The Dividend Cafe - Replay - National Conference Call on Market Outlook July 13, 2020

Episode Date: July 13, 2020

This is the replay of the Market Outlook National Video Call with David L. Bahnsen and Scott Gamm. 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. The infamous mute-unmute problem of Zoom that so many of us have gotten familiar with over the last several months. Well, thank you everyone for joining. It's two o'clock in the afternoon here on the East Coast. And I think we're used to doing these at 11 o'clock Pacific time. And so it feels different to me because I'm on a different time zone, but I know it's actually the same time we normally do these calls. I was trying to think about this. Maybe Scott could correct me. I think this is the fourth location that I've been in for one of these bi-weekly calls because, of course, initially we were doing them from my house in Southern California when the quarantine was still in effect. Then we moved to the office back at the Bonson Group's headquarters in Newport Beach.

Last or two weeks ago, I was at my apartment here in New York City. And then now I'm at our office in New York City. So I'm running out of spots to do this from. But I do want to welcome back Scott Gamm. And I know a lot of you have sent some very thoughtful questions. And of course, Scott always prepares some of his own to guide us through this conversation. If you have more questions as we're doing the call, send them to COVID at the BonsonGroup.com. But I'm going to turn it over to Scott, let him kind of tee us up, and we'll take it wherever it goes here today.

Thanks again, Scott. Well, my pleasure, David, and great to be with you as always. And I figure we start off as we always do with these calls with your take on kind of what's driving the action today. We've got a big market rally right now, stocks up over 1% across the board. Once again, that continued tech NASDAQ outperformance. And I'm curious your thoughts on the divergence there and whether or not you think that will continue. Yeah, it's interesting. The word divergence is a relative term and it can be not relative in the sense that there are times in which

a whole lot of things in the investment world could be going down and the divergence would be that there's some things going up. Where we've been using the word divergence and how you probably just meant it is more to talk about there's things going up some and then there's things going up more than some. And that would be those kind of big tech type names. And it isn't really a big secret how I feel about that. I just wish I had the ability to tell people when I thought it was going to end, and I don't have that ability. But I don't sit around wondering if I'm right or wrong, that it's going to end, and that when it does end, I think it's going to end really badly. Far worse than people probably think. Because at this point, some sort of reversion to the mean

and some sort of recalibration evaluation in line with 6, 8, 12 comparative risk assets that would set kind of a valuation level as to where various things such as big tech or large cap growth or whatever the broad category is belong, you know, a 10% correction wouldn't even move the needle. And so I think that a lot of these things are very overpriced, but they can get a lot more overpriced. And that's what's driving a lot of that optimism. can get a lot more overpriced. And that's what's driving a lot of that optimism. I wouldn't be rooting against them going lower.

It's kind of immaterial to me. But I will say this, that divergence today is a little different than a couple of the days we've had in the last few weeks. And there were days in which the Dow was flat out down and the NASDAQ was up because of four or five names, where today virtually everything across the market is up. And so I know you've been kind of informally keeping track of the days we do these calls, market performance on those days. And I think if people knew those numbers, they'd ask us to do the call every day, because it does seem as if the market's had quite a few pretty big days on these bi-weekly call days. But look, coming off of a weekend,

I think this is three weeks in a row now, and most certainly the last two have been very heightened where I've been glued to the futures market on Sunday night. You spend a whole weekend inundated with doom and gloom from the press. I've spent the whole weekends informing myself as to what that necessarily means and pricing in what sometimes feels like the conclusion would be around the COVID headlines from the media. And yet in the worst negativity of weekends that I've seen going back to the actual negative moments when we literally had thousands of people a day dying. The fact of the matter is the market has just completely shrugged it off. And as I point out in my COVID in markets, and I want to say this to everybody listening and everybody viewing, I have plenty of things that I can be concerned about in the markets. It's just that the thing that I believe is most hyped up

