The Dividend Cafe - The DC Today - Tuesday, January 23, 2024

Episode Date: January 23, 2024

Today's Post - https://bahnsen.co/47R5iUm A short and sweet market recap today as earnings season launches further. Small cap seems to have bounced well since its rough patch to start the year. Bitcoin has dropped -20% since its peak in the midst of ETF approval. I was on set at Fox this morning with the chair of the House Ways and Means Committee, Jason Smith. The 40-3 vote on this tax bill was shocking to me, and it sure seems to foreshadow a comeback of some of the most stimulative parts of the Trump tax bill that previously went away. 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 Tuesday edition of DC Today. I'd say it's a pretty boring day in the market. You have earning season kicking in a little bit. There's still an avalanche of companies that will come this week and next week. These are the kind of heavy seasons. For us, we had just in our portfolio, I think five companies report today. So it was quite a busy day of digestion and analysis. We had a couple that had really big results or was one that came down a little bit. I mean, really a strong day in the consumer staples. That was the top performing sector today, up over 1% on the day. The worst performing sector was real estate.

It was only down 50 basis points. But you ended up with the Dow down about 90 points, a quarter of a percentage point. The NASDAQ up about 40 basis points and the S&P up about, what was it, 29 basis points. Some anecdotal things I'll share. Since the point at which Bitcoin's ETF, not one, not singular, a big avalanche of ETFs were approved by SEC, the price has come down 20%. The small cap sector has had quite a nice rebound. It started off on shaky ground, but it had quite a little comeback. And I'm curious about that because it appears to me on a relative basis to have a big disconnect from big cap.

The relationship or ratios between things like the Russell 2000 and the S&P seem really out of whack. And to the extent that that can, that spread in historical correlation can come together, converge without it meaning the S&P coming down, that's probably better for market investors. Oil was barely down at all, still close at 74.55. The 10-year was down a tad as the yield went up 3.8 basis points to 4.13. And then with our remaining time, I want to walk through for you listening to the podcast or watching the video, the answer I gave in the Ask David section of DC Today, because somebody brought up a point that when I did a dividend cafe two weeks ago about government debt, federal government debt, made the distinction between public debt, money that they owe, which is about 108% of GDP right now, it's about 27 trillion, give or take,

and then total debt, which includes intergovernmental debt, which is about $34 trillion and is about 125% of debt to GDP. And they asked why it didn't include the debt to the Fed in intergovernmental debt. And the reason is that it's not. The Fed bought bonds off of banks and credited cash to the banks and put the bonds as an asset on the Fed's balance sheet. And it remains a liability on the balance sheet of the United States federal government, which, by the way, is you and me. The Treasury bond is a debt to one party, the taxpayers, the federal government, the Department of Treasury. It's an asset to another party. You and me as investors, banks that own treasury bonds,

China that owns treasury bonds in their foreign reserves, and yes, the Federal Reserve. And so the question is, well, but by the Fed buying these bonds, isn't it enabling the government to continue running up more debt? And I would point out the Fed sold off over a trillion dollars of treasuries in the last, let's call it 14 months. And the deficit was up over $2 trillion. From 2015 to 2020, early 20, we added trillions of dollars to the national debt and the Fed was buying no bonds at all. And as it stands right now, in terms of public debt, there is something in the range of $27 trillion and the Fed owns about $5.5 trillion of that.

Some of the other assets on the Fed's balance sheet are Fannie and Freddie mortgage bonds. So the Fed owns a tiny bit less than 20% of our debt. So the Fed is not our bond market. They're way more of our bond market than I want them to be. It's highly distortive, But this isn't Japan. And it isn't intergovernmental transfers. I mean, as a matter of technicality, the government has to pay that back. And so I'm accounting for this accurately.

And unfortunately, it would be wonderful to say the national debt goes up because the Fed's buying bonds. It just simply isn't true. The national debt goes up because our elected representatives spend more and we want them to spend more. I mean, that's not a political statement. That's just reality. I think it's important economics to understand. So I thought I'd leave you with that cheery note tonight. All right, I'm back to another meeting now. So I'm going to say goodbye. Thank you for listening. Thank you for watching. And thank you for reading the DC Today. I'm off on a train early tomorrow for a whole bunch of meetings in Washington, DC.C. tomorrow and then a really important investment and public policy conference on Thursday back

into New York City Thursday night. In the 36 hours that I am gone, my partner, Brian Seitel, will be bringing you the DC Today and he will be doing a remarkable job as he always does. Thanks so much. Have a good night. The Bonson Group is a group of investment professionals registered with Hightower be doing a remarkable job as he always does. Thanks so much. Have a good night. 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.

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