The Dividend Cafe - Thursday - January 30, 2025

Episode Date: January 30, 2025

Economic Insights and Market Movements: A Deep Dive In this episode of Dividend Cafe, recorded on Thursday, January 30th, Brian Szytel discusses the day's positive market movements with the Dow up 168 points, Nasdaq slightly up, and S&P slightly up in percentage terms. He delves into the mixed yet ultimately positive release of fourth-quarter GDP data, highlighting a surge in consumption by 4.2%. Szytel attributes this to increased disposable income and wage growth, along with a decline in savings rate. Additionally, he addresses the Jevons Paradox and its implications for energy efficiency and consumption, using Microsoft's recent experience with AI technology as an example. He concludes with thoughts on the importance of competition and the potential future of AI and natural gas as significant energy sources. 00:00 Introduction and Market Overview 00:21 Economic Data Insights 00:51 Consumer Spending Trends 01:25 Wage Growth and Disposable Income 02:11 The Jevin Paradox Explained 02:45 AI and Market Competition 03:43 Energy and Technological Efficiency 04:32 Conclusion and Final 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. Today is Thursday, January the 30th. Brian Seitel with you recording today's market move, which was all fairly positive. Dow was up 168 points, NASDAq up about a quarter of a point, S&P up about a half a point in percentage terms, that is. So positive across the board.

And there was some economic data that was out today that was a little mixed at first read, but ended up being a positive, which was a preliminary glance and read at fourth quarter GDP, which came out at 2.3%. There was a number of two and a half that was looked for in there. So it was a little lighter than expectations. Although when you read through things, the consumption figure was huge. It surged by 4.2% in the quarter. That's more than double what it has been doing.

So there's a big move up in consumption. And as I mentioned in the letter, one thing I'll always count on is that if Americans are employed, especially if they're making a little bit more than they did the quarter of the year before, I'm pretty sure they're going to spend it and they usually do. We just got off a holiday season. This was a big one and sure enough, it's coming through in these numbers. So you've got a very strong consumer.

It's a very de-levered consumer compared to years past and they're out there spending and with that spending, there's velocity, there's room for GDP advancement. There's economic growth. It's what's showing up in earnings and all these things. I'm sensitive to saying real wage growth because I understand, especially for those not earning a wage, meaning living on fixed incomes, although most of those people are also getting social security, which was adjusted for inflation. But aside from those things, wage gains for employed have been positive recently.

And the gain from prior quarter, meaning Q3, which was 1.1% to this quarter was 2.8%. So these are big increases in disposable income. This is after tax, after inflation. This is the money that people end up having and checking and savings to go either save or spend. The savings rate declined by three tenths for the quarter. It means people save less and then they spent more because they had 2.8% disposable income growth.

So there you have it there. I won't belake at the point. That, and also I had mentioned something that someone picked up on in Tuesday's podcast regarding the Jevin paradox. This is basically saying that as the energy input into technology gets less expensive, that the technology efficiency is wider adopted and used more. And then it leads to again, higher prices and then it's a circle as that happens. So it gets cheaper, it gets adopted more, the, the consumption level goes up. And in that case, the can lead back to higher consumption and again, on

the energy side, on the input side. So that's the paradox at least that is being compared. And I didn't make it up. This was a reference from the CEO of Microsoft on Monday when we had that big tech sell off related to artificial intelligence and this new deep seek company in China with a cheaper version of what can do a similar result with open AI and chat GPT and things like this. But I guess my point is number one, there should never be a fear of competition.

It's good for everyone to have level playing field, open playing field, having competition, more people innovate, push that envelope, push the ball down the field, it's good for everyone. So that's my general feeling on it. But related to AI, the real feeling is just that those companies were valued at such a high level. Anything that was slightly negative in the short term is going to cause them to sell off and that's of course what has happened.

Now they've rebounded here lately too. So keep that in mind. And I think part of it is all related, which is that there's going to be short term volatility in the end, it's a more productive technology and it's something that is beneficial. I think just like Jevin did in the mid 18th, coal is an example in Great Britain that they would lose productivity as coal was a finite source. And when they were going to run out of it basically.

What ended up happening is that the efficiency of the use of coal became so much that it ended up lasting much longer. And then of course, we innovated other energy sources as well, nuclear, natural gas, petroleum, things like that. So I suspect it'll be somewhat similar in this case that the input need for AI to work is energy still and that energy will not come from coal it is going to come from other sources in addition to that and natural gas would be my point to that and the US is

plentiful and I think it's a way to help our budget deficit and our trade deficits with exportation of natural gas so that we're heavily invested in that midstream energy space. So there we go. I'll tie a bow on that loop of a segment there and let you go for this evening. Do reach out with your questions. If any of this sparked any interest or anything, please reach out.

Again, it's Thursday, so tomorrow's Friday, we'll have long form dividend cafe in your inbox and be around over the weekend if anyone wants to reach out. So with that, I'll let you go. Have a good night. Thank you. 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

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