The Dividend Cafe - The DC Today - Thursday, February 16, 2023

Episode Date: February 16, 2023

ASK DAVID “Do you buy this stuff from Larry Lindsey and other economists like him that are worried that financial conditions are good enough that the Fed needs to assume their tightening is ‘not tight enough’? The reasoning seems to be that the Fed should take a message from financial conditions that they need to be tighter. Should the Fed be responding to financial conditions?” ~ L.K. I disagree with Larry Lindsey emphatically on this. It’s inherently contradictory – if the Fed were to try to let financial conditions drive monetary policy, then financial conditions would price (or try to price) how and what the Fed would be reacting to, giving the Fed a constantly moving target. The Fed influences yields and multiples and spreads; to then be influenced by yields, multiples, and spreads is perpetually circular and incoherent. 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. It is Thursday and we are in our last DC Today of the week. We'll have a dividend cafe for you tomorrow on the U.S. energy sector and our thoughts on investing in that space right now and a whole lot of ramifications around energy, geopolitics, the economy, and so forth. As for today, kind of bizarre day in the markets. I'm going to do this quickly. The Dow ended up down 431 points, but it was down at the beginning of the day, you know, 300 and something points like that rallied all the way back. It came to where it was down less than 100. Then in the final, let's see here, let's call it an hour, final hour of the day fell again. So you had kind of a drop, then a rally,

then a drop. The Dow down 1.2 percent, the S&P 1.4 percent, the Nasdaq 1.8 percent. The 10-year was only up five basis points in the yield. The best performing sector today was consumer staples and it was down 0.79%. So you had one of those days where the breadth of the drop was significant enough that all 11 sectors in the S&P were down. Consumer staples was the best or down the least. Utilities after that, real estate after that, healthcare after that. So there's your four most defensive sectors, and they were the best performing yet still negative sectors in the market. The worst was consumer discretionary, which was down over 2%, about 2.2%. So that was the state of affairs in the stock market and bond market today. Oil was pretty flattish, down a little bit, not much. So what was going on in the market today? Well, the producer price index

rose more than expected in January. This is wholesale prices. It was up 0.7 percent, and we had been expecting 0.4 percent. Energy prices, of course, were up 5 percent, because you remember they were down so much throughout the fourth quarter. They came back up and that caused a movement on the energy side of producer prices. Food prices were down 1% on the month. On the services side, the primary contributor to higher wholesale prices was hospital outpatient care. So I'm going to go out on a limb and guess that that's not a real Fed sensitive area in the market. But nevertheless, that feeling that the price levels were not dropping substantially, it still then creates more market volatility around the will they, won't they stuff with the Fed,

which you know well what I think about all that. Housing starts in January were down 4.5%, which is more than had been expected. So single family home, as far as new housing starts, were down 27% year over year. This is the fifth month in a row of declining level of starts. One thing I just want to bring up real quickly, and then I'll let you go, from yesterday's talk about the retail sales number. I read a report this morning from Corbu Research, who, as you know, I read daily. And Samuel Rines, who is a good friend and a very smart thinker, pointed out, and I'm sure others have pointed out too, but I hadn't thought of it yet. And Sam is an original thinker. And I wanted to share with Attribution that the first month of the Social Security increase from 2022 to 2023, where people got an 8.7% increase in their benefit was January. And when you take

the median level of what that benefit represents across the average Social Security benefit that is paid to 70 million people, by the way, it's $140 a month. And so is there a chance that that better than expected retail sales number yesterday is related to the first month of higher Social Security? Or do you think that nobody over 65 spends money anymore? I wouldn't. I can't prove it. Sam can't prove it. We can't track exactly what it's from, but it's something. And it's worth considering that maybe there was a little extra spending money in people's pocketbooks as a result of that Social Security increase. Read the DCToday.com for me on me interacting with Larry Lindsay is an economist. I like a great deal about how the Fed should be taking its cues from financial conditions

and that financial conditions are suggesting to the Fed they haven't tightened enough. And I provide a response to that, I think, problematic viewpoint. That's all I have for today in the D.C. today. Look forward to Dividend Cafe tomorrow. You have a wonderful evening. The Bonson Group is a group of investment professionals registered with Hightower today. Look forward to Dividend Cafe tomorrow. You have a wonderful evening. 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 and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. are from sources believed to be reliable. Any opinions, news, research, analyses, prices,

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