The Dividend Cafe - Monday - July 20, 2026

Episode Date: July 20, 2026

Today's Post - https://bahnsen.co/4yvcd4b David Bahnsen reviews a modest down day for markets as Iran tensions and reported American casualties push oil above $80 (ending above $83), with the Dow down ~300, S&P -19 bps, Nasdaq -5 bps, and the 10-year yield at 4.59%; communication services and energy led while healthcare lagged. He cites IPO froth cooling, noting SpaceX below $120 versus a $135 IPO and far off highs. In politics, he highlights Maine’s Senate race likely featuring progressive Troy Jackson versus Susan Collins and notes Michigan Democrats consolidating behind Haley Stevens, outlining the difficult map for a Democratic Senate majority. Economically, he underscores the Supreme Court reversal of IEEPA tariffs lowering blended import tariffs from ~11% to ~6–6.5%, while flagging a record 105.8M outside the labor force, soft industrial production, rising import prices, and housing starts driven by multifamily. He previews next week’s Fed meeting under Chair Kevin Warsh, balance-sheet maturity shortening, midstream earnings (Kinder Morgan), and answers why shorting stocks is inherently leveraged and generally unsuitable for most investors. 00:00 Welcome and Setup 00:17 Iran Tensions and Oil 01:24 Market Wrap and Sectors 02:17 IPO Froth Check 03:13 Senate Races Outlook 05:39 Economy Data and Tariffs 07:43 Housing and Fed Preview 09:08 Energy Earnings and Gas 10:01 Ask TBG Short Selling 12:00 Wrap Up and Links Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Hello and welcome to the Monday edition of Dividing Cafe. I'm your host, David Bonson, and we're going to go through all the normal things we love to do in the Monday Dividendon Cafe today. The markets were down across the board. Not super surprising based on the way things have gone over the weekend. And I'll start with that, that there were a couple of American casualties, tragically enough as things continue to escalate and re-escalate in our situation with Iran. Oil prices back, you know, up there above $80, like I mentioned, a couple casualties,

threats of more escalation. I'm going to leave you with what the great political commentator Mark Halperin used as a summary of the three options. And you can probably get an idea of why markets might have to figure out exactly what to bet on here because it doesn't seem that any of these options are very good. And one is to walk away entirely. One is to return to an all-out war. And one is to continue with little tit for cat escalations. I think that's the right framing of the different options. I think it's kind of obvious that the third one is the one that we are going to pick for the time being. But it's something

that is going to warrant being watched more if oil prices were to move instead of around $80 to $82 to $90 to $92. So that was a big story today. Now, look, it didn't affect markets a lot. The Dow opened over 100 points to the upside. It's just that it immediately started going down and ended up closing down 300 points, which is 59 basis points. The S&P was barely down, 19 bibs.

The NASDAQ had been up most of the day. It closed just barely below the flat line down five basis points. So all three market indices were down on the day, but not by a lot. You had the 10-year bond yield closed today at 4.59%. That correlation's been on for a little bit. Bond yields going higher as oil prices go higher. I don't think that that's something that is super sustainable or even totally coherent, but that's been the correlation in bond markets as of late. The top performing sector of the day was communication services up 74 basis points, energy, up 55 basis points. But then at the bottom of the pack, you had health care down over

1%. I do want to just point out on this IPO mania and some of the froth that's in markets or whatever. It's more of a bellwether. I don't bring it up for what it means for the company per se. And there's all kinds of information online if people want to follow it for what it means to the company. But just in terms of that risk on risk off and investor sentiment and all these types of things, the SpaceX closed today below $120. The IPO price was 135. The first trade was $1.50. The first trade was 150. It was really up around 200. It hit as high as 225. So it's now down 47 percent from its high. And there is no investor who either bought in the IPO or since the IPO, none that are not underwater. And so that speaks to just this reality of where we are in risk and sentiment and so

forth right now. Moving into public policy, the Democrats special convention to replace their nominee for the U.S. Senate race is not actually till this weekend, but everyone else has kind of dropped out, and it's just left the progressive populist Troy Jackson, who will be the nominee to replace good old, what's his name, Graham Platner there. In the race against incumbent, moderate Republican Susan Collins, why do I bring this up? Well, Troy Jackson's backed by Democrat Socialist of America, by the Our Revolution Pack. So this U.S. Senate race in Maine represents by far the most prominent contested race in the November election where you have that progressive socialist bona fides in the race and potentially quite competitive. The Democrats fight

for a majority of the U.S. Senate may not happen even if they win the main race, but it most certainly will not happen if they don't. And I think that's why the main race matters to a lot of people. However, speaking of Democrats holding seats or winning seats, one thing is I think benefited them in the last couple weeks is in Michigan, where they seemed for a long time to be on the verge of nominating one of these aforementioned socialist types, someone by the name of Abdul El-Said, who I think is now less likely to capture that nomination with a lot of support consolidating behind Haley Stevens. And that represents a seat that the Democrats needed to hold. and again would very likely have lost any possibility of flipping a majority if they didn't even

hold one of the seats that they owned. So that kind of leaves a few different contested states. And you look at Michigan, Georgia, New Hampshire, where they all need to hold seats and I think they will. But then they have to pick up North Carolina, Ohio, Alaska, Maine, and they have to pick up all of them unless they pick up Texas or Nebraska. I would argue North Carolina is by far the most likely that they will pick up. And if it were to just end there, that the Democrats hold the Michigan, Georgia, New Hampshire, and pick up North Carolina and end up with 5248 Republican majority. I would imagine that's the most likely scenario.

