The Dividend Cafe

Today's Post - https://bahnsen.co/3U2mBhF

A modestly positive trading day today in markets with both stocks a little higher and the VIX lower following a few down days. ADP payroll numbers for March came in quite strong at 184k, although the actual employment report this Friday will get more attention. Powell had comments out today that reiterated their patient approach on lowering rates which is really just more of the same with Fed futures unchanged. Sort of a quiet day really all around.

As the office REIT space recovers, earnings revisions for next year have brought the average estimate from -1.8% to now 12.2% for 2025. Healthcare REIT’s have also seen a huge revision from -17.2% to now 6.9% for next year EPS estimates. In fact of all 10 industries in the SP500 with upward revisions for next year, 6 of them are in the REIT space overall. Now, I imagine if interest rates don’t move lower as much as expected the shine may wear off for these analysts, but interesting nonetheless.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3TrUXux

I did a Dividend Cafe exactly six months ago about housing, focusing then on the duel economic and cultural reality of what was going on in the housing market. I think another six months gone by is a pretty good amount of time to now re-address this vital subject in American life. Housing is, for some, a crucial part of their economic story. Even for those smart enough not to think of their house as a “retirement asset” it is still a crucial economic consideration. Almost everyone I have ever met needs a place to live, and the ones I met who did not had very odd theories on the JFK assassination. Very few people own an asset with as much leverage attached to it as their home (assuming one puts 20% down they are 4-to-1 levered on the purchase; imagine buying $1 million of stock and only paying $200,000 for it). Housing costs (monthly) from rent or mortgage to property taxes and maintenance and insurance are the highest percentage of the monthly outflow of nearly every single family in America (even many who do not have a mortgage).

Beyond the economic reality of housing, from the silly (it is an “investment”) to the practical (it cost money to live somewhere), there is a deeply personal reality to housing, including for yours truly. People make memories in houses, they associate periods of their life with where they live, and they form families and social connectivity around houses. And even with all the suburban model has done in a postmodern culture to undermine community, many people’s “houses” are also part of their “neighborhoods” – a Tocquevillian concept we’d be wise to re-affirm. This subject matters.

So today in the Dividend Cafe I want to “check in” on the subject.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/42FOvmj

Stocks rose modestly again today as we flirted with a five handle milestone on the SP500 intra day but closed just two points below. We are up 13 of the last 14 weeks, which is technically the longest streak since 1986. Good thing there wasn’t volatility the following October (joking aside 87’ still closed higher on the year believe it or not). All said, earnings have been quite good, the Fed is on hold for now with the next move lower rather than higher, employment and GDP are quite good, and inflation is subsiding, so the path of least resistance has been higher.

Elsewhere, with year over year decline in CPI out today the slowdown in China post pandemic has been one that few, if any, predicted. After decades of record economic growth aided by a rapidly expanding population and industrialization, growth has been slowing. There isn’t anything different about this playing out in China as it did in Europe and then the US mind you, it just happened faster because of technology and productivity being more advanced than in previous periods. Demographics in the country have also begun to shift. Today, 18% of the population is over the age of 60, and by the year 2032 over 32% will be, which will surpass that of the US. This isn’t to say there isn’t growth in China, it still grew GDP by 5.2% last year, but would you like to guess what the 30 year annual compounded return in the market has been there? -2.1% per year or about zero including dividends.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/3vIRb6n

A positive morning of trading in markets gave way to losses mid-day, only to gain it all back and then some as we headed towards the close, ending up 200 points. Interestingly, the correlation between rates and stocks today actually moved together with both rising, where the opposite has been the case much of this year. 10’s are moving further into four handle territory up to 4.14% as rates crept back up today with a stronger jobless claim number. We are at about a 54% chance on futures for a March rate cut at this point.

We are still early in earnings season, but it has been notable that while 92% of companies reported thus far have exceeded expectations, 58% of them have actually traded lower on the news. A combination of some exuberance over lower rates this year coming out of markets and just some general consolidation after the year-end run-up seems to be at play. I find this consolidation healthy, and with an advance decline ratio only back to -3:1, I doubt we have seen the last of it. More in the link below.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Today's Post - https://bahnsen.co/47aKXKm

There are some financial writers who I believe are professional doomsdayers. There are some who are more nuanced. And, yes, there are others who I think are hard to pin down. I suppose it is most fair to treat all people individually, with unique circumstances and particulars around their approach and worldview. For example, I think some are SINCERE but almost always WRONG (and have a business model that depends on scaring people, even if they really believe it). Some professional doomsdayers are, in my opinion, rank charlatans and grifters – though I’d rather not give names here. Hopefully you get the idea ...

As for how to prepare for various “bad things,” well, that’s pretty much what I write about every week in the Dividend Cafe. In the first such issue this month I wrote the following, and it would apply to the wide array of possible scenarios we face:

“Our Operation Magnify is forever committed to active, proactive, intelligible allocation of capital across Dividend Growth companies, in the Boring Bond space needed to preserve capital, in Credit assets where there is opportunity and compensation for risk taken, in areas of both Growth and Income Enhancement, and of course in Alternatives where we can seek to lower the volatility profile of a portfolio and diversify sources of risk and reward.

Doing that in an era of high rate volatility, of high ambiguity about monetary policy, and a period where far too many eyes are only on the Fed requires a contrarian bend, a deep commitment to real enterprise (bottom-up company realities that transcend monthly price volatility), and a faithful commitment to the principles that made Magnify what it is.

Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com