portfolio design. It's one of the most fundamentally important things right now is that people appreciate the reality of asset allocation. You can believe equities seem to be a little bit rich at this time. I don't hear from a single person that's concerned about equities with the Dow near 35,000 that did not tell me they were worried about equities with the Dow near 30,000, or for that matter, 25,000, to be quite frank. So it isn't something in terms of equity levels that

can or should be timed, but it is something that can and should be allocated and rebalanced and set expectations accordingly. And I believe that a greater focus on alternatives right now makes a lot of sense. And yet the most important thing anyone should be thinking about their own portfolio is not when equities were correct or how they're correct or how long it'll last or what it'll look like. The most important thing is that people really consciously calibrate their expectations to being in line with what a properly allocated portfolio is supposed to do over time. And we've enjoyed a pretty nice little run here for about eight months. a pretty nice little run here for about eight months. And to me, the notion of there being some sort of correction, setback, pause, all of that is inevitable.

And so I wouldn't dare try to time it, but I would certainly hope to set your expectations around that reality. Reach out anytime. Scott, thank you, of course, for guiding this thoughtful discussion. And with all that said, I'll turn it back over to Erica to let us go. 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 Thank you. indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices,

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