The Dividend Cafe - The DC Today - Monday, February 12, 2024

Episode Date: February 12, 2024

Today's Post - https://bahnsen.co/42ztxFL Greetings from the sunshine state of Florida, where I will be all week (different cities each day of the week) seeing clients, talking about the new book, and speaking to a very large symposium of fellow financial advisors. And thank you to all of you who gave such helpful feedback and encouragement on the DC Today weekly program! Brian and I both really appreciate it! The Dividend Cafe on Friday looked at the relevance of work to our understanding of economics. It mixed in an updated thought on modern portfolio theory, and it concluded with a comparison of 2024 to 1999. 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 and welcome to the DC Today, Monday edition, day after the Super Bowl edition, and I might add from Pensacola, Florida edition, which is not exactly normal. So we had an update in the market, if you're talking about the Dow and the defensives, and we had a down day, barely, with the NASDAQ. But it's been more the opposite lately.

You've had more risk on with things like tech and and consumer discretionary. And the defensives have lagged a little bit more. Today, you had a weird day where utilities were up over 1% energy was up over 1% consumer staples were up about 6570 basis points, and then technology was down how much? 77 basis points. So maybe just a little readjustment here. I'm going to go through the normal things we do on Monday, just real quickly, talk through kind of some of the market points and some of the other categories you like to go through. I did want to say a quick note, just thanking people who gave feedback about our kind of adjustments we made on the DC Today program. It was a lot of encouragement, a lot of positive comments,

and both Brian and I really appreciated that. And hopefully you'll keep the comments coming. We want to continue using this medium to make sure we're giving information that's valuable to you in a way that's valuable to you. I would really recommend those of you who missed Dividend Cafe on Friday to check that out, just in the sense that there were three different topics, all three of which I believe are quite important that made their way in. So whether it's the video, the podcast, or the written, check that out. So the futures last night opened up down 30 points. I would love to know what futures traders were on their desk because the futures opened literally during the national anthem for the Super Bowl. And any kind of trader that was not watching the Super Bowl has no business being in this profession.

So it was obviously a muted deal there. But futures are down 30. And by the time the game was over, futures were basically flat up a couple points. But then this morning, the Dow opened up about 25 points, and it got up within the next few hours in the first half of the day over 200 points. It gave some of that back. The Dow ended up closing up 126 points. It's about a third of a percentage point on the Dow. But again, with the NASDAQ down 30 basis points and the S&P was down just nine. The data point I want to share is something I had just been studying here this afternoon, the high yield CDX spreads. So basically it's the spreads that are measuring the lower rated

corporate credits. It's a very important risk barometer. And it's down to 350 basis points. Okay, what that means is that the cost on high yield debt of insuring it or protecting it is at a very low level. It had gotten up to about 600 basis points in the later portion of 2022. Now, it isn't at an all time low. 250 is where I think it's ridiculously low, that there's not nearly enough respect for risk. It's an index I've been personally watching since 2007, and there was a heavy factor in how I adjudicated things, both pre, during, and post financial crisis. I don't think it's a great timing mechanism necessarily, but it is indicative right now of the

fact that there is a pretty high appetite for risk and a very low appetite for protecting against risk. The put-call ratio has gotten very low again. There's a certain amount of complacency in the market. Do with that what you please. But the high-yield CDX, to me, is still indicating that liquidity, people's perception of what the Fed will be doing, the cost of capital, there are forward expectations of good days to come. Okay, what else do I want to go through here on the market? Small cap is up 27%, the Russell 2000, as far as the index, from its late 2023 low point. News stories, besides the congratulations we'll give to the Kansas City Chiefs for their overtime win in the Super Bowl last night,

