The Dividend Cafe - The DC Today - Thursday, June 1, 2023

Episode Date: June 1, 2023

Today's Post - https://bahnsen.co/3C3vY77 As expected, the House passed the McCarthy-Biden debt ceiling bill, and the Senate will do their part by this weekend. The bill passed by a vote of 314-117, quite the nail-biter, with 165 Democrats voting yes and 149 Republicans voting yes. This allows us to now change our focus to the next end-of-the-world moment. Do not fear – it will not take long – a new culprit for the cause of Armageddon will arrive shortly. And the media will be ready to tell you what it is. Futures are now at a 78% chance of a Fed Rate pause at the June 14 meeting (it was less than 40% just two days ago). Several Fed officials have come out jawboning the idea of a pause. I think there is almost a 0% chance that these Fed officials making public comments to this effect do not mirror the view of Chairman Powell himself. The world’s largest chipmaker most connected to Artificial Intelligence is trading at a mere 197x earnings now, which is just the bargain basement level of 23x gross sales. It is sort of surreal to see this kind of excess and froth just a year after all these other shiny objects got taken to the woodshed. Human nature is immutable. C3.ai, a leading artificial intelligence software firm, is down -30% in the last 24 hours as numbers came in vastly below expectations. I bring this up because they are all over the news since, well, they lose $260 million per year on gross sales of $266 million per year. That negative -98% margin being attached to a $6 billion market cap is, shall we say, a sign of the times. 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 Thursday DC Today. You know, these short weeks where you have a Monday holiday, it always seems to go by quick. You have a Monday holiday. It always seems to go by quick. Market was actually up today. And I'm going to quickly give you market metrics. I just want to go through a couple other kind of newsworthy and more qualitative things before I bid you adieu for this Thursday evening. The Dow was up 153 points.

That was roughly about half a percentage point. S&P was up right at about one percentage point. NASDAQ about one and a quarter. And tech was the leading performing sector today, but you had industrials, materials, and energy all right behind it at about 1.25% each. So you had a bunch of, and tech was right at 1.3, you had a bunch of sectors that were just right on top of each other. And then the only two that were negative were these defensives.

Consumer staples was down a tiny bit and utilities were down, you know, three quarters of a point. Technically, health care and real estate were up. But so not all the defensive sectors were down, but the only two that were down were defensives. And that's been kind of the sort of world we're in. defensives and that's been kind of this little world we're in and you know you look at a company that's been in the news a lot lately is this company called nvidia which is the leading chip manufacturer related to the ai space and you see a company trading at 197 times earnings and 23 times sales and that's that's the that's a bigger I think, for me to wrap my arms around, 23 times gross revenues. And you wonder how much of this can continue. And I don't have an opinion on that.

I don't have to have an opinion on that. We're not shiny object type investors. We're not momentum investors. And I certainly have no reason to believe from the testimony history, the things that get real pricey can't get pricier. And a lot of people have their investment strategy. Let's buy overpriced things that we think what's called greater fool theory. Others will help bid the price up and then we'll exit at that right point. You know, it's almost like in describing it, it sounds like I'm insulting it and it's not my intention, but I think it is, there is kind of enough foolishness or hopefulness or naivete associated with what I just said that I can understand if you think I'm insulting it, but that's not my intent. My intent is to just remind people that evaluation stretch period.

And when you get real selective and top heavy with certain things, you generally are in the midst of sowing the seeds for what becomes the next act of the play and a lot of mean reversion. And the problem is you just much like a boring Broadway play that you're begging for the intermission. You don't know how long a certain act can go. And that's where we are. Uh, you know, by a certain act can go. And that's where we are. You know, by now the debt ceiling deal, it's kind of not technically done deal because the Senate, it doesn't look like they're going to get to vote tonight. It will pass through the Senate. House has already passed last night, 314 to 117, slightly more Republicans and Democrats against, but still, I mean, obviously by a 200 vote margin, a big

passage. And then I think potentially, you know, the market did not wait to rally a tiny bit today because of the debt ceiling thing. I mean, they've known all week this was a done deal and you've had down days. I think it's probably that it's getting more baked in like, oh, the Fed really isn't going to hike at this next meeting. And just two days ago, the odds were growing quite a bit that they were. There was more and more chatter around that. But now, as of today, the Fed funds futures are back to 78% chance. So it's not a foregone conclusion, but that's pretty high for only 13 days away. for only 13 days away, 78% chance of a pause, of not hiking at the next meeting, which would be the first Fed meeting of the FOMC, the Federal Open Market Committee, since March of last year,

or is it April of last year? It's over a year, over a year. First meeting where they wouldn't have hiked rates. The jobs report will come tomorrow, the BLS official jobs report. Today, the ADP number came and it was quite higher than expected in private sector payrolls. But there was this massive contribution to that number from the mining sector, the largest monthly new hires in mining ever. And it doesn't really make a lot of sense. So I don't know what to make of it. We'll look at BLS tomorrow. And that's kind of scoop. Oil jumped up today about 3%. It's back up above $70. So another day, another dollar, and hopefully another lesson learned in the DC today. We will look forward to your dividend cafe tomorrow. And in the meantime, thank you for listening. Thank you for reading.

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