The Dividend Cafe - Market Outlook w/David L. Bahnsen - April 25, 2022

Episode Date: April 25, 2022

Volatility, Rate Hikes, Inflation, and so much more on this Dividend Cafe Special Edition Podcast 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, hello, everyone. It's been a little while since we have done this environment, and I prefer to only kind of do it in special situations. situations now. We got away from that every single two-week deal that became a tradition in the aftermath of the formerly known as COVID moment. But there's been a lot of market volatility the last few days. And as I saw futures this morning, I reached out to my handy communications team, Scott Gamm and our studio managers and department directors, Brian and Glenn. And we said, hey, let's put something together today to get on video and audio for you guys about this specific moment we're in. And for those of you who have watched me and Scott do this over the last couple of years, you know how we kind of like to riff around the current moment.

Obviously, we do have some questions and things that have come in that we'll address. But I'm going to let Scott drive and I'll be here to answer questions about where we are in the midst of current market volatility. So with that, let me turn it over to our still trusted partner in crime, Scott Gamm. Scott, it's been a little while since we've been able to do this, so good to be back in front of you. And let's have our conversation, shall we? Yeah, David, let's do it. Great to be with you, as always. And certainly the past couple of days have been particularly volatile. You talk about, in some of your writings, a repricing in markets, given the recent rise in interest rates. What else should we know about that repricing? What are the kind

of mechanics of it? Because we've been seeing a lot of volatility really since the start of the year. Yeah. So let's talk about that first, because I'm sitting here looking at a chart of the Dow. The Dow is down close to 2,000 points from where it was a few days ago as we're sitting here intraday right now. And that's a grand total of 5% or 6%. The Dow had been at a pretty elevated level just as of a few days ago. It had been rallying pretty hard. And yet, when I talk about repricing, I really am talking about something much more than a two or three day event and certainly more than these two or three days. Because the NASDAQ's repricing, the technology sector repricing, you could argue the high yield bond market, you could argue cryptocurrency, you could argue consumer discretionary. argue consumer discretionary. There are plenty of things out there that are down more than 5,

6, 7, 8 percent, down more than two, three or four days. And it warrants the terminology repricing, a revaluation. Now, that is a term that needs a little definition. I'll give that to you. But it also is a term that can sound a bit more dour because a lot of times you have, we had, what was it last year, Scott? Five or six of those moments where the market had a four or five or 6% drop that lasted three days. And generally it was around some kind of COVID spike or some other nonsense. But a repricing is being used as a word to suggest something more paradigmatic, meaning that there is a valuation adjustment being done to an asset class, being done to a sector,

being done to a group. And therefore, it is not merely the volatility. Every day there's repricing. That's what volatility is. But a repricing that is more systemic where, hey, this has been trading in a range of 30 to 40 times earnings. And now it's going to trade in a range of 20 to 25 times earnings. I'm making up the numbers as an example. That's a repricing, a re-rating are some of the terms that we would use as portfolio managers.

So I've been convinced for some time that a repricing was coming across a lot of the frothier parts of the market. And I am now convinced that we are in that repricing. But I think it started before even the end of the year and has begun to kind of democratize a bit. It started at some of the really absurdly priced things that were very low quality, some of the bad SPACs that came out and bad IPOs, and expanded into some of the stuff

that really had very little revenue, very little earnings, and was overdone and across different parts of software, technology. And then it went into the kind of COVID work from home, new technology, new economy stocks that really proved to be none of the above. You know, they had a big spike. They certainly had an increase in customer awareness and brand awareness during the COVID moment. But some of the home video companies But some of the home video companies,

some of the video technology companies, I'm not going to say names of real companies here, but I find it ironic that the one that became a household name during COVID is the one that you and I used for most of our recordings throughout the COVID moment. And we're actually not using it right now because my communications team that are paid professionals have found

a better system for doing it, right? But no one was doing that before. And stock prices weren't reflecting real consumer discernment as much as kind of immediate brand familiarity. And so that stuff has to catch through into stock prices. And you have a lot of these companies that were home exercise equipment and were food delivery and whatnot, all with a technology bend and technology kind of ecosystem around them. Some of them are trading lower than they were before COVID. And that is a value destruction that is generously called a repricing because it's been a bloodbath. But we're not just looking, this is what I mean, the democratization of repricing. That's group that was down 50 to 70 percent and even has names that are down 80 to 90 percent. That's sort of just a kind of punishment of speculators and a little bit of sanity that

had to come back into the universe. Now, though, what I'm referring to repricing is you have the largest video streaming, entertainment streaming company in the world, the largest e-commerce dot-com type company in the world, that company down 20, the streaming company down over 50 percent, the largest social media company in the world down 50 percent. It's gotten into big tech now. It's gotten into big tech. And so the whole Nasdaq down near 20 percent. None of this is Ukraine, Russia. None of this is oil prices. No one canceled their favorite subscription, digital subscription service because of gas prices.