the former president, Don Trump, did ask the Supreme Court today to rule as to whether or not his case that he lost with the appeals court about presidential immunity on some of these charges he has, by going up to the next level Supreme Court, regardless of what they end up ruling there, I'll withhold my guess on that, it is still very likely to delay things further. So I think that's kind of the bigger news event today. There isn't a lot in the news cycle, by the way. Economically, though, tomorrow, the CPI number for the month of January comes out. So consumer price index is largely expected to continue moving lower, both because there are the disinflationary factors I've been talking about for some time,

but then the measurement of it all, it's well known that the rents and shelter and housing related measurements have lagged significantly far longer than I think is rational or reasonable. And so regardless of what's happening with other price levels, there's an expectation that CPI will be headed downwards because they know that this rent barometer is going to be headed downwards. We'll see how that number comes in tomorrow, Tuesday. The Senate now, because they didn't filibuster, they got through the procedural hurdles. So they're expected to now go pass a standalone Ukraine funding bill and an Israel funding bill removed from border security after that deal was killed

last week by Senate Republicans and was also going to be killed by House Republicans. Now what happens on a standalone bill that the Senate passes bipartisan and sends to the House, I think it's going to make for some very interesting politics. There's a chart in the DC Today about inventory levels and housing year by year over the last five years, just to give you an idea of the incredibly low supply that we have in single family residences as a country. And to be able to see where things were pre-COVID, where they are now on the supply level, and even pre-COVID, it wasn't great, but it's just really a powerful chart to illustrate that. Okay, wrapping things up, we're down to a 16% chance in the Fed funds market

of a rate cut at the March meeting, but we're at a 65% probability at the May 1 meeting. So that seems to be the newest consensus view. We'll see if that moves at all after CPI data tomorrow. Am I against doomsdayism on Monday? Yes, I am. I'm against it seven days a week. What's one of our factors today to reinforce why doomsdayism is anti-rational, anti-reasonable, anti-factual? How about the fact that in the late 19th century, this is just stuff I was reading this weekend, housewives in America on average were hauling eight to 10 times a day water from an outside well into their house, 50 gallons a day, in aggregate 36 tons of water per year. In aggregate, 36 tons of water per year. Okay?

Yes, tons, like with a T. A single load of laundry required 50 gallons of water because of the washing, boiling, rinsing, and obviously the technology and so forth just wasn't there. By the way, this wasn't the only thing they're having to haul from outdoors to indoors was water to have reasonable you know hygiene in the clothing but even ashes and so forth from stoves had to be removed this was a burden put on on housewives at this point in time so this isn't ancient history is just a little over 100 years ago that's the way people in in well-to-do affluent urban areas were living. So yeah, I think things have gotten better in that regard. Somebody asked a question to ask David about, there was a company I mentioned that we own that is really consistent in updating throughout the quarter as they get new projections

in some of their oil and gas metrics, how much they're drilling, producing. And he was wondering why all companies, all sectors don't update. Why wait for the quarterly requirement? Wouldn't it lower volatility to have more transparency? And what I had to point out was that the company I use is actually an exception to the rule. Most companies can't be forthright throughout the quarter because they don't necessarily know. It doesn't lend itself to day-by-day quantifiable metrics, what's happening within business conditions. But let's say they did have an indication. Giving up that data more frequently than is required exposes them to risk, accountability, regulators. There is certain liability that could come up. And I think a lot

of companies have just said why are we doing this to be nice uh there isn't a reason to do so and of course many don't even believe the quarterly disclosures are exactly a pleasant thing but then third is the competitiveness of it why if you're giving that data to the public uh you're giving it to your competitors as well and so there there are some industries where it may not be a concern. That is certainly the case example I used with Exxon, but I don't think it is true of every sector. Very thoughtful question. I hope the answer is helpful. I'm going to leave it there. I look forward to giving you what's on David's mind each of the next three days in the DC today. Brian Saitel will be running with the rest and I'll see you in the Dividend Cafe on Friday

as I continue to mosey around city by city here in Florida. Thanks for listening. Thanks for watching and thank you for reading the DC Today. 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

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