The Dividend Cafe

One of the hardest things about being an economic commentator in this day and age is that economic commentary requires nuance, and this day and age requires narratives.  There is to be a single narrative about X, and any variation around, above, beneath, or of the exact X narrative is heretical or at least unappreciated.

It is a tough way for society to function, but it is an especially tough way to do economic analysis.

I do not merely refer to the inevitable complexity involved in topics like these that are, well, complex.  You are smart readers, and I do my very best (sometimes better than others) to make complex topics a bit more comprehensible in my writing and speaking.  Readers and listeners can judge how effective I am there, but I do try.  No, this is not about complexity, but nuance, which basically can be quite simple at times; it is just that it doesn't fit into the script of a narrative.  It isn't binary.  The nuances of proper economic analysis aren't always fit for a forced narrative.

Such is the moment we are in, and today I want to answer your questions about the state of the economy.  If I do my job right, everyone will be mad at me when all is said and done (I should fail at landing in either of the primary narratives of the day).  Such is the plight of an economic truth-teller in 2022 ...

Jump on into the Dividend Cafe!

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I really did mean to write this entire piece last week but simply ran out of time and space. I will give you a recap today of last week’s takeaways but then make sure this week’s wraps a bow around our updated point of view on inflation.

This is not merely a philosophical exercise. There is an abundance of empirical support provided for my position, and I think you will find a lot of the information about the present state of affairs surprising. You may draw a different conclusion on the matter than I do, but my conclusions on what this means for the decade ahead have profound implications for citizens and investors alike. Again, this can’t be armchair stuff for a real asset allocator; this is what we call fiduciary responsibility.

So grab a cup of coffee and get comfortable. This is one of those truly Dividend Cafe editions. Jump on in…

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It has been a year and a half since I first took up the inflation/deflation debate as a matter of contemporary debate (a part 1 and a part 2). As much as I wished then (and now) that the great economic fight we would have for the next thirty years was inflation, I believed then (and now) that the great economic fight we will have for the next thirty years is better referred to as deflation (a term that itself will require more precise explanation. Some more in-depth updates on the subject have also been produced with a deep desire to really explain and contextualize the state of affairs.

Nevertheless, the responsibility of clarity in messaging is with the writer, not the reader, and while there is only so much I can do to make sure those reading it understand it, I have a pretty strong desire to keep doing more.

Let me just leave the introduction there and dive into this topic. I suppose I do hope some clarification comes out of this, but truth be told, I am more passionate about just reiterating the great economic message of our time. My agenda is not academic, and it is not political. I am responsible for actual client capital, which is to say, the instrumentation by which actual human goals and needs are met. I take it very, very seriously. And this subject sits at the center of what I believe is a generational economic challenge.

Let’s jump into the Dividend Cafe …

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I send this week’s Dividend Cafe at the end of a 24-hour trip to Las Vegas, where I spoke at a conference yesterday. 2,600 people have come to the 110-degree city of sin for the purpose of hearing various economic and political musings, and one such forum of musings was a panel with myself, Steve Forbes, George Gilder, and Mark Skousen discussing, of all things, my book! It was a surreal experience to be next to Gilder, whose Wealth and Poverty was a transformative book in my intellectual development as a pretty darn young guy (you would actually think less of me if you knew how young I was when I read it).

Anyways, by the time you read this, I will be on a plane back to New York City Friday afternoon, where I will be working all of next week before returning to Newport Beach next weekend.

We are living in a time where there have been more bad ideas than money to invest in (or at least bad prices at which to buy those ideas). Soon we will see more money than people acting on bad ideas. But right now, a little parsing out of what the laws of contrarian investing mean is in order, and I think you will find it fascinating.

Jump on into the Dividend Cafe …

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The fundamental tension in the economy today, and less directly so, in markets themselves, is really simple: Is a recession coming that slows down price inflation? That question is simple to identify as the economic tension point of the moment, but it is not simple to answer.