to create concern and is not doing so, namely the COVID outbreaks in Florida, Arizona, and Texas, is not one of them. So what do you make of some of the rises in the case count that we've been seeing in those states? Yeah, I think that it's a very strong, I'll answer it this way. The case count, what I make of the case count in concert with the market's response is that the market sight and mind case count, but has pushed it down its list of concerns appropriately so that hospital resource capacity, utilization, utilization equipment access and utilization fatalities and so forth are really driving where I think the society's focus is and where the market's anticipation of where we go is and again markets are always pricing in what they believe about the future. Arizona was leading the pack with case growth acceleration about a month ago. Of these states that have had hot spots and outbreaks, they're the first that

are starting to meaningfully see the daily case growth decline. And I think we expect to see that in Florida and Texas in the next week or two as well. And so the reason why I believe the case growth has escalated in some of those states, and yet the market has not been concerned, is it speaks to the broader point that in fact the case growth is not really the material input that is economically and let alone or even medically relevant. Now that begs the question, what is? And I think there's some area of disagreement around that. The testing count continues to be an important part of the denominator because the positives are the numerator that get divided into the denominator. And the higher the denominator is, the lower the positivity ratio is. That's really been the

problem of Florida, Arizona, Texas. And notice I left California out of that. I'll tell you why in a second, is their positivity rate legitimately went up. A lot of the states that have seen case growth, Scott, they just simply haven't seen the positivity rate go up or they haven't seen it go up that much. So all that means is that you have more cases because you did more testing. These were cases that just otherwise weren't being detected previously because of inadequate testing or lower testing. We're clearly testing a heck of a lot more non-symptomatic or very light symptomatic people. And there's different opinions as to whether or

not that's a good or bad thing, but it's certainly a relevant thing in the data. I talked about this at COVID markets recently. There are also a lot of counties, or excuse me, it's not a county problem, it's a lab problem that are not reporting negative cases. And so when you get reporting back of 100% positives, there's a pretty good chance that that's not all the people who took tests. And that, of course, doesn't inflate the amount of cases. Those positives are legitimate. Those people tested positive for COVID-19, but it is artificially deflating the denominator by not showing the broad array of how many people were tested. That's been a significant factor, we think, in Florida over the last couple weeks. So I'm probably on a couple tangents here, and I'll send it back over to you,

because I'll ramble on on this for the next 30 minutes if I could. But I think that the case growth is a concern to the extent that you want to see cases declining, so we can just really put this thing in the rear view mirror entirely. But then on the other hand, I think that when you look at what they called a second wave in South Korea, in Japan, in major cities in China, in the United Kingdom, in most of Western Europe, there doesn't need to be a mystery as to whether or not a society can be reopened, including with schools opened, and still have COVID be declining and mortalities declining. That's pretty much been the case in the bulk of the world where it's been done. There may be behavioral things in certain states that have needed to be fine-tuned. There's also very different results in some states within our own country.

Some have pinned it back to what date states reopened. And that's really confused a lot of the epidemiologists because I use Colorado as the best example. Colorado and Georgia reopened at the same time and Georgia had a bit of a second wave and Colorado just simply didn't. And so you get outdoor, indoor discussions. There's a lot that can be discussed about it.

But back to the market and investment aspect, the reality is that I think the society is going to live with COVID cases. And what we have to do is make sure we don't overly deplete our hospital resources and that fatalities are minimized and we protect our most vulnerable. So do you think that the market is also optimistic about the reopening of the U.S. economy that has already taken place and perhaps more reopening that will continue to take place in the coming months? Yeah, I mean, there's no question the market's optimistic about it. I do think that a lot of expectations and how that would get measured into GDP growth

has gotten pushed out a little bit. Some of the vertical movement we began to see in late May and early June, then you get a slowing around some of those pockets where the the reopenings have had somewhat qualification around it. I'm here in New York City where there were zero fatalities yesterday and at one point you know they were having days in which one to two thousand people were dying a day as you know and yet right now the restaurants aren't open to go inside. Now, many restaurants are open on patios, not so much here in Midtown Manhattan where my office is. Um, but in the neighborhoods of like Upper West Side or Upper East Side, there's a lot of patios open, but what

