The Dividend Cafe - The Dividend Cafe Monday - August 19, 2024

Starting point is 00:00:00 Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, hello and welcome to the Monday edition of Dividend Cafe. It is a very special day because I am recording for the first time in our brand new, beautiful offices on 6th Avenue here in New York City. It's really just been a very special day for us. I know a lot of you don't care. I don't blame you. If you're just here to get the market info, get the news, get the economic analysis, I can understand why you don't care where we go to work every day. But for those who are clients and are

Starting point is 00:00:42 a little bit more connected into the TBG family, it's been a very special day and we're excited to be here in the Written Dividend Cafe. We have some pictures and video link and things like that. But if you're in the area in between 53rd and 54th Street, the whole city block there on 6th Avenue, just a few blocks away from Central Park, is our new home. We will be here for 10 years minimum. And I'm a long-term thinker, so I can imagine it will be much longer than that. And in the meantime, the markets did not sleep for us to start our new day in the new office. And in fact, it was another rally day across the board.

Starting point is 00:01:27 All 11 sectors in the S&P 500 were up on the day. The technology sector and communication services were the leader. And I think they were exactly the same on the day, 1.44% for both. But the worst performing sector was consumer staples, not surprising, a more defensive sector, and it was up 0.32%. The bond market was up a tiny bit. The 10-year was down. The yield down 1.7 basis points to 3.87%. So you have lower interest rates, higher PE ratios, getting ready to wrap up completely earning season, what ended up being a pretty solid earning season with a little bit of hiccups in the middle. And the other element about the market right now is that the dollar had dropped and the

Starting point is 00:02:19 market was down big at the beginning of August. And now the dollar has dropped further and the market is up quite a bit. And this is sort of a little microcosm of a point I make from time to time, but I want to reiterate for you now. I've never seen anything that gets a more convenient scapegoat than people saying, oh, well, the dollar's down, it's hurting the market. Or the dollar's up, it's hurting the market. The dollar is down, it's hurting the market. The dollar is down, it's helping the market. The dollar is up, it's helping the market. It's either an intellectual schizophrenia, an economic idiocy, a little bit of both, or sometimes people are rightly attributing the fact that there are times where a down dollar is good for markets and times

Starting point is 00:03:04 where an up dollar is good for markets. That's not generally the case within a two-week period that it is both and, but it's certainly there are points at which it can be both and throughout history for very economically fundamental reasons. That's not what's going on now. So people in that currency world often just don't know what they're talking about and I have to listen to them and you don't. So I'm just sort of projecting onto you a little bit. Speaking of things I have to listen to sometimes, I did get a kick out of something Larry McDonald shared, who's an analyst, wrote a book on Lehman Brothers years ago that I reviewed and enjoyed and puts out a lot of different analysis on markets. And so just from time to time,

Starting point is 00:03:45 I like to capture some of the stuff that he will share with me. Bitcoin three years ago was at 59,000. Today it closed at 59,000. Over the last 10 years, it has had a drop of 82%, 58%, 65%, and 75%. Four monumental drops over the last 10 years. Of course, it's up huge from 10 years ago. And three years ago, it's dead flat. This has all the characteristics of something that we would refer to as not a store of value. Maybe it's a great speculative trade. Maybe it's

Starting point is 00:04:22 a terrible speculative trade. Maybe it's going much higher. Maybe it's going much lower. You can think whatever you want about all those things, but the words store of value are probably not appropriate here. There is a link in Dividend Cafe today for an article that our very own Matthew Gregory wrote. Matt is our director of our planning department here in New York City. And the SECURE Act, which Congress had passed and then did a second version of it in 2022, a SECURE Act 2.0 passed by Congress, has a lot of rules, restrictions, and changes around retirement accounts and distributions from retirement accounts. And Matt has written a piece that you'll find at DividendCafe.com that I think is excellent, summarizing recent IRS rulings, guidelines,