One reason for this complexity is that some of the premises brought to the question are not to be taken for granted. And this is the subject of today’s Dividend Cafe – what do we know about current economic conditions, potential economic developments, and eventual economic results? What do some think they know that could be wrong? And what is an investor to do through all of this?

I have some thoughts to share that can hopefully bring clarity to much of this, and some of those thoughts are merely clarifying, while others may be non-consensus views. Either way, convictions run deep at The Bahnsen Group, as does humility. That is another “tension” that we hold gladly.

Let’s jump into the Dividend Cafe …

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Happy Independence Day weekend to you and yours. Or for those without much historical interest, Happy Fourth of July.

Today’s Dividend Cafe is not going to dive into the state of the market, though I can promise you that Tuesday’s DC Today will have plenty to say about the first half of 2022 and our expectations for the second half.

But for today, I want to look at this Independence Day holiday that we celebrate in our country, and analyze what the Fourth of July has to do with markets and economics. I make no bones out of the fact that I love my country, and much have that has to do with understanding what this country is – an idea, and an exceptional idea, at that. How the exceptional idea of America ties into markets, economics, and investing, is where we are going in today’s Dividend Cafe. Jump on in – there will be time enough for BBQ and sun this weekend.

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I’ll be very honest with you – I prefer single-topic Dividend Café issues. I wrote a multi-topic weekly commentary for many years before moving to a “mostly” single-topic orientation, and I have never loved writing Dividend Café more. I feel that the weekly information quality and value is higher with a singular focus each week, and I think the “variety” style works better in our daily market bulletin that is Dividend Café’s cousin, The DC Today.

But today’s Dividend Cafe is a bit different. There are a few “big” issues that people are bringing up daily, and I want to do a little multi-question fireside chat with you.

So jump on in to the Dividend Cafe … I promise you’ll find something of interest, and maybe even intellectually transformative!

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Volatility continues and certain market sectors are reeling, along with investors.

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Once again we find ourselves in the midst of a tumultuous week in the markets, and yet with bigger fish to fry in the Dividend Cafe? What could be bigger than a 1,400 point drop in the market on the week, and a 3,000 point drop in the last two weeks (note: I am hitting “send” on this before the market opens on Friday, and pre-market action Friday does appear to be to the upside right now, but you know how that goes)?

Well, for one thing, I think most of the commentary I have to offer on the specific things taking place this week in markets was well-covered in each edition of The DC Today this week. If day-to-day market distress is distressing you, I hope you will turn to The DC Today as a resource. Reading it cannot make the market go up any more than my act of writing it can, but hopefully, it can provide clarity around where this volatility fits into expectations for investors who have real financial goals in their lives.

So the bigger fish to fry I refer to are not about the specific Fed meeting of this week, or this most recent interest rate hike, or even my broader theme about the carnage in “shiny object” investing … It has to do with discussions around a potential deeper level of concern in financial markets, and what they may look like. I hope after reading this week’s Dividend Cafe you will feel a bit smarter, a bit more informed, and a bit more at peace.

Let’s jump into the Dividend Cafe …

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I purposely wrote this week’s Dividend Cafe before the CPI number posted this morning at 8:30 am ET. Lots of traders were getting in front of this late Thursday, and a market that had rallied up +2,000 points in the last two weeks was down -1,000 points in the last five days and is now down a lot as markets open Friday.

We are in a period of short-term traders trying to front-run the Fed, but more particularly, trying to front-run those who they think are trying to front-run the Fed. What I mean is not as complicated as it sounds: The basic belief is that if inflation data looks worse, for longer, the Fed becomes more Volcker-like in their hawkish tightening, and that hurts risk assets; therefore, if we see a whisker of “more inflationary than expected” some will start selling, and we should sell before they sell.

Well, good luck with all that.

Today I am going to look at what could make this market get worse, not in a “traders are going to do this” kind of way, but in a real systemic, significant, macro kind of way. It will turn into a two-parter, no doubt. But let’s look behind the headlines of the day, the CPI print of the moment, and the Fed actions of next week. Let’s dive into the Dividend Cafe …

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