The Dividend Cafe - Monday - December 30, 2024

Episode Date: December 30, 2024

Today's Post - https://bahnsen.co/40bB1Px Final Dividend Cafe of 2024: Market Updates, Policy Insights, and Year-End Reflections In the final Dividend Cafe of 2024, David discusses the volatile market activity of the day, including significant fluctuations and end-of-year rebalancing. He provides a brief update on President Trump's policies, including endorsements, H-1B visa debates, and efforts to delay the TikTok shutdown. The episode also touches on former President Jimmy Carter's passing, China's economic decline, New York City's record-high hotel prices, and potential changes to Fannie Mae and Freddie Mac under a future Trump administration. David reflects on the year gone by and sets the stage for the annual year behind-year ahead white paper to be published next week. 00:00 Introduction and Year-End Reflections 01:02 Market Recap and Analysis 04:14 Policy Updates and Political Commentary 08:01 Economic Indicators and Predictions 11:52 Closing Remarks and Upcoming Plans 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 and welcome to what I guess is going to be the final Dividend Cafe of 2024. I wanted to do this Monday edition just because I wanted to have something here in the final week of the year. And yet I am out at my desert house in beautiful Rancho Mirage, California, where I am supposed to be working away all week on our annual year behind year ahead white paper. And indeed, that will be the major writing focus of the next 72 hours of my life. I'm very much hoping to have it done by Friday.

And then we're going to put it out as the Dividend Cafe next week. And so this is what we've done for many, many years. For those of you who have followed Dividend Cafe or been part of the Bonson Group for a long time. And this year in particular, it's a big project. There's a lot to say about the year that just was and a lot to say about the year ahead. And it's a research project and a writing project I take very seriously. In the meantime, we did have a market day today. So I'm going to make a few comments on that, do our normal around the horn with policy and the Fed and housing. President-elect Trump is doing a great

job of keeping me on my toes with various policy announcements and projections and things. So I'll cover a few of those things. And then we will have a Dividend Cafe this coming Friday that I'll record back at the Newport Beach office at the end of the week. And then we start the new year next week, Monday, January 6th with our normal schedule of everything resuming. So our schedule always gets a little off around the holidays. I presume yours does too, as everybody has travel and different things going on. So we're doing our best to stay on top of things, keep you informed, and also keep the content schedule light enough that we're not overwhelming people when hopefully they have better things to think about. I can tell you that the markets definitely have better things to be

doing than focusing on the day-to-day right now because you really saw today a sort of encapsulation of how distorted reality is. And I'll explain briefly why. But the market opened today down 550 points at the first tick of the day, and then it went down over 700 points. And then a few hours later, it was only down 200. And then in the final minutes of the day, dropped another 200 points. So it closed down 400, a little less than 1%. The S&P was down a little more than that. The NASDAQ was down a little more than that. But what would make something like this happen? No news, very light volume. I can't even tell you how many traders are not at their trading desk. But on the year, a lot of bonds are down on the year and almost every area of stocks is up on the year.

And you have a lot of generally non-taxable entities that are a significant part of market activity, pension funds, endowments, foundations, various institutional investors that have mandates and automation around certain rebalancing, quarterly, annual rebalancing. It often can happen into the next quarter. It often can be waived. There's sometimes just not enough movement to make a difference. But I think right now it's rather clear that there's probably a decent amount of bond buying. You saw the 10-year yield today down eight basis points. So you got a little bid up in bonds, and then you had across the board stocks down. Energy was only down eight

basis points, but that was the best performing sector. And then one of the best performing sectors of the year, consumer discretionary, was the worst performing today, down nearly 1.6%. So there's other anecdotal outliers that can talk about other stories, but this one's a pretty easy one for me to call. And I think how hesitant I generally am to ever suggest causation around what the market does, because I'm so much of the school of thought that who knows and who cares on any given day. But this is rather clear that there's some end of the year rebalancing going on. All right.

So what else? In terms of news, we do pay our respects. Former President Jimmy Carter. It's quite fascinating. He was the longest living president. In other words, he passed away at the oldest age of any president in American history. He died yesterday at the age of 100. He'd been under hospice care for quite some time.

Of course, he was the 39th president of the United States. And so our most sincere rest in peace wishes to former President Jimmy Carter. In terms of, I mentioned a few policy things of President Trump. He did come out this morning and offer a full-throated, what he put, his words were, total endorsement for Speaker of the House Mike Johnson to stay as Speaker of the House. That's been up in the air for a couple of weeks now since the continuing resolution debacle of a couple of weeks ago. And there being maybe 30 to 40 House Republicans that are inclined to want to turn their back on Speaker Johnson, but are not very likely to do so