I mean, maybe some did. I shouldn't say that. But you know what I mean. That's not the systemic factor going on here. You have a revaluation playing out in front of our very eyes. out in front of our very eyes. And so that is a byproduct of the excessive froth that was there that had to just kind of stop. And then the economic fundamentals of how an asset must be priced against a risk-free rate and a risk-free rate that is now on the 10-year, it went from one and a half percent to 2.8 percent, 2.7%. You had the Fed funds rate that is about to get up to about 75 basis points that have been at zero. Every yield point in the first two years of the curve

is substantially higher from zero to two years. Your T-bills are now priced a bit higher, still pretty low historically, but as they play into the pricing of risk assets, they left long duration, high multiple equities, highly vulnerable, and the chickens have come home to roost. And perhaps part of this repricing, at least in recent weeks, has been driven by rising interest rates. Obviously, the 10-year Treasury yield is up quite a bit so far this year. Seems like the market's doing part of the Fed's job, although we know the Fed is likely going to step up those interest rate hikes, perhaps as soon as next week and for the rest

of the year. But I also know that last year we would have occasional worries about higher interest rates or the movements in the 10-year treasury yield. And I know you've always also pointed out that a higher 10-year yield is actually healthy. It signals growth. And so what do you say to folks who are kind of watching the tick by tick yield on the 10 year and kind of trying to figure out what that means for the stock market's next move? Yeah, that's a great question. And I hope people forgive me for having to give a bit more

sophisticated of an answer, but it really does warrant one. And I do my best to not offer complexity for complexity's sake. I prefer always to try to offer simplicity where that will effectively communicate the message. But this is not about absolute level of yields when you want to price in growth. It's about spread. It's about the yield curve. It's about differentials between a particular point in the economic cycle, let's say six months out, and a particular point in the economic cycle, let's say six months out, and a particular point in the economic cycle, let's say 10 years out. So I would do anything to have a 3% 10-year. I'd like a 4% 10-year if the six-month level was at 1% and it was showing this nice steep

curve that anticipated greater growth into the future. steep curve that anticipated greater growth into the future. The interesting thing about what we're dealing with right now is not that the 10 years got up to 2.7. It's at the two years at 2.7, 2.5. It had been inverted a few weeks ago for a couple of days or a couple of seconds. Right now, though, it's basically a flat line all the way from two years to 10 years. So I don't care if that number is at 3.5% or 2.5%. The yield curve is still pricing in, no growth, Scott. It's all of the movement higher is in the next two years. So when you say the market's done the Fed's work for it, that's all that has happened is from zero to two years, they've priced in over 200 basis points of rate hikes, and then they anticipate total flatness terminally. The bond market is not pricing in

inflation after two years, and it's not pricing in real economic growth after two years. years and it's not pricing in real economic growth after two years. And so I think you could have a 2.5% tenure that was a good thing and you could have a 4.5% tenure that's a good thing. What you have to know to know how to interpret what the tenure is doing is what the shape of the yield curve looks like before and after. And then from there, do a qualitative assessment as to why and whether or not you're looking at bond markets trying to absorb inflationary concerns or growth expectations or whatnot. And so my view is that the market is basically saying the Fed's going to get the short-term rate up, and they're pricing it in somewhere around 200 basis points within the next 18 months, and then they think the Fed's done. The market has every reason to not believe that there's going to be that great economic growth beyond and great reason to believe that there's going to be a premium on top of the Fed funds rate into the future.

So the longer dated part of the curve is not pricing in inflation or growth expectations. Whether or not the market is overshot as to what the Fed will do remains to be seen. That's long been my view. I'm certainly more open to the idea that the Fed will prove more hawkish than I would have given them credit for. I think I've had a pretty good historical precedent for believing the Fed would be less hawkish than anticipated. But we do not know yet. People saying, well, look, the market's pricing in this and the Fed's talking this way. They still don't know what the Fed does when things really hit the fan. Right now, the Fed does not care what happens to overpriced technology companies.

