The Dividend Cafe - The DC Today - Monday, December 11, 2023

Episode Date: December 11, 2023

Today's Post - https://bahnsen.co/41lZfWf Greetings from 29 degree Grand Rapids, Michigan where I have had a day of meetings and recordings and give two different speeches in two different Michigan cities tomorrow. I will be back in the much warmer climate of New York City on Wednesday. In the meantime, the special Monday DC Today awaits you … 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. Well, hello, welcome to the special Monday edition of the DC Today. I am recording from Grand Rapids, Michigan, where it is actually already almost dark outside, and it's only 5 o'clock Eastern, and it's quite cold. But nevertheless, beautiful city. Had some meetings and speaking and recordings and things today,

and then I'm in a couple other Michigan cities tomorrow giving speeches, and I'll be back in New York City on Wednesday. So in the meantime, I'm here at the hotel recording, and tomorrow Brian Seitel will bring you DC Today as I'm out and about. You know, the market rallied again today, and I have a few things I want to talk about with the market. We'll just kind of cover all the basics. Futures were up about 40 points last night. And then I kind of quit looking at the market long enough to watch Dallas beat up Philadelphia. I thought they were going to win by 40 points and, you know, still a really good looking game for the Cowboys. Futures didn't hold that 40 point lead. It kind of went flat.

Futures didn't hold that 40-point lead. It kind of went flat. Market looked about flattish this morning, very early pre-market. And then it opened up about 75 points. And it did zig and zag from there. It kind of went lower, went higher. But by an hour or two into the day, it was kind of up. And then it ended up closing at a high and was up over 150 points into the day, it was kind of up and then it ended up closing at a high and was up over 150 points on the day, nearly half of a percentage point. An interesting tidbit about last week,

the Dow closed on Friday, exactly where it closed the following Friday. So you had a little up and down movement throughout last week, but it still ended up kind of being flat. I wouldn't be surprised if we see more of that. You get things moving higher. You know, today, 10 out of 11 sectors were up and so forth. But there isn't really a catalyst other than some event driven, you know, geopolitical unexpected earnings is season is done and won't pick back up for another month. Um, you know, the, the Fed is, is a hundred percent baked into futures that they're not going to be raising rates. We'll get a CPI number tomorrow. That's mostly, um, kind of baked in as to where things will go.

mostly kind of baked in as to where things will go. The expectations are that the core inflation rate will be up 0.3% on the month, but that headline inflation will be flat on the month. I don't expect there to be a big variance from consensus. And so therefore I wouldn't expect a huge market impact, but you never know. All that to say, I think we are hopefully in kind of doldrums to kind of ride out the rest of this year, and obviously that can change at any time.

I don't say it as a prediction. I just say it as sort of a feeling. As far as this market goes, there's a chart at the DC today of the top 10 companies in the S&P 500 and what they're waiting within the index is and then over the last 25 years or so. And you can see it is really at a high level. It hasn't been right now, the portion of the S&P that these top 10 companies represent since the late 90s. When you get 10 companies representing about 35% of the S&P, that's just simply extraordinary. Now, we had it in late 1989, and I think a lot of people know what happened in the year 2000.

And the last time before, you know, that it got to this level, which we've now since transcended, was at the end of 2021. So not 25 or 24 year ancient history. But then, of course, we also know what happened in 2022. I'm not predicting that when the market gets this top heavy, it means an imminent correction is coming. I'm only saying that this top heavy, it means an imminent correction is coming. I'm only saying that this top heavy has historically done that. And that doesn't really speak to any timing, but rather just eventually, you know, the rest of the market has to catch up or the market ends up tipping with top heaviness. That's where I think we're at now on an index basis.

That's where I think we're at now on an index basis. The 10-year bond yield actually was up a few, the yield was up a few basis points and ended up closing down one basis point on the day. So at 4.23%, that bond rally is held well in the long end of the curve. The top performing sector today was consumer staples up 1%. I was thinking about, have I said that all year? Consumer staples up 1%. I was thinking about, have I said that all year? I mean, I'm sure there's been a day or two, but I do this almost every day. And I don't think we've seen consumer staples at the top of the pack all year, but maybe one or two days.

