The Dividend Cafe - The DC Today - Tuesday, October 18, 2022

Episode Date: October 18, 2022

This is Trevor Cummings joining you as your guest host on DC Today.  You can find my weekly commentary at www.thoughtsonmoney.com.  Also, please join me for the DC Today video and podcast – see below. Market Action Dow: +341.67 (1.13%) S&P: 1.16%% Nasdaq: 0.9% 10-Year Treasury Yield: 3.994% (+2 basis points) Top-performing sector: Industrials (+2.36%) Bottom-performing sector: Communication Services (+0.54%) WTI Crude Oil: $83.22/barrel (-2.6%) Key Economic Point of the Day: • Industrial production in September rose 0.4% which was a surprise to the upside – estimates were 0.1%.  Additionally, August was revised slightly to the upside, as well; a revision from -0.2% to -0.1%. • The National Association of Home Builders’ (NAHB) monthly confidence fell 8 points to 38 in October, making 10 consecutive months of decline.  Note, the index was at 80 last October and this 10-month decline tops the record of consecutive declining months set in ’06/’08. Links mentioned in this episode: TheDCToday.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Hello and welcome to the DC Today. One thing you'll notice is that I am not David Bonson. I am Trevor Cummings, filling in for David Bonson today. He is in New York with a few of our other partners doing their annual due diligence meeting. He'll be talking about that in the coming weeks. It's something that they do every year for something like the last 13 or 14 years, meeting with every manager we collaborate with and just basically digesting everything that's going on in markets. And the intent is to bring back some actionable items to improve our portfolio management. One joke they always make at church is they never like to give me the microphone because I'm usually going to tell an inappropriate joke or I'm going to get emotional.

So I'll start today's guest appearance with something a little bit emotional. I just want to say thank you to Dave Bonson. It's a blessing to have this opportunity to fill in for him today. But I've had a front row seat at this company since we had seven or eight employees to now 50. And if you work alongside David Bonson, you know that he comes every day with full energy and love for the clients. Wakes up somewhere around 3 a.m., goes to bed somewhere around the 10 p.m. range, and just nonstop digesting, producing content, and really not only caring about the employees that work here, but caring about every single client. I'm always very thoughtful that we could have a business based on subscribers or something of that nature, but he produces so much free content. Again, I'm honored to fill in for him. So usually in the DC today, you're going to get around the horn of what's going on in the world. So we'll look at that. Today, the market started

up really strong, brought over some heat from what we had yesterday. The Dow Jones ended up finishing up 341 points. That's up 1.1%, 1.13 to be exact. S&P 500 was up 1.16%. The NASDAQ was up 0.9%. That was led by industrials, 2.36% on industrials and communication services. The new sector they devised that holds Meta, Facebook, and a few other companies was up 0.54%. Oil was down 2.6%. That's $83.22 a barrel. That was kind of the round the horn for the market. Some of the interesting things that we saw today, there's an early announcement that Joe Biden would be releasing some more of the oil reserves to fight gasoline prices. David Bonson spoke on Charles Payne. There'll be a link included yesterday talking about NOPEC and kind of his thoughts on that.

What you'll see right now coming from the White House is going to be a lot of things that you have to decide, is it substance or posturing? We have a huge election coming up. And over the next three weeks, there will be a lot of talk about pushing down gas prices and things like that, even if a lot of these things wouldn't have a huge amount of substance. So we saw yesterday, I think it was reported that there was already 130,000 voters in Georgia. That was early voting. Again, that's three weeks before ballots. I think that broke all the records. So this is a highly awaited election and is going to determine kind of what the face of the House and the Senate look like. So again, you will see campaigning on all fronts as we report some of this data. Some of the other key. So again, you will see campaigning on all fronts as we report some of

this data. Some of the other key data points today, you had, let me check my notes here. You had the industrial production that came in at 0.4%. The expectation was 0.1%, so higher than expected. What you saw was for the month of September, there was a higher amount of, for the mining sector, you saw more oil and gas production. You also saw an increase in the production of autos and auto parts, huge attribution there. So that was to the positive. Again, you saw industrials take off today, the leading sector. Then NAHB, the National Association of Home Builders, they measure their confidence every month. About one year ago, that metric was 80. Today, it's 38.

It was down eight points last month. That's 10 consecutive months of reduction. In 2006, 2007, you had eight consecutive months. Let's just be real. There's a lot of people sitting on their hands right now trying to figure out what's going to happen with the housing market. If you want to look at housing over the long term, you would assume for affordability that housing prices should walk in lockstep with wage growth. But you saw that disrupted because over the last few years, you've seen house prices go through the roof, right? A lot of people stayed at home because of COVID. They got more familiar with their own house. They wanted to improve it or get a new home.

So you saw people moving around. Again, huge spike in home prices. But then what do we look at? David Bonson always says people don't buy a home price. They buy a monthly payment. The monthly payment is highly determined by mortgage rates. So you saw mortgage rates more than double over the last year. I'd have to do the math if it was a double. I think they got as low as two and a half and now we're in the sixes. So yeah, more than doubled. And that's going to have a huge impact on affordability. So when you think about home builders, they are wondering because they have to be ahead of the curve. They have to figure out what is demand going to look like when they're done with production. So we will continue to keep our eyes on that.

But one would assume that housing prices need to soften or mortgage rates need to come down. There needs to be some sort of equilibrium where we can get into affordability. If you read my weekly piece, it's called Thoughts on Money. You can get it at thoughtsonmoney.com. And what I really focus on is financial planning and investor behavior. I thought a great conversation for today to end off with is I love the Ask David section. We used to run a lot of events locally. Our client base has gotten quite big, so it's hard to fit everybody in the same room now. But when we did those, I was always a proponent of saying, hey, let's make the content 100% Q&A.

I think that's a great way to see what's the class thinking. What do people have on their minds and what do they want to know? Today's question was somebody was basically asking, hey, some friends and family have come to me and said that they think that the dollar is not going to be the reserve currency. And there's going to be some sort of crypto based replacement. And for that reason, I should buy silver. What say you, David Bonson? And I love the way that David formulated his response because it's very succinct. But he also said, hey, there's some truth that perhaps the decisions that the Federal Reserve's making and debt and things at the high level are not ideal. So you got some of the premise right,

but the conclusion is absolutely wrong. And you see this a lot where people get some idea that something's broken, something's wrong, and they're descriptive where they have troubles when they become prescriptive on what do I do with that? So what David pointed out in there is, hey, let's look at the results of silver over the last 10 years, even over the last two years. And did it serve the purpose or the expectation that somebody was trying to fulfill? What you'll find a lot in finance is we will never be short of negative news. So if you go out looking for it, you're going to find something. And the problem is someone always has an idea or pitch or something to sell you on. Hey, here's the solution for this. Again, we've been talking

about a lot. Nobody talked about inflation for the last decade. Now it's the hippest and most important thing to talk about. So every single person in finance wants to give you some sort of inflation solution. My advice to you is just be careful. It's very hard in personal finance to differentiate the noise from the signal. And what we try to do here at the Bonson Group is try to share our convictions and give you advice that we believe is evergreen and financial truths that you can really use to build the foundation of your planning to protect and grow your family's wealth. And with that said, I'll be back tomorrow with our next issue of DC Today.

Thank you for joining me 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. Thank you. Bonson Group and Hightower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein.

The data and information are provided as of the date referenced. Such data and information are subject to change without notice. Thank you. on the client's individual circumstances and can change at any time without notice. Clients are urged to consult their tax or legal advisor for any related questions.