They don't care what happens to SPACs. They're willing to let some heat come out of the financial markets. But it's when credit spreads fully dry up. Right now, the high yield spreads about 425 basis points wide over treasuries. If you start getting a total cessation of bank debt and of non-bank lending, you know, in kind of the juicier parts of credit markets, it remains to be seen what the Fed might do. So far, I think the Fed's perfectly comfortable with what they're seeing in both stock and bond markets.

But that could change. And yeah, it is my view that it will change. But I don't know at what level or when. And so we'll have to see how that plays out. But that's the long answer to the question about the 10-year, is that the market is essentially right now absorbing all of what it believes about the next 18 months, that the Fed will have to move the short-term higher, and then after that, the market does not see that longer growth expectation.

What I would love is a better sloped yield curve that is more normal, that is pricing in more economic normalcy, a term structure that allows for a term premium, a price of money, a price of time baked into the price of money. Why shouldn't someone lending the government money for 10 years get higher than lending it for two years? That's what you would expect in a normal world. The bond market is still not giving us that. So how would you characterize what we've seen in markets so far this year? or is it just sort of the, I guess, sort of consecutive events coming together, sort of perfectly timed to give the market somewhat of a reason to stay low or to decline further?

You know, it's really interesting. It's a few of these things all at once for different people and different investors. So I didn't ask you to ask that question, but in a way you're kind of teeing up an opportunity for me to point out, you know, if one is a client of ours and is not looking at the market at all or the indexes, they're just looking at their own portfolio, they wouldn't know what you're talking about because it's not only that they haven't had a correction, they haven't even been down, right? I mean, energy stuff's getting hit a little bit today, but like for the most part,

you know, a lot of value, energy, dividend oriented has had a very good year. Certain, you know, stocks and sectors within it may be down. But then if you looked at like people who were entirely only in really shiny object tech stuff, not even Fang and Big Cap, more profitable companies, but a lot of the junkiest junk, they may be getting walloped. It's not just a correction, it's an obliteration. And then you have varying differences in between. And for a lot of people who are index investors, it's been a slight correction. The S&P is right around that kind of 10% level. NASDAQ a little worse and Dow a little better.

And so it's interesting, isn't it? It's a dispersion of result. And Scott, you know this because you've often been the one portraying, you're the messenger to the media. Sometimes when I'm portraying my viewpoint and you're telling the Wall Street Journal

or Washington Post or Yahoo Finance, you know, our beliefs on some of this stuff. I've been saying this for a while, that the similarities to the year 2000 are very interesting, that I was anticipating a risk on, risk off dispersion that didn't go where everything was risk on and then everything was risk off, which is mostly what we've been living in since the great financial crisis, but rather something that was more NASDAQ and Dow-like from the year 2000. Where in that infamous year, obviously very early in my career, the NASDAQ got pummeled and the Dow was actually up. And it's so foreign to those of us within the last 20 years of context because that has almost been an impossibility economically in the last 20 years

where everything just was so highly correlated to one another. The violence may have been worse in one area than another and the upside may have been better in one area than another, and the upside may have been better in one area than another, but the directional correlations were very tight for most of the last 20 years. But back in 2000, when the NASDAQ fell off, value kind of went the other way, the Dow, various things that were not as connected. And that's sort of what I think we're in now. And that's sort of what I think we're in now. It's completely crazy to me that you have companies with over trillion dollar market caps or with well over $500 billion market caps that are the biggest household name companies in our world, huge software operating system companies and ecommerce.com companies that

are down 20%. system companies and e-commerce.com companies that are down 20%. And yet the equal weighted S&P 500 is down 6% or 7%. Why is that? Well, it's because large cap value is really not down. The energy sector is really up quite a bit. So there's been some zigs and zags that have created a different experience to different people. I can't say that that will continue entirely. If this market sell-off accelerates enough, it'll catch up to other areas, but not in equal proportion. And there will be a far greater defensive merit to some of the higher quality companies and some of the more defensive sectors.

