The Dividend Cafe - The DC Today - Monday, April 24, 2023

Episode Date: April 24, 2023

Today's Post - https://bahnsen.co/3oDNT0y Earnings season is off and running and, so far, looks pretty good (or at least not that bad). But it is really early, and the heart of earnings season will be this coming week and next week, and we will keep you posted each step of the way. Dividend Café took a real look inside the inflation story of the last couple of years, particularly the lag effect of shelter. But it did so not merely in how it overstates the CPI now but how it understated it in 2021. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Hello and welcome to the Monday edition, special edition, DC Today. I'm going to start with some breaking news. today. I'm going to start with some breaking news. No, it's not. Tucker Carlson has been fired from Fox News. It is not. Don Lemon has been fired from CNN, though both those things are true. It's that Aaron Rodgers has been traded from the Green Bay Packers to the New York Jets, by far the number one news story of the day. Other stories include that supposedly President Biden will announce his reelection bid by video tomorrow, Tuesday. That isn't even confirmed. And there's a few market things and stuff we're going to go through in a moment that you could consider newsworthy. But let's just kind of first do the little

breakdown of the day. The Dow ended up up 66 points on the day. That's with energy up one and a half percent on the day, by far the top performing sector. Technology down almost half a percent. The S&P was pretty much dead flat. It was up a tiny little bit. And then the NASDAQ was down about 30 basis points. And so no dramatic activities anywhere in the market, but a fair amount of dispersion, different levels of results. Let's keep in mind as it pertains to the S&P that only 17% of companies have reported results so far. So we are about to get a flood of results this week and next week. The lion's share companies will report over the next two weeks, both within our own portfolio, but as well as within the S&P 500 at large. And that includes the bulk of these big tech

companies that matter so much to where market returns are. Other activity today that I think is noteworthy in markets is a pretty substantive bond rally. You had every point of the term spectrum down, excuse me, up as yields were down anywhere from six to eight basis points from the two-year up to the 30-year maturities. So a pretty noteworthy rally across the term in bonds. Oil was up 1%, not a big move there. Something I want to point out as it pertains to the dollar, that the ongoing press about the dollar being down somewhere between 10% and 12% on the year. When you're comparing it, what we call the DXY, it's versus a basket of other currencies,

the yen, the euro, et cetera, et cetera. And it's true. It is down 10%, 12%, depending on what exactly you're looking at and the exact start date and so forth. But it is up 13% from the place where it was throughout the bulk of 2021. So really what you saw was the dollar had done what it had done post-COVID, then you had a meaningful move higher that now it has given half of that back, give or take, as the dollar appreciation relative to various other currencies worldwide. I mentioned some things in the news impactful to markets. The Tucker Carlson firing and even the Aaron Rodgers trade are not examples of things that move the markets. But the debt ceiling debate

potentially may be. And Speaker McCarthy's bill that was released last week that they've been whipping votes for ever since, they can only afford four defectors to maintain 218 yes votes, which would be needed to pass it. And I think it's a game changer if they pass it. I really do. The reason why I say that is, the reason why I think it's a game changer is I really don't see how it doesn't force the White House to negotiate if the GOP House passes a debt ceiling lift, even if that debt ceiling lift comes with what is in this bill, $4 trillion of spending cuts over 10 years House or at least split, at least where there's a sort of division of culpability that makes it a very different political matter than if it's a one-sided affair blaming the House GOP, which is certainly what would happen if they do not pass

a bill of their own. Now, why wouldn't they be able to pass the bill of their own? There are three things that I think are challenging to get the 218 votes that they need. One of them is that it does get rid of ethanol subsidies, a tax credit for use of biofuels, that ethanol biofuel that, you know, most people on the right are against, not all are, especially politically. You can imagine if you're in a farm-heavy Midwestern state. And then what exactly they're doing with defense spending and what exactly the politics of that are within the right these days is kind of a mystery to me. There was a time, obviously, where Republicans were known for being strong on national defense. And right now, defense spending could very well not be viewed as something that is leverageable to the Republican side. And then I think the other piece is work requirements that are attached to some of the social welfare and transfer payments. And I don't think that'll end up being an issue.

I think that they'll overcome that politically on the right, which is all we're talking about here. All right, real quickly, housing prices, excuse me, housing volume, the volume of transactions of people selling a home was down 13 of the last 14 months. In March, another down month in terms of transaction volume. It's down 22% year over year. Now, that's a sizable decrease, but I would have expected that number to accelerate and it has not. decrease, but I would have expected that number to accelerate and it has not. The median home price is down about 9% from its sort of June, May or June peak of last year. And that's the number that we'll kind of look to here in the months ahead and see what happens in this tug of war

between volume and price that's taking place in the housing market. The Fed funds rate at this point, it's all but assured they're going to hike a quarter point last year. Excuse me, next week, the Fed funds futures market is now up to a 91% implied probability of a quarter point rate hike. There is an against doomsdayism section, once again, in this Monday edition of the DCToday.com focusing on the just utter collapse of abject global poverty. Most people who are decent human beings would love to see that number at 0%. It is not at 0%, but it has gone from 29% to 9% just in the last few decades. And it's gone from 85% to 9%. Those living in abject extreme poverty, virtually almost the whole world 200 years ago

to less than 10% of the world now. I am against doomsdayism. Finally, the Ask David today dealt with this question of benchmarking a portfolio. When you look at your portfolio, how do you want to compare it to what other index may be appropriate to see how you're doing? It's an issue I've addressed heavily over the years, have very strong opinions on. My opinion has never been, by the way, don't take your portfolio and look at an index. Don't take your portfolio and compare it to whether it's the S&P or the Dow or the bond market, whatever you want to make up. My opinion has simply been that we don't care

about it, that we are dividend growth managers who have a distinct philosophy that drives us to believe in dividend growth investing, and that we want to benchmark or adjudicate, evaluate how a portfolio is doing relative to its ability to achieve financial goals. That if one outperforms a benchmark and fails to meet portfolio goals, that sounds like a bad thing to me. And if one underperforms a benchmark, but meets portfolio and financial and investment goals, that seems like a good thing to me. And so we do not accept that an index that is heavily distinct and different from a portfolio that is constructed to help a client or an investor meet their particular goals, that that index tells us anything about how the investor themselves is doing. And particularly within dividend growth, that growth of the income within the portfolio, that A, we already believe through time, regardless of what the lag effect is, sees price appreciation follow, but B is relying upon

the organic and internal growth of income, not the actual pricing that comes from any number of circumstances, either price appreciation or depreciation could be coming from any number of circumstances that are immaterial to the investor. So our philosophy of benchmarking is not so much that we think it's a bad thing using an index. It's that it doesn't really solve for what we care about, which is clients meeting goals. It doesn't tell us anything about whether or not we're doing a good job. If the market's down 8% and we're down 5% and we're seeing dividend cuts, we're not happy that we outperformed by 3%. And likewise, if the market's up 12 and we're down 5% and we're seeing dividend cuts, we're not happy that we outperformed by 3%. And likewise, if the market's up 12 and we're up nine

and we're seeing great dividend growth, we're most certainly not unhappy. And so we're just incapable of caring about the larger part of the conversation. But that doesn't mean someone else can't decide. It's just, we would add that their own human nature is highly likely to care in periods of up markets to care about relative returns and in down markets to care about absolute returns. This is just what I've observed for 25 years. I don't think it's going to change anytime soon.

It's about all I got. I think I pretty much covered for you watching the video and listening on podcast. Most of what we covered in the written DC today, there's always a few other nuggets in there, especially on Monday worth checking out, go to the dctoday.com do rate us, please review us. It really helps the podcast traffic and visibility. If you'll be so kind as to write us a review at Apple for the DCToday.com podcast. Thanks for listening. Thanks for watching. Thanks for reading the DC Today. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC,

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