is the real economic activity relative to full strength? 10%, 30% at the most. And so you have this sort of halfway thing where, okay, we're open. That's better than zero. Like we were in March, April, most of May, but we're not to where we need to be to actually see economic vibrancy. And so I see it and feel it here in Manhattan. And I know it's happening in a lot of parts of the country. It's a very important theme. You get a bit of a V-shape when you're coming off of zero. But then to get to where you really need to be for maximum margins and maximum productivity, we're going to need much more reopening than we have right now. We talked about tech stocks earlier, and I have some more questions on that. But I think it's

also good to focus right now on your top concerns for the market, because you mentioned how some of the tech stocks have been getting a little bit overvalued. So what are your concerns for the markets right now, both in the short term and the long term? Well, because the question is what my concerns would be for the markets, I will qualify the answer to say that I don't really feel a great deal of concern about the market per se, because I don't own the market. I'm really, I think I've been pretty good for over 10 years, but I'm better than I ever have been at the last 10 weeks at being concerned with companies and not a broad market that is not an asset I own. And by the way, that generates the vast majority of its return as an index from expansion of multiple, meaning people just bidding up its valuation. from expansion of multiple, meaning people just bidding up its valuation.

So really what I want my focus to be on is the fundamental increase in value of companies. And as a free enterprise guy, I think that comes from execution and competition and productivity, you know, maximizing opportunities in the marketplace. Those are the things that really drive profitability and therefore ultimately shareholder returns. But I know what you mean by the question and I think that the answer is the broader concerns I would have in the market would be related to its current dependency on one sector and one very limited amount of companies within that sector. And I think that it distorts the overall valuation of that market. And then it's a reinforcing issue. It's reinforcing right now on the way up, but it would be reinforcing on the way down if and when that moment comes, is that heavy index ownership and the amount of technical support to buy up to that

level or buy sell down if it goes the other way is rather severe. So I'd be concerned about the top heaviness of some of those names within the broad market leadership. That's really more of a comment on the NASDAQ and then the S&P 500, much less so with the Dow, which is why we use the Dow as a more, I think, accurate barometer of the American economy. But then if you look at the things that are on my list, I think that the US-China dynamic is still a wild card. There is a number of things that could come up that could pretty quickly, you know, spark volatility. I was thinking about including a joke in Dividend Cafe last week, or maybe adding it into this week. And I couldn't find a way to phrase it the way I want to do. But you realize, I think you probably remember this, Scott, you were still obviously anchoring at Yahoo TV at the time, but it's not ancient history.

This is like real life. I'm not being funny. President Trump effectively tweeted about not buying avocados from Mexico, and the market went down like 1,000 points for like six days. You know, that threat of a trade war escalation of Mexico back in May of 2019. I think you were on vacation, David, the one day you took a vacation. Good memory. Good memory. You are correct. And so you have something that could be far more significant than avocado purchases from our neighboring country to the south, with national security, with technology,

with supply chain, much broader economic and geopolitical ramifications in the U.S. relationship with China. And it seems to be kind of holding in there, but there's no question both sides are putting their chess pieces on the board. And I expect the possibility for some shock and awe to come. It could be very short-lived in markets. But again, there's a lot that will be playing out geopolitically in China. That I have absolutely no doubt. And then, of course, the election is about to become a bigger issue, something I'm beginning to do a lot of research on. And I think in this coming Friday's Dividend Cafe, I got the results of a lot of research on. I think in this coming Friday's Dividend Cafe, I got the results of a big institutional investor survey this morning.

And I think right now you're more and more getting priced in a market expectation of the Joe Biden side of things, but you're still quite a ways away from the market pricing in the possibility of Republicans losing the Senate. And if you believe that Biden may win, but the Republicans may keep the Senate, and you're Mr. Market, you know, you're trying to discount 1 trillion market decisions at once. Well, there isn't any reason to fear the loss of the corporate tax rate that we have right now, because Joe Biden can't get rid of that without a Democratic-controlled Senate. It's if the market is wrong about that,

that that starts to maybe get repriced into the future. I think you're really going to see the Senate races, all of which are currently held by Republicans. So it would be four incumbents that would have to lose. But Iowa, Maine, North Carolina, and Montana are very likely going to dictate the prospects of the U.S. Senate. I think the Democrats will lose their Alabama seat, and I think the Republicans will lose their Colorado and Arizona seat. And they're starting off with a three-person lead, and Arizona seat. And they're starting off with a three-person lead. So that would knock it down to two. They gain one and lose two. So then the Republicans have to win three of those four seats, North Carolina, Maine, Montana, and Iowa. And the corporate tax rates future might come down to those Senate races. Now, how does the market discount that

outcome in July? There's not a person on this planet who knows what's going to happen in one of those seats, let alone all four. And they're probably not going to know in October. I think those polls will probably stay tight in those four Cs. So there's so much variability in the election outcome. I think it's going to be on the radar. I think it's going to maintain an elevated level of volatility. But, you know, I don't think there's going to be closure to it until near the end of the year. Well, and you mentioned companies, and then you mentioned tariffs,

and, of of course taxes. Those were maybe over the past two years, 2018 taxes were a big topic on earnings calls, 2019 tariffs were a big topic on earnings calls. We've got earnings season starting today, tomorrow. What will you be looking out for on some of those calls? Will it be more of a COVID focus in terms of what we're hearing from the big CEOs at some of the top companies, many of which you own for clients? Yeah, last quarter, our focus was really exclusively on the great dividend growers of our portfolio, providing us the right rhetoric and economic defensibility of their shareholder, of their capital return to shareholder policies, meaning their dividend sustainability. And we got what we wanted out of last quarter. There was no way for them to give guidance. The whole world was shut down.

Their first quarter results were worthless because for 10 weeks of the 12-week quarter, the economy was reasonably open. The last four of those 10, it was starting to kind of get muddied up by COVID. And then the last two weeks, we were in full-blown nationwide shelter in place order. So Q1 was so distorted. Q2, we knew was going to be a throwaway. Now, as we get ready to go into Q3 and companies are reporting on Q2, it's pretty close to worthless again, but a little less so than last quarter. But their guidance forward is a little bit less worthless than last quarter. So we care to hear their prospects. The first company of earnings season report reported this morning, a very large soda and water beverage manufacturer, consumer goods that we happen to own. And they reported really great results. And I think that

we're going to see companies that probably surprise markets a little, but I don't think the surprise is going to come from them saying what happened in Q2. It's going to come from their outlook for Q3, Q4, et cetera. But our vantage point is really very focused on the ability of these companies to defend their dividend. And me and my team, our investment committee, Julian Frazos, our head of equity research, our whole investment committee obsesses over this topic. And we have a great deal of confidence that the dividends of our portfolio companies are sustainable. Yeah, makes sense. And I want to get in some questions from folks who have written in, taking a break from the markets for just a moment. Stacey from Laguna Beach writes in, do you believe commercial real estate is dying? And does that bode poorly for other markets? The risk with commercial real estate where it impacts or spills over in other markets is in the financial structure, the results around their debt that underlies.

They're generally held in commercial mortgage-backed securities or on the balance sheet of banks. And if you had a systemic and very elevated level of defaults, And if you had a systemic and very elevated level of defaults, and again, you have to go back to the financial crisis of 12 years ago and look at 2008, 2009 into 2010, where you had this really, really gross overvaluation going in, very excessive amounts of leverage, low equity in these projects, and then a total repricing and a grand and lasting 18-month recession, double-digit unemployment that lasted for a couple years, and then look at what those default environments were. Now, there's some that would say it's worse this time. That's really kind of ridiculous. But it certainly could be fair to say specific to hospitality or specific to certain retail.

I think retail is going to reopen. But I think it's a fair question to say how long will some of the hotel sector be out and so forth. But you look at what default levels were and have to kind of extract from that an expected systemic ramification. And the biggest difference, and I thank God for this, but it's something I've written about and really devoted part of a book I wrote to, is the equity is so important. When you enter bad times over levered, you don't have much cushion for a one year period of hotel travel being down, or eight month period of retail being impaired, or what 18 month period of office rents, vacancies being elevated. But when you have lower debt profile and a higher amount of equity, the ramification to investors, look to that landlord, their cash flows are going to be

significantly impaired. But as far as the systemic financial structure, we think the default rates of 2009 and 10 were very low. The recovery rates were virtually 100%. And we think this is not as bad as that. So in pockets, there's definitely vulnerabilities and select properties and so forth. I'm avoiding an idiosyncratic answer and giving you the broad answer. Do I think that there's this broad commercial real estate disaster that will lead to a broad economic and stock market? The answer is absolutely no. Well, and maybe a related question comes from Will in Irvine. How are state and local budgets going to survive the aftermath of the COVID-19 crisis? It is related because it's one of the reasons why I still don't accept that policymakers are going to let all the pain come to the commercial mortgage, the commercial real estate

sector, because this is a massive amount of revenue to both state and local municipalities, either the sales tax from retail or the property tax from all of the above. And so I think there's a tremendous incentive to allow these things to be as productive and fruitful as possible. And they don't have a lot of time. It's one of the things I'm going to be talking about in today's COVID and markets, by the way, is why I think that there's a Restaurant Act carve out coming in the next stimulus. I spent some time over the weekend on the phone with two senior people in the White House, one of which is a very close friend and very senior within the economic administration, and why I believe that there will be a motivation to help lift up this

decimated restaurant industry. It's related to city and state revenues. That if they have big cities all over the country that end up with a graveyard of a restaurant industry, not only is that tragic for the unemployment it produces and for the communities that are victimized by it, but it takes away revenues from these cities and states and just makes a bigger hole that really Congress is going to be turning to the feds to go fill. So I think that the state and local financials are very precarious. They haven't even begun to consider how they're going to fill it where it's most precarious, like the city I'm sitting in right now. I noticed that Nashville, Tennessee increased taxes a little, that Dallas, Texas is looking to increase. I think that either statewide or maybe it was only Maricopa County, but in

Arizona. So you see certain areas saying, okay, we just got hit a little. We need to go nudge up our sales tax or nudge up a property tax or something. They're looking to go try to get ahead of it a little, seeing what's coming. But yeah, the biggest question is what is the bailout going to be? And that we're going to know when this stimulus 4.0 comes. And then we also have another question, switching gears. David, why are midstream MLPs getting hit hard so badly over the last several months, other than overall demand depression,

and what other related COVID headwinds might they be facing? Well, the second quarter was one of the biggest quarters, if not the biggest quarter for MLPs in history. So what we're really talking about was the first quarter being one of the worst quarters for MLPs in history. And then last week in July. But the last few months, there was a huge vertical move higher in the pricing of a lot of midstream pipeline companies, both those tax-structured as MLPs, master limited partnerships, and those tax-structured more traditionally as corporations. biggest issue last week was the governmental, the judicial ruling blocking the Dakota Access Pipeline and it causing a sort of systemic question as to what other new projects will end up being able to go forward. Now, my view, even though I vehemently oppose that ruling and believe that those pipeline operators out of the back end should not have to shut down pipeline operations, it probably is a benefit to those that are real heavy

Permian operators. And you can make that argument about other particular parts of the country as well, where there's a lot of oil and especially natural gas extraction. But the answer as to why is purely sediment driven. You have this huge yield premium, yield spread. You can get a lot more income from MLPs than you can REITs or utilities, other spread sectors to the treasury bond market. And investors don't have the confidence because of that impairment that the sector's taken on. And it's just become an area where you have to perform. You cannot go buy 20 companies and have three do really well and six or seven survive and 10 go out of business. So the sort of Darwinian principles are very much at play. Who's going to survive and

thrive? And I think that's down to only a couple names that investors can have that confidence in. And therefore, when you get crude oil confidence, back here into the 40s is enough to provide some of that. Get up to the 50s, and you're off and running. But really, it's the ongoing demand for natural gas, natural gas liquids that will provide the volume support necessary to economically rationalize our pipeline industry. And so I think it's going to take time for the pricing to come back. I think it's going to take time for the pricing to come back. But again, I'm not in any rush on that because I really believe we own the better quality companies. And those yields are incredibly opportunistic.

And, you know, we'll, of course, hear about dividend health in the oil space this earnings season. I would imagine that'll be a topic of conversation on some of these calls. Yeah. Let's also talk about, David, the dollar. You said in last week's Dividend Cafe that you expect it to weaken. So with that, are emerging markets a good buy? This is another question we're getting from a viewer. Well, I don't, yeah, the answer is yes. The the answer is yes i don't want our value proposition in emerging markets our thesis of investing to be a weak dollar but but with that said there just isn't any doubt that in the short term on a tactical basis a or dollar provides a pricing boost to the emerging market space. Historically, emerging markets have outperformed international developed markets and U.S. developed markets by a wide margin in periods of the dollar declining. However, if I had to base an emerging

markets trade just simply on the dollar going down and what that would mean in currency adjusted terms to EM investments. I wouldn't make them. What I want is to own stuff that I would be happy owning, meaning operating companies in these so-called emerging markets in any currency period at all. And then just accept that those returns are going to be enhanced or detracted from based on various currency environments that are inherently unpredictable.

So the short answer to the question is yes, but the long answer is I don't want to ever rely on that because we really are fundamentalist about emerging markets. Moving on, David, we've got another question. Do you believe that remote work will fundamentally change the nature of the way Americans work? That what will? Remote work. Will that change how Americans work? I guess essentially, perhaps if I can interpret the question is, do you think remote work is here to stay? And perhaps what does that mean for your investing thesis? Or is there an investing thesis you could build around remote work? Yeah, no, I don't. And I wouldn't want to debate that with anybody because it's very unknowable. But I think that it is often the case that people take a one-month, three-month, six-month trend fad. In this case, you could hardly call it a trend or fad.

It was forced upon most of the society by threat of imprisonment. Yeah, I think the remote work is going to have a higher role in the future than it has had in the past. It was going to even before COVID. But I do not believe that the entire American economic system is going to be restructured around people working from home. I think that that is being vastly overstated. I think that that is being vastly overstated. Yeah, I guess you saw a lot of the stocks levered to remote work kind of come down in value a little bit once things started to open up. So I guess you could make that kind of rotational case for any trend that we see over time.

Yeah. Yeah, I think it's an understandable thesis. It is, I don't mean this insultingly, but it is somewhat pedestrian. But it's also very demographic driven. And there's a lot of mixed data as to what various age groups think about and ages and stages of life, what they think about remote work and so forth. So I will focus on where a very significant portion of the white collar workforce exists, which is my age and stage demographic. And just simply say that I don't believe a lot of people with kids at home are relishing the opportunity to work from home permanently. Well, David, let's get back to the markets as we kind of get to the end of our broadcast here. The NASDAQ was negative. It's now flat after being more sharply in the green earlier today. But, you know, one thing I noticed, David, gold prices up firmly today, still above $1,800 an ounce. You know, I guess, is there anything to read into that?

Normally, obviously, when we see gold up, that suggests that some cohort of investors are a little bit worried about the equity market out there. Well, I think that's true at times, Scott, but I don't think it's true all the time. I think that the historical relationship between gold and equities is not at all reverse correlated. I think that there are periods of heavy cyclicality and periods of heavy counter cyclicality where there's an undeniable correlation now is not gold and equities or a reverse correlation gold inequities, it is gold and copper. And they are clearly very pro-correlated, pro-cyclical right now. Copper, I believe, has just had, if it's not its strongest quarter ever, it's very near it. And that leads me to believe that there is some underlying activity in the industrial metals that is probably more noteworthy than even gold, which has so many different things, different rhymes and reasons that could make it move

as a sort of a substitute currency at times. Gold is bought as a hedge. I think it's oftentimes bought unwisely as a hedge, but gold has a lot of central bank ownership. There's a lot of things that can move the price of gold. But the idea that when gold goes higher, it is being bought to hedge out equities, I don't think is always the case. And I certainly don't think it's the case right now. Otherwise, you wouldn't have a 400 point Dow day and gold moving higher. And in fact, gold has moved $150 an ounce over the last four months as stocks themselves have moved, you know, thousands of points. So we wish, to be honest with you, that we could figure out what makes gold move. If there were an internal rate of return, we could derive from it. I'd really like to monetize that. But unfortunately, I think that it becomes more speculative than we feel comfortable playing with.

So we don't utilize it as a direct investment, but we certainly look to it for whatever price signals it is often able to give. Yeah. And David, when we look out towards the second half of 2020, I mean, is there anything that you want folks to focus on? We talked about the election earlier. We obviously have been talking about COVID all along, but is there something else that's sort of on the radar that you don't think is getting enough attention? Besides the election and COVID and China, yeah, I do think that the shape of the economic recovery, there's so much focus on the jobs market and a lot of parsing out of the labor data, there's been a pretty decent amount of nuance into some of the zigs and zags that are embedded in the labor statistics. But again, I've only talked about it a little. Maybe some people think I've talked about too much, but relative to how much it's on my mind,

I think that what you end up seeing in the next six months in manufacturing, in ISM non-manufacturing, the services sector, durable goods orders, feeding that industrial production, which would really tell you if CapEx is escalating or not, are businesses investing into their futures or not? I've said this for years and years and years, but it's one of the most important economic principles. There's nothing that is more of a positive feedback loop than CapEx because it both creates economic activity and signifies economic activity all at once. So obviously the jobs market matters. It's going to have a lot of political ramifications. It's going to have a lot of political ramifications. It's going to have a lot of headline ramifications and human ramifications.

But I think that for the undercurrent of economic health, people cannot ignore where we go over the next six months in business investment because it's entirely possible that you get a better than expected recovery out of COVID. You get a better kind of post-COVID reality, herd immunity, a vaccine, a better therapeutic, all these things we really want medically as a society. You get a lot of people back on the payrolls, both monetary and fiscal stimulus kind of end up doing what they're intended to do. And there

doesn't appear to be a big hangover effect for a little while. All of that can happen. Everyone's going to feel great. But then you're going to say, wait a second, what's next for the next couple of years? And for there to be organic and productive economic growth, it's most certainly going to require business confidence and business investment. Yeah. And that lag time you mentioned is key because we need to see that investment now in order for the next few years to show that growth. Yeah. And when you say now, I think that means the rest of 2020, right? Like, I don't think that you're going to get multi-billion dollar factory commitments where they're not even sure if college football is going to happen yet, right? But once we get a little more clarity through July, August, going in the fall,

for the rest of 2020, I agree with what you said, yeah. All right, well, David, we're almost out of time for today, but want to thank you as always for all of your insights, and it's always great to be with you. And we want to thank everybody for watching, and we'll see you again in another couple of weeks. Yes, you will. Thanks, everybody. 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. The Bonson Group and Hightower shall not in any way be liable for claims and make no 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.

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