It's one of the reasons that even though they weren't really capturing a lot of offense earlier in the year, now consumer staples and healthcare are looking to be much more defensive. And energy has been much more offensive all year. It's been beneficial. So this is a very interesting market and much more like year 2000 than the year 2020 or 2008 or some of the sell-offs we've had in between. When you talk about the energy sector, David, I also know that a segment within that sector that you've been talking about for quite some time, really before the energy trade became so popular and perhaps crowded, was the midstream segment of the energy sector responsible for the transportation of energy. Update us on your views there and kind of how you see that part of the sector playing out over the next year, at least for the rest of this year.

Yeah, I'm looking at right now, just as we're talking, and there's some downside in the midstream energy sector today. So it's funny as we're talking that that is the case. But really, it's just been an absolutely extraordinary place to be all year. And in a way that's different than some of the upstream companies that we've done very well in, because I am the first to say, and we've trimmed profits in some of our upstream exposure, that the upstream did not just do so well. It did so well where a lot of the value got taken out. It still has ongoing fair value, but it was no longer at a deep discount where I would argue there was like almost free money to capture and you were just simply waiting on the timing.

That has gone away in upstream. you there was like almost free money to capture and you were just simply waiting on the timing. That has gone away in upstream. Now, I still think there's a story there and I still want to be invested and we've trimmed profits but maintained our base weightings and our upstream exposure. But not only has midstream done well, it's never even got close to what I consider historical fair valuation and we measure this by yield spreads. And so you look at what has the midstream sector done in its yield to investors relative to utilities over history, relative to corporate bonds over history, relative to the S&P, relative to various benchmarks, you gauge a historical valuation around these yield spreads and then look at all those spreads now and all of them tell the same story. If you get a divergent response, you have to wonder if something's broken. But essentially on a spread basis, the midstream area of energy still looks quite attractive for income, for growth and for growth of income. So not only has it been a great performer, but we still believe in that story and candidly

don't think it has anywhere near the same vulnerability around the price of the commodities. There is definitely a truth that was exposed in the last seven years, a truth that was a learning experience for me as a portfolio manager, that there is a price at which commodities become relevant to midstream, where they discourage the entire investor sentiment, where they discourage volumes to the point that even though you would think lower prices would create higher volumes, it speaks to lower production incentive. And therefore, you're going to have less oil and gas going through pipelines. The difference is it's not on the margin sensitive from, let's say, $100 oil to $90 oil.

There's sort of a gaping level. All of a sudden, you're at $30 oil? Yeah, that just destroys midstream pricing. Fair enough. It destroys capital expenditure incentive for future projects and future growth. But right now, oil at $100 going to $80, that hurts profit margins for upstream, but it still leaves them perfectly profitable. But $100 to $80 doesn't even make a whiff of difference to midstream. There would still be ample volume and ample profitability in the midstream, where at $80 on the margin, it affects upstream. Now, I'm not saying we get back to $80. I was unaware $80 is

even considered a low price. But my point is that I guess there are people that care if oil is 100, 107, 120, 95 for upstream. All I know is all those numbers are still very profitable. But for midstream, it doesn't matter any of those numbers I just said. So the need for greater exporting of natural gas, the need for more infrastructure to facilitate such, the profitability of these companies that are engaged in the storage and especially transportation of both crude oil and natural gas, the ability to convert natural gas, the processing and liquefaction processes, the export terminals that are needed. This entire story is highly compelling, and that's engaged in the midstream component. And we could take a little bit of price volatility along the way.

Wouldn't concern us at all. But it's been a great place to be this year, and I think it's going to continue to be, Scott. but it's been a great place to be this year, and I think it's going to continue to be, Scott. Yeah, and David, when we look at, you know, certainly gains in the energy sector this year, gains in the midstream part of that sector this year, declines in the broader markets this year,

how would you be thinking about new money that you might be putting to work, and would you be putting new money to work right now within various pockets of the market? Yes, as a fiduciary, our clients pay us to work their capital, not to merely custody it. And to the extent that we will manage the process of deployment of new capital around that specific client's risk tolerance, liquidity profile, given tactical considerations that we're engaging in as portfolio managers. But the bias must always be towards the deployment of capital. a deployment of capital. And right now, we think that in our portfolio, there are things that have had a great run higher. And there are things that look really, we love how they're priced right now, that have really kind of come down a bit. Some of the publicly traded private equity asset managers

was one of the largest shopping mall REITs in the country. There are a few things that we just love these prices and don't mind at all deploying heavily there. And then there are other areas that are kind of in the middle. And so we're deploying with caution and prudence, putting a certain allocation of new cash to work to get that foot in the water, but then from a risk mitigation standpoint, then tethering the rest of the money in either tactically or periodically. So there's nothing that is just so screaming cheap that we're saying, let's get all in. We're tethering, but we are most certainly not looking

to be aggressively buried to the sideline. And I want to point out that one of the reasons is if you get a massive hawkish Fed surprise that does greater damage to markets, I'm stuck with two realities at once. One is the short term impact to markets, which would clearly be damaging. And one is what I think would be a significantly greater long term market environment. I am not worried about the Fed being more aggressive in normalization. I am excited for the Fed to prove me wrong. In other words, I would view that as a longer-term bullish signal. My hesitation is not that, wow, the Dow 33,000 could go to 30,000

if the Fed really surprises us with their balance sheet reduction or with their rate hikes. An extra 10% down for a long-term accumulator is a great thing, especially if it's going to now be in the context of a market that has removed some distortions, that has removed some impediments to long-term growth, that has perhaps removed some zombies, that has allowed for a better risk pricing in the credit markets. Those things are uncomfortable for investors in the short term, but they'd all be better long term. And so I want our clients to hear me. I will take that because I think we will benefit from it longer term.

Again, my problem is not thinking it will happen. It's being a bit skeptical because I'm not totally sure that it will. But for next week's Fed meeting, you think 50 basis points is sort of a done deal. They did a great job pricing it in. They used forward guidance. They used press releases. They used press leaks. They used kind of the B team of the Fed governors who are in a lot of cases at first were not even voting members to get information out there. Markets kind of took it in stride. Then they just slowly continued this kind of price it into markets drip by drip, and they didn't get anything that shock and awe them. And they're going to go forward to 50 basis

points next week. Ultimately, it wasn't just what I was saying about press releases and leaks. They ended up with Chairman Powell himself telling us at the IMF in a more recent speech, you know, they're ready for the 50. So, you know, even when the head honcho is going out saying it, they've telegraphed already what they basically are supposed to be meeting about next week to discuss. It's clear they've already made their mind up. And just to go back to what we were talking about earlier, assuming that happens next week, I wonder how the 10-year yield or how the bond market responds to that, because it seems to have responded to that already. You are exactly right. It's already responded. And so there would be nothing to respond to to announce that the Fed funds rate, which has a duration of 24 hours, is going up 50 basis points.

There would be nothing for the 10 year to respond to. and maybe look at some more of the company-specific fundamentals, kind of taking a step back from monetary policy, what has your reaction been to the earnings calls, the earnings announcements we've seen so far, both for the companies that you own for clients at the Bonson Group, but also just kind of broadly? Is there anything that you're seeing that either worries you or that encourages you?

Both. We've had some great results in the market at large, and you've had some terrible results. And within our own portfolio, we've had some just beautiful results that we were really happy with and a couple of disappointments. So one of the largest telecom companies in the world disappointed us late last week, and not with any real operating results per se, but the disappointment was more in their guidance around their pricing power was less than we would have expected, and then the portion of the debt on their balance sheet that is fixed and therefore unaffected by rate movement,

they came out to announce that 75% to 80% of the debt was fixed and wouldn't impact things. But the market immediately said, well, that means 20% to 25% is not. And this is going to take away $150 million, $200 million of EBITDA for you, or excuse me, of earnings, not EBITDA, which does not factor in interest expense. And so that was a negative story. But then we look at one of our old tech companies that released last week, and it was just a glorious quarter, record revenue growth, and a lot of great things happening strategically. So we've had divergent results in our own portfolio, and the market itself has seen it. So both as it pertains to our own portfolio holdings and the market at large, it's very early.

You're only about 20% of the way through earnings season. So by the end of this week, we'll be closer to 50%. By the end of the week after, we'll be closer to 80%. So the next two weeks are pretty heavy on earnings results, both in our companies and in the market at large. And you talk about that old tech theme, which clearly is playing out this year, just compared to, I guess, what many would call new tech being FANG, which has had obviously a very tough go around over the past, you know, several months. But for some of those stocks, the past several years. Yeah, it's funny.

I've always thought of FANG as new tech and cool tech. It's certainly big tech. The big tech part hasn't changed, but the new tech and cool tech has definitely changed. But the new tech and cool tech has definitely changed. It's newer than my old tech, but it's older than the real shiny object tech, the innovation tech, the arc tech, if you will. You know what I mean there? And so even within Fang, you have some companies that are down over 50 percent and one company that's only down 8 or 9 percent. And it's done much better.

And so I think that there's an indexing reality to FANG because of market cap-weighted indexes. There's a certain component of ongoing buying that has helped. Other names have been fundamentally impaired. So all the different things happening on the technology side are, as we talked about well over a year ago, definitely facing a dispersion of result now. We'll see that in earnings season as well. We saw it last in Q1 announcing for Q4, you had FANG names that had huge upside in their stock price after they released, and you had fang names that got killed. And I expect the same thing will happen this quarter too, dispersion of results. Yeah. But in terms of

some of the other themes that have been coming up on these earnings calls, inflation, or just sort of broader labor shortages or things like that. And I know, obviously, in last week's Dividend Cafe, you were focused on the labor shortage and the so-called great resignation. But maybe connect those thoughts with what we're hearing or not hearing from companies that you follow. Yeah, I think that you hear the word inflation in company earnings results now way more than you ever have. But by the way, you said the inflation pressures and then labor shortages. And I would actually argue that the labor shortage is very heavily correlated to the inflation pressures. correlated to the inflation pressures. And I'm quite convinced from a macroeconomic standpoint that it's the biggest driver of inflationary pressures is the labor shortages. And so you

look to what might be happening in Shanghai right now and in Beijing and where you get a shortage of laborers at that level of the supply chain and multinational companies that have China playing a very big role in either the front end or the middle component of some supply chain process and where that slows things down and puts upward price pressures, the markets do not like that. And that's a huge part of what would be going on right now. And so it's not inflation in the way we're used to discussing it about the Fed or about government spending.

And yet I think that's a very big component. Obviously, the story of last year and this great resignation, the stuff I wrote about in Dividend Cafe Friday, that has added a lot to labor shortages that have then created a lot of goods inflation, meaning upward pricing pressures in goods versus services. Now you're seeing it more in services, and I think you're going to see it less in goods later in the year. So those extrinsic circumstances, whether it's shutdowns in

China that are impacting supply chain or great resignation dynamics in the United States. All those things are very relevant in the economy as we sort things through. And so it forces you to have to listen to analyst calls during earnings season because it affects every company differently. Yeah, well said. And David, I think that's a good place to leave our conversation for today. We covered a lot during an important time for the markets with volatility continuing to show its face. So grateful for your insights. Always great to be back with you, David. And I know we'll talk soon.

Yeah, thanks so much, Scott. Appreciate you jumping on on short notice and obviously all the great work you do for us at Bonson Group. And I want to just close everybody with this comment. First of all, I hope you got a lot of the call because we did discuss a lot of macro subjects. And I thought Scott's questions probed the right spots for where we are. But hopefully my compliance and supervision folks are thrilled with us because we got into a lot of micro as well. And we did not say the name of a single company. So we played it within the sandbox, and yet hopefully you get an idea of some of the real micro components taking place in the market right now that were useful for you on this call.

So I'm going back to my desk. I'm getting back on with the traders here to see what we're going to do the last couple hours. Now, Scott, I looked at the market in the middle of our call. I think you did it again. You brought the market into positive territory. And that was something we used to do quite a bit back in our, you know, kind of different iterations of COVID calls.

We would get on the phone or get in the video. Markets are down 500 points. By the time we're done talking, markets might have been up 100 or 200. And we just sort of did it again. And so if this keeps up, clients are going to ask us to start doing these calls more often. I don't know. Yeah.

It's not me. It's you. I just ask the questions. I don't give any of the wisdom. Yeah. Great stuff. You're right, though. It's not you, but it's also not me. These are markets, right? This is what markets do. And for what has been put into the great stew of financial markets.

For years and years, we've been adding ingredients that have basically forced a time of exacerbated volatility. financial repression with that level of monetary intervention and not end up best case with higher volatility and worst case with significant repricing. This is the world you're in. It's not going away. We'll continue to do what we do, managing through it. And thank you for joining us on this intervening call. Thank you, as always, to the great folks in our strategy and communications department, the Bonson Group. And Scott, thank you once again. And we'll look forward to rejoining at another time. Take care. 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 opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance Thank you. Reference to your end. The data and information are provided as of the date referenced. Such data and information are subject to change without notice. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client's individual circumstances and can change at any time without

notice. Clients are urged to consult their tax or legal advisor for any related questions.