The Dividend Cafe

Lots to cover here in the DC Today … Listen to the podcast or watch the video, and check out the info below!

MARKET ACTION

Dow: -351 points (-1.03%)

Business Roundtable CEO Outlook Survey was at its lowest number since Q3 2020, but is way, way above the breakeven level of expectation (that is, still anticipating substantial economic expansion, albeit with a grimmer relative outlook than last year)

The trade deficit came in at $78.2 billion in October, less than the $80 billion expected. But total trade was up on the month and is up +13.7% versus a year ago. The container ship debacle has largely subsided and yet there are still some issues marginally constricting trade (China COVID policy, Russia sanctions, etc.)

Key Economic Point of the Day:

Business Roundtable CEO Outlook Survey was at its lowest number since Q3 2020, but is way, way above the breakeven level of expectation (that is, still anticipating substantial economic expansion, albeit with a grimmer relative outlook than last year)

The trade deficit came in at $78.2 billion in October, less than the $80 billion expected. But total trade was up on the month and is up +13.7% versus a year ago. The container ship debacle has largely subsided and yet there are still some issues marginally constricting trade (China COVID policy, Russia sanctions, etc.)

Links mentioned in this episode:

Futures opened last night down -40 points and stayed around there into the evening. This morning they pointed to a down -100 open pre-market and worsened a bit from there.

Markets on Friday gave us the full gamut of today’s idiocy, as futures quickly dropped over -400 points upon the God-awful news that more jobs were created than expected last month and that lower-income people were making a little more than they had the year before. Then, hours later, markets finished to the upside after a day of volatile trading.

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The markets rallied dramatically on Wednesday when the chairman of the Federal Reserve, Jerome Powell, gave a speech at the Brookings Institute essentially confirming the likelihood of a Fed “slowing” its plans for interest rate hikes. Other speeches this year have seen markets fall a thousand points. The direction of market impact is less important to my point than the impact itself: we have markets that are highly susceptible to speeches given by one person. And when I refer to “markets” I do not merely mean the stock market but also the (much larger) bond market, the (similarly-sized) housing market, and the (gigantic) market for currencies.

Of course, the nature of market movement is not so much about a speech, per se, but rather policy expectations that are derived from a given speech. And the response in financial markets to the policy decisions of the Federal Reserve is hardly where it all stops; Fed decisions impact all aspects of the economy. No person lives a life free of impact from the decisions of the Federal Reserve.

Today I want to unpack this a bit more, at least as much as a commentary of this size will let me. I doubt all of this information and perspective will be new to consistent readers of the Dividend Cafe, but I do believe you will find it relevant to your investing life, and more importantly, relevant to how you think about the economic affairs in which we live.

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December has launched and I have some things to tell you …

MARKET ACTION

The Fed’s favorite inflation measurement (PCE) came in up just +0.2% on the month, less than the +0.3% expected, and known to be tainted by the misleading contribution of housing’s lag effect (which I have written about extensively). The September gain had been +0.5%, so the stock and bond market responded favorably to the disinflationary trend.

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A monstrous rally ensued today when Jerome Powell verified Fed plans to slow down on rate hikes. Do I think this makes sense? Well, I will tell you what I think about all of it in today’s podcast and video!

MARKET ACTION

Dow: +737 points (+2.18%)

Q3 GDP growth was revised upward to +2.9% annualized (from +2.6% before)

Links mentioned in this episode:

An interesting but not especially noteworthy day in markets today, and we have all the commentary you need right here

MARKET ACTION

Dow: +3 points (+0.01%)

The Case Shiller Housing Index dropped for the third month in a row, now down -13% since August.

~ Marty

There are a few pretty substantive differences worth noting. First, the Fed doesn’t actually use taxpayer money to buy treasuries, though it is taxpayer money that is being paid back to the Fed (that is what a Treasury bond is). But the main difference is that the Treasuries on the Fed’s balance sheet are backed by the full faith and credit of the U.S. government, and no principal or interest payment has been missed in nearly 250 years. Alameda was backed by FTT, which is worth less than a beanie baby.

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Market Action

Futures opened last night down -50 points or so and were down -160 points into the evening. This morning they were pointing to a down -200 point open pre-market.

The market’s challenges today were clearly related to concerns about the supply chain and some contagion effect around the disruptions in China (see Top News Stories below)

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Today we are one day closer to cutting into that turkey, enjoying some homemade gravy, and spending some quality time with those nearest and dearest to us. A great time of the year to be grateful, and I, Trevor Cummings, am personally grateful to be filling in for David Bahnsen today. I wish you all a wonderful Thanksgiving, and I encourage you to take a moment to watch or listen to what’s happening in markets today (links below).

And off we go…

Full Blog post here: https://bahnsen.co/3V7jsLO

Topics discussed:

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I actually hate the title this week, because the word “stupid” really is pretty mean. I try not to be mean because I think it is wrong to be mean (I can elaborate if needed). However, in this case, when James Carville famously said, “it’s the economy, stupid,” in the context of what voters cared about in the 1992 election, he basically created a new adage for how we say that a particular thing is really the thing.

And that is the topic of this week’s Dividend Cafe – the thing in dividend growth investing, and clarifying some important terminology and concepts around the thing. And as you shall see today, the thing is growth of income.

Let’s jump into the Dividend Cafe!

DividendCafe.com

Another volatile day with the Dow closing flat after being down nearly -400 points. More to say here:

MARKET ACTION

Weekly initial jobless claims came in at 222,000 – not a big move from the week before or variance from expectations

ASK DAVID

~ Mike S.

Yes, it would be. But they won’t.

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