The Dividend Cafe - Thursday - August 6, 2026

Episode Date: August 6, 2026

Brian Szytel recaps a down Thursday market session (Dow -464, S&P -13, Nasdaq flat) amid ongoing rotation between tech and value, with the 10-year yield up 6 bps to 4.68%. Economic data showed initial jobless claims at 199k, a historically low level supportive of strong employment, and Q2 productivity rising 1.4% versus 0.6% expected, which he notes could be disinflationary over time alongside tools like AI. He then focuses on U.S. fiscal issues, citing a 7.7% fiscal gap versus much smaller gaps in Germany, France, and Italy, arguing Europe’s lower gaps reflect much higher taxation (including ~20% VATs), which comes with slower growth and reduced competitiveness. He warns U.S. fiscal irresponsibility can reduce long-term growth, even if higher rates from “bond vigilantes” are uncertain in timing. 00:00 Market Recap 00:44 Jobs and Productivity Data 01:10 AI and Disinflation 01:53 US Fiscal Gap Focus 02:35 Europe Comparison and VAT 04:24 Debt and Interest Rates 05:39 Closing Thoughts Links mentioned in this episode: DividendCafe.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. Welcome to Dividend Cafe. This is Brian Saitel with you here this midweek version of our podcast, and it is Thursday, August the 6th. Down day overall, this is still a very positive week, though. And the Dow ended up closing down on the day, 464 points, which these days means 18. tens of a percent. S&P was just slightly down, 13 points, and then NASDAQ was actually flat, more or less. Rotation keeps going back and forth between tech and more value-oriented sectors, but today was more of a sideways day on the tech side and then a down day on some of the

value stuff on the blue chip side. Interest rates were up still back and forth in Middle East, so this is the same story I keep talking about, but the tenure was up six basis points. We're at 468. There was a couple of things in the economic calendar today. We had initial job list claims at $199. Just remember that under 200,000 number on weekly claims is really low. So we didn't see it in the ADP private payroll this week. We missed on that number. But these weekly claims numbers are really a pretty good sign for employment. Historically hyper low there, meaning 30-year lows type of thing. The other thing we had was the preliminary Q2 productivity number much better than expected. This is important. And actually, it's important for a lot of reasons. We keep talking about AI and all the

fun stuff around it, but it's supposed to add a lot to productivity. And we are saying it show up in some of these numbers. So we got a 1.4% for Q2 instead of a 0.6 projected. If you remember what Warsh has said about that is he does view it as disinflationary, because the advent, for example, if you remember when we got email in a PC at work and things, you know, how much more productive things were and how much more you could do for less at 10 or what I work at 12, 14 hour a day is getting a lot more down than what it used to because you have these fancy tool. and all that. And that's what I think AI will ultimately do. And it should be downward pressure on prices over time. But we're not at that stage yet. Okay, what I wanted to talk about today was less

about Iran and less about technology or AI, those types of things in the market and just pull things back. There was a great research report that our friend Renee Anano puts together at Corbu, one of our favorite geopolitical analysts, but also just a dear friend, a great guy. And I wanted to focus on that just a little bit. There was a chart. and some information about the U.S. fiscal gap. Right now, we're at 7.7%. In 2013, Stan Drunken Miller was saying that there was a problem and it was going to keep getting worse.

And back then, it was 7.3. So it has continued to widen. It is a real problem and it is unsustainable over time. But the comparison wasn't just for that reason. It was actually against Europe. Most people would think of Europe as worse off, not better off. But when you look at countries like Germany and France and Italy, it was interesting to see their fiscal gap.

and only 2.6 to 3.4 at Italy sank as the most. And that's half or a third of what we're running in the United States. And it's a bit of a head scratcher, at least it was for me. When you start thinking about it, it's less on fiscal responsibility. So it's not that the Europeans are more responsible with their budgeting. They aren't. In fact, they're in most cases worse than the United States, believe it or not, meaning they're spending more, is that they're just taxing twice as much.

So when you talk about government revenue, the U.S. takes in about 27 percent of GDP, As a taxing authority, and in Germany, it's 46%, Italy, 47, and in France it's 50. And the reason is they have a VAT, a 20% VAT. This is a value-added tax, basically a consumption tax, and it hits everybody. It's just all the things, all the goods and services are assessed this extra tax. And so things cost more. And what you get out of that is a smaller economy over time, and you get less growth out of it. But yeah, you get more government into the revenue.

But it's pushing on a string a little bit there. And it's the opposite of what a supply-sider would think like myself. And so I guess my point was to just unpack some of the differences, they're both bad. That doesn't mean because the U.S. is 7.7 and France is 2.3, that France is doing a better job. No, that's not it. They have more tax revenue and a lower growth rate and a smaller economy in the process over time and a less competitive one globally. And so all of these things are totally tethered together.

And at the end of the day, there's no way to get around it other than some uncomfortableness, which is you've got to change your budgeting and spend less. You can try to tax more out of it, and you'll have those downsides with it. And that's really what I wanted to talk about is more of an evergreen topic. The other way to look at it, and this is an intuitive way to look at it, is that at some point the world will demand a higher interest rate from a less responsible country like the U.S. if we can't figure out how to balance our budget. And that makes total sense. It would make sense if you were a credit borrower. If you kept just charging more and more on a credit card, eventually your credit score goes down and eventually you have to pay more in interest to do that.

Totally makes sense. The difference here, though, is the U.S. has a printing press. So we're also the reserve currency. There is a difference to those things. Maybe bond vigilantes will come. Maybe that's what we're seeing on the 30 year being at 5.2. I look at that. It's just normal personally.

In my lifetime, I'm 48, turning 49. So the 30 year at 5% is a big whoop, but I understand that it was lower than that, and now it's a little bit higher. But I don't view that necessarily as the vigilante is coming out and punishing the long end of the curve all that much just yet. I'm actually not convinced that will happen. But even if it does happen, I'm also not aware of the timing it will take for it to happen. So it's not an investable thesis for me. And since that is the case, what I would say is just fiscal irresponsibility will lead to lower growth over time. And I feel pretty good about saying that.

And that was my point to the topic in there today. Wishful thinking is that we just start getting our act together and spending less. But when you look at defense, both the interest expense in what it is now as a percentage of government intake and then also all the health care and all their entitlements, it's tough to see without some tough decisions. But I think those decisions are going to end up happening sooner than later. And I do have every faith in the dynamism of the U.S. system and way of life to figure it out. But it's time to do it now. So there you go. There's my fun topic to leave you with here on your Thursday evening. I will let you go and get back to your evening and wish you well. And if I don't speak to, have a nice weekend. Thanks again for listening to the Dividend Cafe. The Bonson Group is a group of investment professionals registered with Hightower Securities LLC, member FINRA and SIPC, and with Hightower Advisors, LLC, a registered investment advisor with the SEC.

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