But one or two other states could go a different direction, but getting to a full flipped majority seems right now like a very difficult mathematical and electoral path. Economic front, we have a few things to go through right now. First of all, one of the most underrated things that's happened for the U.S. economy this year was the Supreme Court reversal of IEPA tariffs. Because of about 30% of those tariffs being struck down, it brought the total tariff rate, the blended total rate on U.S. imports from about 11% down to 6.6.5%. And that is calculated as just the total duty divided by total U.S. imports, all right? It's a marginal cost to U.S. businesses, and while it remains higher than it had been and higher

than I would like it to be, the point being that it is significantly lower than it had been, and I think that represents a really substantial benefit for the U.S. economy. Now, on the negative side on the U.S. economy, there's 105.8 million people in America right now outside the labor force. That's the highest ever. There was 832,000 people who left the labor force last month. keep in mind that does not represent unemployed people, it represents those that are not even looking for employment and or unemployed. So it's a wider, vaster number. Industrial production

increased 0.1% in the month of June. That's less than have been expected. Utilities output and mining drove the increase while manufacturing and capacity utilization were unchanged. And then import prices were up. There's a lot of talk about this at the end of last week. import prices were up 0.3% on the month and are up 7.1% year over a year. Even when you take out the volatile energy impact, they're still up 4.4% year over a year. This is on top of, by the way, a big move up in the month of May, a 1.7% move in that month sequentially. So you just have substantial ramifications here from tariffs, no question. On the housing front, new housing starts. We're up three and a half percent. You go, that sounds like what we want to hear. Then you look under the hood

and single family starts actually declined in the month of June. It was all multifamily that drove the increase. You had a big increase in permits that have been pulled for multifamily, but a decrease in single family. A 17% increase in multifamily starts really skewing the total numbers. What the real housing stock need is in new single family supply. So the Fed will be meeting next week. It'll be the second FOMC meeting since Chairman Warsh became the new chairman of the Federal Reserve. And in a lot of ways, you could argue it's Kevin Warsh's first meeting without the kind of introductory drama that the last meeting had. Right now, the futures market has a 16% probability for a Fed hike next week.

that's not very high. And I don't believe that they will be increasing rates next week. But the futures markets also suggest an 83% chance that there will be a rate hike before the end of the year. Beyond the interest rate policy side, I do want to point out the Fed is not yet shrinking the assets on their balance sheet, but what they're doing is shortening the maturity of the bonds they own. And that's what Warsh is making clear they have plans to do more of into the future. and so it is a kind of soft changing of the Fed balance sheet and reducing of Fed impact in the economy. So oil today closed up a little less than 1% above $83 a barrel. Midstream, by the way, was up 2.5% last week.

Oil prices were up 15%. So he had kind of a rally in a lot of the energy ecosystem because of the situation in Iran. But on midstream, they do go into earnings season this. week and Kinder Morgan is always a major midstream energy company that starts off earning season. Their quarterly results will come out in the middle of this week and should be very interesting. The average price of gasoline, by the way, around the country did get back up above $4 for a gallon of gas. All right.

In the ASTBG section, someone had said, you know, is there ever a time for shorting stocks? When you look at healthy fundamentals missing, the company has a high PE, low-levels, free cash flow. What if we just took an unlevered short position? Would that be a good thing to do in your investment worldview? And before I can answer, I want to first start off with, I need to make sure everybody understands that there's no such thing as an unlevered short position. That by definition, shorting is levered because you are borrowing an asset that you don't own, selling it, and then your hope is to buy it back at a lower price and return the asset to the person you borrowed from and who you borrowed it from is usually a broker, some financial firm.

So that is essentially embedded leverage in any shorting transaction. But the question as to whether or not I think shorting makes sense for us, for you, I think that there are hedge funds that specialize in shorting that are doing it with hedges or doing it with a particular risk profile or mandate. And certainly you would like to think a lot of these short focus managers have a lot of talent behind it. I have no issues there. But when it comes to us deciding to go just simply look at companies with subpar fundamentals

or high valuations and say, oh, yeah, let's go take a short there. First of all, you can buy a company a weak fundamentals and it doesn't go down. I mean, shorting a company because you think it has bad fundamentals is a great way to get your face ripped off. Generally, those that are very, very good short managers have found something totally broken in a company, not just merely high valuation. And a lot of times they've identified fraud in a company or something like that. It's outside the mandate of what we do.

I would not recommend it for regular investors at home, but I certainly think that there's some great short focus managers out there. I hope that answers the question. There's a couple of links in our brand new, more-to-chew-on section in dividend cafe.com today. Check those out. It will be there every Monday, every Friday. I'm looking forward to to unpacking more of the more to chew on section in the days, weeks, months ahead. In the meantime, reach out with any questions you may have, and we look forward to yet another week in markets, getting deeper into earnings season, and all the fun things happening in our country,

our world, and in our financial markets. I'll remind you that on Friday's Dividendant Cafe, I looked at the five things that I'm concerned about in the current state of markets, and five things I'm not concerned about. Please check that out if you're interested. Thanks for listening. Thanks for watching. Thank you for reading the Dividing Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC member FINRA and SIPC and with High Tower 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 risk. There's no guarantee that

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