Starting point is 00:05:12 clarifications about that. We want to give you more information from our tax side, our risk department, estate planning, financial planning. So expect other members of the brain trust at TBG besides me and Brian on the investment side to contribute. And if you're laughing right now about me being part of the brain trust, I don't think it's very funny. Okay, what else? I do have a little video link. I was on Fox Business earlier today talking about some of the policy proposals that Vice President Harris did release over the weekend. I already about some of the policy proposals that Vice President Harris did release over the weekend. I already referenced some of them in the Friday Dividend Cafe. I'm going to be doing more writing on it. There may be more meat on the bone coming throughout the

Starting point is 00:05:54 convention this week. I'm a little politically surprised that some of the first elaboration of economic agenda centered around price controls with groceries, and very explicitly so. But there's some critique of it that I provide, and you're welcome to check out in the link. The NFIB, Small Business Optimism Index, is back up to the level that it was when the Fed began tightening. So the optimism had dropped, not brutally like during COVID, but meaningfully throughout the period of Fed tightening. And it's now come back to where it started. I think it's worth pointing that out. On the housing side, Friday, we got the data on housing starts down 6.8% in July, down 16% on the

Starting point is 00:06:43 year. That's with multifamily and single family together. The single family was worse in July, down 16% on the year. That's with multifamily and single family together. The single family was worse in July, but multifamily helped over the last year. Multifamily is even a little worse than single family. So again, new starts are way down. The difference is we're not really overbuilt in our country with multifamily. We have a lot of replacement building to do though, but we are not overbuilt in total supply. Weamily. We have a lot of replacement building to do though, but we are not overbuilt in total supply. We're way underbuilt. Excuse me, we're not underbuilt in total supply with multi. We are obviously underbuilt in single family. So here we are with the Fed, 72% chance right now of a quarter point cut in September, which means a 28% chance of a half point cut, 0% chance of no cut.

Starting point is 00:07:27 I think that those numbers may change when the August jobs report comes out. If it's really bad, you may get a half point cut in September. But I want to reiterate, Peter Buchvar said it this morning, but I've been saying it for a few weeks. Peter and I are on the same page on this one. It's just ridiculous to care if you get a quarter point or half point when the market's pricing in 100 basis points by end of the year and 200 basis points by the end of next year. Who cares what the September versus November distribution of these rate cuts is? But again, two percentage points are expected to come out of the Fed funds rate from five and a half to three and a half percent by the end of 2025. Speaking of the Fed funds rate from 5.5% to 3.5% by the end of 2025.

Starting point is 00:08:06 Speaking of the Fed, Chairman Powell is speaking at Jackson Hole this weekend on Friday. The symposium begins Thursday. There's oftentimes a little drama that comes out of Jackson Hole. More often than not, there's not. But CNBC will be there, and it'll be very serious, and there'll be countdowns and all the drama and then we'll see what happens. Two different questions in the Ask TBG today. I'm going to send you to dividendcafe.com to check those out. One of them dealing with whether or not I think

Starting point is 00:08:36 there is systemic risk of the huge growth in the passive investment space. And then another one dealing with what was, I'm sorry, I'm pulling it up here. I wrote my answer to it this morning. Am I forgetting? Oh, the NASDAQ talking about its three-year return versus like a five-year return that's much better and whether or not there's cherry picking going on. And I make a much more important point about the range bound market, I believe that did start three years ago, not five years ago. So check that out. Okay, I'm going to leave it there. That's our Monday Dividend Cafe brought to you from our new spot in New York City. And we'll be back with you, our daily recap, Tuesday, Wednesday, Thursday, and one way or the other, I'm bringing you Dividend Cafe this Friday as well. More to

Starting point is 00:09:20 come. Thanks so much for listening, watching, and reading The Dividend Cafe. Thank you. 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. This document was created for informational purposes only. The opinions expressed are solely those of the Bonson Group and do not represent those of Hightower Advisors LLC or any of its affiliates. Hightower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based

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The Dividend Cafe - The Dividend Cafe Monday - August 19, 2024

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