against the wishes of President Trump. And so Speaker Johnson is likely safe as a result of this announcement today. We'll see what happens. And of course, President Trump can turn on him at any time too, but that's where things stand right now. In terms of some of these divisions or debates or drama playing out in various elements of the right, a big one took place from Christmas Day and then over the weekend around the subject of H-1B visas and basically the allowance of foreign-born immigrants to come to the United States and work on special work visas. And there was a reason this debate came up, which was that President Trump announced that, and I always say this, the first name wrong, Shuram, but the last name Krishnan would be his artificial intelligence advisor. And he has been an outspoken advocate for getting rid of any limit on the amount of green cards that can be issued for these H-1B visas. So certain people that were Trump supporters took to social media to pile on on this. And then other really high

profile Trump supporters and advisors, Elon Musk, Vivek Ramaswamy, came out in defense of the idea that we need high skilled immigration for American competitiveness. And that became an interesting issue over the weekend. President Trump has largely stayed out of it other than last night, reaffirming his support for some element of H-1B visas. I would love to get into the topic more because I have strong opinions on the subject myself, but there's a lot of people talking past each other where there's the question of the high level efficacy of having such a program. Is it beneficial to American interest to be able to

retain and recruit and attract and then provide legality for high skilled immigrants? And is that what the program is actually doing? And those are two different topics. And I think it led to a rather, well, you'll be shocked to hear a rather ineffective conversation on Twitter. Okay. And then the other piece of President Trump over the weekend was he wrote an amicus brief and is in his capacity as president-elect asking the Supreme Court to delay the shutdown of TikTok that is right now set to go into law in January. And again, Congress has already passed it. President Biden signed it, and it is looking for some delays at the court level. And President Trump's looking to kind of get involved and cut a deal. So that's worth watching. You say, I don't care about TikTok.

I promise you, I don't care either. But it's important as it pertains to U.S.-China relations and other negotiations. Speaking of China, their industrial profits dropped 7.3% in November. It's the fourth straight month of industrial profit declines. Factories, utilities, mining, these areas are very weak in this very deflationary moment China's experiencing. It may seem anecdotal, but I think it's worth noting. I've been in New York City well over half the time for the last four years and watched this city come back post-COVID and the reality on the ground of how crowded it is, how busy the restaurants are, whatnot.

The average hotel price in New York City last week hit an all-time high. The median, so this is including high-end and lower-end, median hotel price at an all-time high. Is that a bellwether for the whole U.S. economy? Not necessarily, but it does speak to just how preposterous so many of these predictions were about four years ago. Housing and mortgage. Bill Ackman, famous hedge funder, Pershing Square, million and a half Twitter followers tweeted out today that he expects Trump 2.0. I promise you, this is something that Trump ran on or was a very exciting part of any policy plank, even though I have strong opinions about it. And Bill Ackman has strong interest in the matter about privatizing Fannie and Freddie, which was put into conservatorship by the Treasury Department in September of 2008 and still sits there today over 16 years later.

It's there today over 16 years later. Ackman suggesting that he believes the Trump 2.0 administration will pull Fannie and Freddie out of conservatorship and into resumed privatization. This, to me, is a very interesting topic that I don't know if Trump is going to care about much or not, but has a lot of relevance to various elements of our credit markets, housing, and not to mention, I think, the kind of country we want to be. I'm going to be watching that closely. Federal Reserve working at an 89% chance of no rate change in the futures market right now, next month. And then you are basically looking at two or three rate cuts projected throughout the year. So that's worth watching if that is going to be

changing, because I think a lot of us believe that the Fed is falling the market on this. Three and a half to 4%, somewhere in that range is where it looks like the Fed funds rate would close a year from now. It sits right now at four and a quarter. Oil was up almost 1% today. It's staying above $71. Midstream energy was up over 1% last week. Obviously, a holiday shortened week, holiday light. I put a link in Dividend Cafe today to a great article in the Wall Street Journal I read over the weekend, reiterating some of the things that we've been saying for months and months here at Bonson Group that the big issue for those wanting drill baby drill in U.S. oil production is the capital

discipline of the major operators now. They're just simply not likely to be going and doing the level of speculative, what they used to call wildcatters. But the E&P, you had 50% of the market run by private companies, smaller players 10 years ago. You now have only 24% of the market in those smaller type players. of the market in those smaller-time players. Larger, especially big public companies with a focus on capital return, just simply not looking to the same level of production that does not make sense to their investors and their business model. Therefore, there is a certain ceiling to the level of production that you can expect, particularly out of the Permian Basin. All right. So there will not be a whole lot of other communications here throughout this week as we go into New Year's Eve tomorrow. 2024 comes to an end. Markets closed on New Year's Day the 1st. Markets will be open on the 2nd. We won't have a daily recap that day. And then on Friday

the 3rd, I will bring you a dividend cafeend Cafe from the Newport Beach studio. And then next week, all of TBG is fully reopened across the country, normal with our normal set of publications and communications. And I will be bringing you the annual year behind year ahead at the end of next week. Thanks so much as as always, for listening, watching, and reading the Dividend Cafe. Have a happy new year. 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 opportunities referenced herein will be profitable. Past performance is not 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. Thank you. expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. 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.