So, yeah, that was the leading sector today up 1%. The only down sector was, oh, excuse me, communication services was down 1%. And I have to think there might have been a big name in there that helped drag it down. A kind of interesting newsworthy event, there's a link to this in the DC Today about reports of an offer for a private takeout of the long publicly held company, long publicly traded company Macy's. publicly held company, long publicly traded company, Macy's, which by the way, did used to many years ago be in our dividend portfolio. And we exited that for the same reasoning we often do. It was really, I think, just kind of in line with what our process and thinking is. And there's been a lot of names over the years that we have sold well before they ever cut the dividend. Macy's was one. But private equity coming in and saying they think a turnaround is possible,

they think a turnaround is likely, and it's going to be much more beneficial in private markets than under the scrutiny and needs of public. So I don't know what's going to happen to that deal. I don't have any commentary on it. The link is there if you're interested in the news story of it. But I bring it up to say I don't think there's only one company out there going into 2024 that may be in the crosshairs of various private equity opportunities. There's plenty of capital. And then the question is,

where is their strategy for companies to have a better exit, a better time doing a turnaround by exiting public markets. So that could very well be something I talk about more in the weeks ahead. All right. The president of the University of Penn resigned on Saturday based on the testimony of last week, which you really would have to watch to believe. Public policy, it looks like this sort of confusing. I want to say this real quickly. The CHIPS Act, which was passed by Congress, was going to pass a waiver that would not require companies to go through environmental review. And then that would expedite them being able to get Chips Act money quicker. But the group that wanted to waive the environmental review was mostly

Democrats, and the group that said no to waiving the environmental review was mostly Republicans. But see, the reason that Republicans are doing what they often wouldn't do is that they are really upset about some of the post passage CHIPS Act restrictions and stipulations and whatnot. And so they are using this to kind of slow down that process. And then I think some on the Democrat side are anxious to get those funds out. So it's interesting reversal of how you might normally expect people to line up. those funds out. So it's interesting reversal of how you might normally expect people to line up. But you know, when you pass corporate welfare, that's kind of what happens, strange bedfellows.

The White House is struggling to get their financing for the next batch of Ukraine support across the finish line. If they don't get it done the next day or two, I believe Zelensky's on his way out to address the House and Senate. I would imagine this gets punted into January, and I would imagine it doesn't get done standalone, that it ends up having to be attached to border bill or Israel bill or both. There's a lot of moving parts there. Unemployment came out on Friday, 199,000 jobs created, 3.7% unemployment rate. The numbers from the last two months were revised downward by 35,000. Not a huge revision, but it wasn't an upward revision either. Year over year, wage growth is 4%. The only thing I'd say about the report, which wasn't great, it wasn't terrible,

it was just right in the middle there where I talk all the time. But there were 38,000 striking workers that were back in the flow now this last month. And they had been out the month before. So it was kind of muted. By the way, speaking of not muted, consumer confidence jumped back up again last month. So I wish you could understand how worthless that data metric is. All right, against doomsdayism. You, you if you don't feel this is against doomsdayism, then you know, you do you I'm just sharing my take 1.25 billion less people living in extreme poverty today than 25 years ago around the globe. That's 137,000 people per day that have come out of extreme poverty. So that strikes me as a really good thing. Okay. Finally, someone asked if I thought Bitcoin would exist at all in five years. And I laid out the fact, the idea of it not existing and whatsoever is not my viewpoint.

I have no idea what will happen in five years. I don't know what the price will be. I only know that I'm not able to price it based on there being no internal rate of return, and that there is still to me a dilemma that is unanswerable by Bitcoin enthusiasts, which is either it doesn't really take off because it doesn't ever get adaptation as a medium of exchange, that it just continues to be primarily used by somewhat nefarious users, and that the idea of it being a really widely used, stable medium of currency never happens. And that doesn't seem like a good thing. But then if it does happen, and there is widespread adaptation, then I think it invites a significant more amount of regulation

and intervention, which strikes me as a negative to what the enthusiasts of this cryptocurrency are after. And then regardless, if you get wide adaptation and very limited regulation, okay, I still don't know what that has to do with the price of the Bitcoin. But the question was about if I thought it would just cease to exist, I still don't know what that has to do with the price of the Bitcoin. So, but that, but the question was about if I thought it would just cease to exist. And that's not necessarily my view. I,

I, my view is that there it's unpredictable. Okay. I'm going to leave it there. We covered a lot of ground. Please check out the dctoday.com, uh, divinity cafe on Friday.

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