The Dividend Cafe

This week I did something a little unique. I dedicate the Dividend Cafe to the topics du jour in the space of prices, labor, production, and the Fed – basically, all the stuff everyone is talking about (and should be talking about). But rather than it seeming like a single, monolithic essay on it all, I think I have it broken up into bite-sized pieces that will be easier to understand and take in.

We live in interesting times, and if this week’s Dividend Cafe helps you to understand these times better than you did before reading it, I will be a happy man. Let’s dive in and see if that happens.

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Market movers and shakers discussed in today's episode.

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There is a lot of anxiety in the economy right now even though the unemployment rate is incredibly low, and nearly every metric on the planet is looking good (besides elevated price indexes). We went month after month last year with people telling us (and many of them seemed to really, really enjoy saying so, mostly because they are awful human beings) that no one would ever shop again, fly again, or “demand” again. The consumption side of the economy was dead behind a brutal pandemic, they said. And we would all be wise to stop paying our office leases, buy some comfortable couch clothes, order food delivery, get an exercise bike delivered, and sit around the house binge-watching TV and just waiting for it all to end.

But now the tune has changed, a lot. Not that drama and intensity – that is the exact same. It’s just the culprit is now the opposite. Now things are too hot, too much activity, too much demand, and prices are too high. That we are supposed to take advice now from the people who zealously told us the opposite 12-18 months ago is odd to me.

But I digress. Pricing pressures exist in the economy and when folks are not talking about Congressional legislation or Fed policy, they are rightly focused on that. Today I want to explain why they are focused on the right thing (price inflation), but for the wrong reason, and more importantly, with the wrong solution. And yes, with an eye towards the right conclusion in your portfolio.

Off we go …

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Most of the attention in the markets this week was on the Fed’s announcements Wednesday – (a) That interest rates aren’t being changed any time soon, and (b) the quantitative easing program launched 20 months ago will start to be slowly eased back later this month with a goal of no additional bond purchases in roughly nine months).

But very little attention is ever paid to why these policies exist, and what their impact is to the various things we investors care about.

In the Dividend Cafe today, we will look at the state of monetary policy, the fiscal policy that has necessitated it (yes, those two things are married right now), and what investment lessons we can extract.

Earnings season is preparing to wrap and it was a solid one. Congress is continuing to bat around legislative things that have not gone the way most people anticipated (or even close). There was huge election news this week that speak to the current political landscape. And yet through it all, the major investment story of the week may be the one least discussed.

Come on in to the Dividend Cafe.

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Today's call focuses on the latest in financial markets and the reconciliation bill.

I wrote last week about a small amount of rather large economic principles that are too often forgotten in contemporary thought, and in many cases were never learned in today’s financial advisory community. I promised a part II this week where we focused more on the application of these principles, and there is no way I would disappoint you after that powerful cliffhanger.

I will point out before we dive into the Dividend Cafe that I hosted a fireside chat with Bahnsen Group economic and policy advisor, Larry Kudlow, this week. You can find that whole video replay on our website if you are so inclined.

Today’s Dividend Cafe is short and sweet but does focus entirely on the promised mission – putting into practice for investors what the theories of economic wisdom look like. Off we go …

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Today's Dividend Cafe dives into some of the great economic principles one has to learn if they are to ever learn anything about economics and finds a comparison with the great investing principle of all time.  I hope I will connect the dots well for you.

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I loved writing the Dividend Cafe for many years with a “jump around” approach, basically covering a wide array of topics that would enter my orbit of interest each week. I made a decision late last year to start writing “single topic” and to write the entire thing in “one sitting” – basically Friday mornings – so as to make it a more coherent and cohesive read. I do like it better that way, and the feedback I have gotten suggests you do too.

Today is a little old school, which happens every once in a while when no singular topic is inspiring me. There are a number of things I want to look at today, from the Value/Growth discussion to the impact of debt on the economy to so much more. I did write it all in “one sitting” (yes, Friday morning – I am a serious creature of habit), but it covers a handful of different topics that entered my world this morning from a plethora of inspirations.

So off we go into the Dividend Cafe, a read that will be well worth your while.

Links mentioned in this episode:

Links mentioned in this episode:

The effort to meet face to face with leading money managers, hedge funds, macroeconomic analysts, and other such “life of the party” luminaries began in 2006. Of course, back then I was overseeing just $100 million of client assets and busily deciding if I was going to move my business at UBS to either Bear Stearns or to Morgan Stanley (yes, that was a real dilemma I once faced; I’d say the angels aided me in my decision). But I had very limited access, basically no clout, and asset management firms that were perplexed by an advisor’s desire to do such intense due diligence.

“Your firm has told you these managers are good. Isn’t that good enough?”

“Your firm likes our fund. Why do you need to meet the managers?”

My stubborn insistence on actually creating my own process, on doing much deeper dives than the average advisor does, paid off in big ways for me. But I quickly found out that the “payoff” was not merely in how I was able to better vet products and solutions used on behalf of my clients. These meetings became a source of transformative learning for me in my career as an investment professional.

This week’s Dividend Cafe is not about the trip down memory lane, unless by memory lane you mean the last five days. But Brian Szytel and Deiya Pernas have once again joined me for over a dozen face-to-face meetings with stellar investment professionals, and we do so in a time where great questions exist about the current market cycle. About geopolitics. About China. About the Fed. About risk asset valuations. About societal stability.

So jump on into this week’s Dividend Cafe, and get a glimpse into what we learned this week. The results may or may not shock you, but they will not bore you.

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