The Dividend Cafe - Tuesday - December 9, 2025

Starting point is 00:00:00 Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Good evening and welcome back to Dividend Cafe. This is Tuesday, December the 9th. Brian Saitel with you here on a fresh week in our Newport Beach, California headquarters here at the Bonson Group. And today was a bit of a down day in the stock market. We had a down day in the bond market slightly as well. marginally so. The Dow ended up closing off on the day, 179 points, which these days equals about a third of a percent. S&P was basically flat, and the NASDAQ was slightly higher by about 13 basis points, so slightly higher on some tech stocks. Everything else was marginally down. Bond market was slightly off yields on tens, dropped about two basis points, so we're at 418. Basically, most things, at least coming out right now, are just dependent on what's going to happen

Starting point is 00:00:56 tomorrow. Not so much on the interest rate decision from the FOMC because there's a 90% chance they're going to cut 25 basis points. So that's pretty priced in. But the press conference afterwards is always where the fireworks are. And that's where most people will be watching and paying attention to what they actually say about things. Remember, the government was shut down for over a month. And so a lot of the data was delayed. A lot of it really just became irrelevant as it's coming out. The fresh data that we're getting has been somewhat mixed. We've seen both softness, strength in the labor market, and similarly in some of the services and manufacturing reports as well. So there's a lot to digest right now, and I know the market will be looking to what Powell

Starting point is 00:01:36 says. Also, you've got a replacement FOMC president coming in as well in May of next year. So there's a good amount going on the interest rate side. I wrote about that, at least on the balance sheet, a little bit about that last week. We closed essentially at the lows on the stock market, and the only two pieces of data that we're out today, one of them was the NFIB Small Business Optimism Index. This is a survey that comes out, gives you a pulse, at least, on small businesses. Remember, that's a majority of the market in the U.S. A little bit higher than expected, so we've got a 99 number versus a 98 figure. What does that mean?

Starting point is 00:02:12 Not much, frankly. Those things tend to be backward-looking, in my opinion, so a lagging indicator versus a leading, and just take it for what it's worth, a period of time, really, that it's responding to. is a bit of a strange one, I guess, with government shutdown. There was the job openings number. Again, this was a delayed report. So this is that JOLTS, JOLTS, number that we report on quite a bit. Gives you a good barometer on the labor market.

Starting point is 00:02:36 Obviously, more open jobs is telling you that employers are bullish about the future. It tells you that they're trying to add more headcount to grow their business. It usually is a good sign. And it actually is more of a forward indicator. But the Jolt's number, the job openings figures were actually better than expected. We got a 7.67 million versus a 7.11. It's a good, that's a fair amount difference. Okay, I know the numbers seem arbitrary, but that's a pretty big beat on new job openings, and that would be a positive sign for the labor market. One thing I did note in there was the

Starting point is 00:03:10 quit rate, so people wanted to change jobs and quit, was down to 1.8%. That's hyper low. This is like the low that we saw during the COVID period. You've got the employment paradigm that really shifted, the paradigm went more towards the employee after COVID. Demand was large and there was pent up demand and all those things. Now it's gone the other way. So you have less people quitting than you did back then. That's a positive thing on the employer side. And speaking is one. I think that's a good thing. But the employment picture overall still is hanging in there. There's not many different arguments to be made that it's really falling out of bed. So we'll see what the Fed goes over tomorrow, but my sense is it'll be hard for them to say that interest rates are

Starting point is 00:03:54 going to go down a whole heck of a lot when you still have labor and some of these reports coming out on the positive side. So it's going to come down to both inflation and also the employment market. And I think it's more of a balanced picture than maybe markets are priced in currently at this level. So what does that mean? With some of the repo stress that I've talked about, which is a drain in liquidity inside of the banking system, you've actually seen some of these rates like SOFER and even Fed funds creep a little higher. Currently Fed funds, again, it's a range, but it's supposed to be four to four and a quarter. It's actually just above four and a quarter right now.

Starting point is 00:04:27 So I know that they're going to talk about reducing interest rates, but I also think they're going to talk about the balance sheet. And obviously QT is ending, but it'll be about when they're going to actually start adding to the balance sheet again. So we'll be watching that quite closely. A couple of things in the Ask TBG section today. one of them was about the investment in utilities and with the demand as being so strong and the pricing along with it, would that suggest the profitability should grow and also the dividends and how meeting these demands require additional investments and infrastructure, so on and so forth. So I think it's best to just not paint one sector with one broad monolithic brush.

Starting point is 00:05:07 There's a lot of differences inside of them, specifically in the utility sector. There's a lot of geographical disparity between where these things are located and which markets they serve and the way that they serve them. So they're not all the same. And no, not all of them are funding data centers and part of that sort of growth there. But all that to say, we know that for generations, we've underbuilt the infrastructure and the energy side inside of this country, both just with energy demand and growing population and growing markets and all those things, there's certain for an investment opportunity there. Obviously, we have our play into that space, but it's always been a very strong dividend player. We like it for those reasons. The only

Starting point is 00:05:47 difference now is that there is a more expensive paradigm because there's been more of a popularity behind it with some of the data center growth. Good point in there today that David had, I thought. This is actually from Louis Gav, from GavCal Research that we read and appreciate, but there was some examples given about just because companies are heavily investing in spending, capital expenditure in a space like AI, for example, doesn't necessarily mean that those companies will be successful, even if AI proves to be every bit as productive as we all hope it will be. Good examples, if you remember back in the natural gas fracking industry when that first became popular in a technology that we realized would really unlock a whole new potential for energy

Starting point is 00:06:32 growth in this country, there was a company called Chesapeake Energy that was the leader in that space. Ultimately, the company ended up in financial distress and unfortunately the CEO had his own issues, took his own life at one point. But before that all happened and transpired, the amount of investment and cutting technology and just the lead that Chesapeake had in that fracking industry was arguably far ahead of most of the others. And that company ended up going away. Same thing with Lucent Technologies, if you remember. This was a major investor in fiber optics and in that buildout. And of course, that ended up proving every bit successful. And it was a huge theme and we all rely on it today, literally. I'm using it right now. But that said, look what

Starting point is 00:07:14 happened to that company as well. So our point is not just that the underlying thesis can be actually true and it can come to fruition, but getting the actual investment right is a different story. Those things can be very, very tricky and very tough. And our approach on this is to really focus on those bottom-up fundamentals because it will help you. It helps guide the realities of what's actually flowing through to an income statement and a balance sheet to guide that. And of course, a dividend approach theme along with it, then you have a safety of income, but then also an assurity that the income statement is as true as it's stated because you can't really just, you can't fake a dividend payment like that. But that's the way that we're playing a lot of

Starting point is 00:07:52 this stuff. So we have these exposures, but we've done it in a very reasonable and bottom-up fundamental way to make sure that we have the right exposures. Those two company examples I thought were good ones. That's what I have for you today. I appreciate you listening very much, as I always do. reach out with your questions, and I'll be back with you tomorrow on Dividend Cafe. Have a good night. Thank you. The Bonson Group is a group of investment professionals registered with High Tower Securities LLC, member Finra and SIPC, and with High Tower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through High Tower Securities LLC.

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The Dividend Cafe - Tuesday - December 9, 2025

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