The Dividend Cafe

Today's Post - https://bahnsen.co/3JFT7AK

By the time you are reading this, the first half of 2023 will be complete.  I can't put exact market figures here because I am writing this middle of the market day, Thursday the 29th, so the precise finality is a day and a half away.  But the general themes that made the first half of 2023 what it was are quite clear, and I think you will find this "2023 halftime report" Dividend Cafe to be quite provocative.  And what else do you hope you find in the Dividend Cafe if not "provocative" ...

So let's jump into the Dividend Cafe and see what 2023 has delivered thus far and what might be on the horizon for the second half!

Links mentioned in this episode:

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

An upward revision in Q1 GDP fueled by stronger consumer spending and exports, jobless claims figures that came in better than expected, and a passing grade for all US banks in Fed stress test results were what fueled today’s market rally and run-up in short-term rates.

Links mentioned in this episode:

Today's Post - https://bahnsen.co/3XrRlJ6

At the ECB Forum in Sintra Portugal – Powell, Lagarde, and Baily all had hawkish comments on inflation and tighter central bank policy needed to contain it. However, all three felt that could be done without inevitably causing a recession.

Links mentioned in this episode:

Today's Post - https://bahnsen.co/3pr9HgK

So another day gone by and I don’t think the world knows much more than it has 24 hours ago about Putin and the weekend coup threat.

Natural gas prices have jumped from $2 to $2.80 BTU in just 15 days or so (+40%) and not surprisingly energy stocks with a natural gas focus have done much better than those exclusively focused on crude oil. One of the energy bear arguments seems to have really dissipated, and that was the idea that exposure to higher rates would be catastrophic for the highly levered energy sector (in 2020 it was often said that the debt cliffs these companies have would usher in a wave of bankruptcies). A new survey from the Dallas Fed of 150 oil and gas companies indicated that less than 20% see tighter credit conditions having a significant impact on their business.

New home sales were up +12.2% in May (volume) with supply down to 6.7 months (had been 7.6 months). My study is starting to indicate a worthlessness to national supply data when some markets are so substantially under-supplied and some suffering from big over-supply (making the aggregate number like the guy whose “average temperature” is found with one arm in the freezer and one in the oven). But what I would point out is that median sales prices have dropped -16.2% (for new homes) since their peak, right in the middle spot of that 10-20% drop I predicted (though this is just new homes, not existing, yet).

Seattle and San Francisco, by the way, have seen double-digit median price drops of existing homes. Hmmmmm

Links mentioned in this episode:

Today's Post - https://bahnsen.co/3NMJ3bk

Top News Stories

Friday night the absolutely fascinating news hit that a coup d’etat was underway in Russia, or at least an attempted one, with mercenary chief, Yevgeny Prigozhin, leading troops out of Ukraine and into a city south of Moscow with significant military headquarters for Russia. Putin, of course, called the act a treasonous betrayal and vowed revenge. As the day went on Saturday it was announced that a truce had been reached and Prigozhin had called off the march on Moscow, and would be allowed to peacefully enter Belarus. But then over the next 24 hours more and more news and analysis came that seemed to indicate that, ummmm, maybe that wasn’t going to prove an entirely safe exit plan for Prigozhin.

The entire question comes down to whether or not this indicates the beginning of the end of the Ukraine war, and it is too early to tell. If nothing else, it still indicates a vulnerability for Putin, especially if reports are true that other Russian generals and oligarchs were actually favorable (quietly or out loud) to what Prigozhin was doing. I wouldn’t read too much into kneejerk responses from anyone, but it all does seem reasonable enough to say that (a) Putin’s position seems weaker than at any time since he took power, and (b) An internal Russian move may be a more likely end to Putin and the aggression against Ukraine than anything else we have seen so far.

Links mentioned in this episode:

Today's Post - https://bahnsen.co/3CKX1o6

I gave a speech this week at a large economic symposium where I am blessed to lecture every summer. My talk tackled many of the themes I write about all the time in the Dividend Cafe – the impact of excessive indebtedness on macroeconomic conditions, the comparison of pre-GFC Japan with post-GFC America, the diminishing return of fiscal and monetary policy to impact the business cycle, etc.

This week’s Dividend Cafe takes all these themes and lessons of so many Dividend Cafe bulletins and puts them together the way I presented them at my speech this week.

And most of all, I have tried to incorporate some suggestions of what could change it all – not what will change it all, but what could.

So jump on into the Dividend Cafe. From Grand Rapids, Michigan, to the Big Apple, Japanification is real. And the impact of debt on growth is the most misunderstood or ignored economic

Links mentioned in this episode:

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

The Bank of England surprised markets by hiking rates a half point this morning (a quarter point had been expected).

Chairman Powell did his very best in front of the House yesterday to basically swear they have more rate hikes left in them (all the while swearing they are data dependent, with the apparent contradiction between promising something six weeks in advance of the data coming in that you are promising to be led by never really being explained).

But then … Atlanta Fed President, Raphael Bostic, came out and said he believes the Fed should hold rates where they are now for the rest of the year …

So if you don’t know what the Fed will do next, join the club. The futures market is up to a 77% implied probability that the Fed will hike at the late July meeting. I remain skeptical but not adamant. And the Fed remains content with ambiguity and public mixed messaging, with “trial ballooning” apparently a new policy tool in the toolbox.

Links mentioned in this episode:

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

Brian Szytel here with you today, kicking off the first day of Summer with just what I know you all used to look forward to as kids – discussion on the days market action, Fed comments, and inflation. Not to worry, I won’t let you hit your Summer vacations uniformed with all thoroughly discussed in today’s podcast and video.

Links mentioned in this episode:

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

Greetings from Grand Rapids, Michigan where I spoke at a large economics symposium today, and where I will be for the next couple of days before returning to NYC on Friday. As is my intention on most weeks with a Monday market holiday, this Tuesday DC Today is basically being done with the old school “Monday style.”

Links mentioned in this episode:

Today's Post - https://bahnsen.co/4301I8h

We have had a lot to say about housing here in the Dividend Cafe over the years, most recently here with a broad update of projections for supply, demand, and pricing, and more philosophically, last year’s bulletin here that aimed to provide a bigger picture perspective on how to think about it all. I was and am proud of both issues of the Dividend Cafe and the message embedded therein. Housing is a big part of the U.S. economy, where we live is a big part of our lives, and what it costs us is a big part of our monthly pocketbook.

Yet today’s Dividend Cafe is a little different. Not only am I not offering a forecast today as to whether or not median home prices will drop -9% from here or go up +5% or some other irrelevant nonsense, I also am not speaking to some macroeconomic ramifications of housing the way many pundits do (this many construction jobs will be added or lost, or this increase or decrease will take place in spending at the Home Depots and Lowes of our economy, blah blah blah). I do happen to think most of those discussion items are silly, misguided, and misunderstood, but that is not why I am ignoring them today. Besides them being bad questions, and impossible to answer, I also have a different focus that is more important to our lives and well-being.

Today I want to dig into the single biggest reality of housing that no one seems interested in talking about – and that is the cultural implications of how we have re-framed our view of residential real estate over the years. Some may prefer a discussion to the latest projections around the rocket science that is “home flipping,” but I believe our angle today is the lowest hanging fruit of how we ought to think about this subject. Let’s jump into the Dividend Cafe …

Links mentioned in this episode: