The Dividend Cafe - The DC Today - Tuesday, January 3, 2023

Episode Date: January 3, 2023

I began writing this from Dallas, Texas this morning, where yesterday USC suffered a heartbreaking loss in what was one of the most exciting Cotton Bowl games ever. I am back in Newport now, where tomorrow morning we reveal the new large office expansion to our team (same floor, same building). It has been a labor of love, I assure you. We have added new advisor offices (we have a new advisor starting in Newport Beach and another new one starting in Nashville next week), but mostly the Newport expansion houses new members of our Tax Department, Planning Department, Research, and Trading. It is really beautiful space. Today’s DC Today is the normal Monday format of DC Today and, obviously, the kick-off to 2023! There is a 27-page white paper coming Friday in the Dividend Cafe providing the most comprehensive recap of 2022 and forecasts for 2023 we think you will find anywhere. I hope you find it to be a labor of love, too. 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. of 2023. I am literally right off of an airplane coming back from Dallas, Texas. We're in the office. I'm actually in my own office in Newport Beach right now, not in the studio because our whole office, we have a whole new expansion opening tomorrow. And so the area where the studio is, is being worked on as certain people are moving over to new space. And there's a lot of tech stuff moving around and this and that. And so it's kind of a weird chaotic day combined with my travel. And yet nevertheless, there is a DC today and whatever chaos you think is going on in our office and with the change and with the travel and with USC's depressing loss and all of those things, it pales in comparison to the chaos going on right now as we speak on Capitol Hill, which is largely what DC Today is

about today. I want to talk about what's going on in the house race. The fact of the matter is that markets did start the year today with a pretty fair amount of volatility. You always kind of wonder coming off of a sort of quasi holiday break what to expect in terms of reopening and traders being back at their desks and things like that, the end of tax loss selling and so forth. The expectation that we were going to have a weird day in the markets was foreshadowed last night where futures opened up about 150 points and then went kind of flattish and then went down. And then this morning we're showing up 250 points.

And so you just had a lot of movement showing kind of a lack of direction. And then the market traded in a 550 point range today. It was up as much as 250 points on the Dow. It was down as much as 300 and it closed down 10 points. Now, the S&P and the Nasdaq didn't fare quite so well, largely because you had two gigantic capitalization companies that were down a great deal. A company called Tesla was down about 12% today and a company called Apple was down nearly 4%. And so, you know, those size of companies,

that's going to change things in the indexes a bit. But the bond market rallied today. The 10 year yield was down eight basis points. So you got quite a bit higher in bond prices. And the Capitol Hill activity that as I'm sitting here recording right now in the middle of the afternoon on Tuesday, January 3rd, I have no idea where it's going to go. And I don't know if we're going to know by 2.15 in the morning, let alone 2.15 in the afternoon. The bid for Kevin McCarthy to become the Speaker of the House, Republicans obviously have a majority, but his inability to get the votes necessary from someone in his own party means that they can't get to the 218 majority needed. And he failed on the first ballot, which was the first time it's happened in over a hundred years.

And then as I'm sitting and recording now, they've now gone twice more. So there's now been three different ballots and he's failed through all of those as well. So at some point, does somebody blink? Does a compromise come? Do they keep doing this for months? Do they accept a motion to vacate and delay? I mean, there's a few procedural things

that could happen. But when something hasn't happened over 100 years, people start reading their 1836 textbook on stuff. God knows what's going to happen. And I don't know that it's a huge impact in the markets right now, but it probably can't be helping. It certainly adds to a little uncertainty. But the main takeaway I wanted to share with you today and DC today is that I've really racked my brain thinking about this today. I read a number of reports. I talked to two friends of mine on the Hill. I don't think, regardless of how this gets worked out,

I don't know how you can draw any conclusion than that the debt ceiling debate later in the year is going to be an absolute prime opportunity for a few of these folks on the Republican side to grandstand, but not just for the sake of a few days or a shutdown or whatnot, but potentially really holding out on that funding. But potentially really holding out on that funding. The way it works, just so you understand, is that Congress passes legislation to pass a budget. And they've done that. Anyone who doesn't like the budget doesn't have to vote for it. But then there's a separate issue that is procedural, not legislative, about a debt limit. And Congress has not passed a balanced budget amendment. So you can legislatively solve for debt limit anytime you want by saying you can't spend money you don't have. Congress refuses to do that.

And Congress accepts budgets that don't do that. And people can argue all day long. In fact, I think most people would, by the way. That's what they need to do. We need to run deficits or whatever. I mean, I have so much I can say on this. I just don't want to waste your time right now because it's not really my point. Regardless of what one thing should or should not be the size of government or our relationship with deficit spending or whether or not the deficits are the fault of

the fact that our tax rates are too low or others who believe the spending is too high or whatever. There are different opinions on all that stuff. And I most certainly have my own, but that's not my point. My point is that Congress agrees to this. It gets passed legislatively. And then the debt ceiling becomes this procedural thing that's totally unrelated to legislation. And it provides an opportunity for a legislator to not have to legislate. And that's totally unrelated to legislation. And it provides an opportunity for a legislator to not have to legislate. And that's what my grievance with it is. But I guess that's my takeaway from a market standpoint on this stuff with Kevin McCarthy today. Whether one likes him as Speaker of the House or doesn't is not necessarily my point. There is, to me, pretty clear willingness that because of the

weird margins by which the Republicans have a sort of majority, but where I'm going to guess somewhere between five and 20 of those people stand, I think that we should anticipate later in the year a debt ceiling debate that is different than something we've seen in the past. And I don't mean that in a positive way. And I also don't mean that because I like the idea of a permanently limited debt ceiling. I don't. I don't like excessive indebtedness. But the way to solve for excessive indebtedness is to spend less, which is the responsibility of Congress appropriates money and passes budgets. So this whole thing is kind of weird. And maybe after the SC game yesterday, I'm not in the mood for it. But I think it's market warranted. So I wanted to bring it up. I mentioned a couple of big stocks that were down today that hurt markets. Energy

was the worst performing sector on the day, but in communication services was the best performing. And actually, as best I can tell, there's more positions that were up today than down. And so I think you had an okay day breadth wise, but you just had a few larger sized positions that brought down the other averages. I have so much I want to say about where we are in the market, the economy. It's just that I wrote a 27-page white paper over 9,000 words to do just that. And I don't really want to give it all away. That paper will come out on Friday of this week. There will be extensive video and podcast to go with it. There's a lot more to say that I just won't say right here. But for now than today, that's the major story. A lot of escalations in Ukraine over the weekend from the vantage point of those who are rooting for Ukraine, not Russia, which I hope is still like a thing.

Ukraine had a successful weekend, but that ended up not becoming the major story in the political news cycle today along this drama playing out right now on Capitol Hill. So I'm going to leave it there. We don't have earnings season starting for a couple of weeks. Clients will receive a weekly portfolio report in the morning with the kind of end of the year summaries of a lot of different things. But that's our back to D.C. today edition here on Tuesday, January 3rd. I look forward to coming back at you tomorrow, Wednesday, the 4th. Have a wonderful evening. Reach out with any questions. Questions at the Bonson Group dot com. 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.

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