The Dividend Cafe

I have been thinking a lot about the stock market lately, but not for the reasons most people think about it. The most common thing people wonder about the stock market is something like this: “Is the market about to go up, or down?” I think long-time readers of the Dividend Cafe know how I feel about that question (“long-time” could mean the last two weeks in this case). I am always and forever agnostic about short-term moves in the broad stock market, not merely around anyone’s (including my own) ability to forecast such, but also around the relevance of it to one’s actual financial picture. But I hear things said about the stock market sometimes that simply concern me. I am going to address a lot of those things this week and look at some basic historical facts of the market and the environment in which we find ourselves. My goal will be to look at what does not represent a “rough” or “troubling” market environment, and what does. And in so doing, I hope we can find some takeaways about portfolio construction that speak to a present application that you will find useful. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I do something a little different in this week’s Dividend Cafe – I cover three topics, and pretty separate ones from one another at that. In my mind they are all connected – but lots of things are connected in my mind that may not make sense to others. In this case, I see them as distinct topics yet connected in the sense that they all are part of our investment worldview at The Bahnsen Group. The challenges to dividend growth in index investing, the particulars around the Energy sector in 2021, and the inconvenient truths about bitcoin – these are three separate topics, but they are all topics we have thoroughly developed beliefs about, beliefs that are an off-shoot of our foundation. And we dive into some COVID stuff that is alone worth the price of admission – chart-filled and everything! So view it as one topic with over-arching connectivity, or a three separate topic week, but either way, this is a Dividend Cafe you will be glad you read. DividendCafe.com TheBahnsenGroup.com

Hosted by David L. Bahnsen, Founder, Managing Partner, and CIO of The Bahnsen Group and Scott Gamm of Strategy Voice Communications. DividendCafe.com TheBahnsenGroup.com

Like most of you, before the financial crisis, I had never heard the term or uttered the term “quantitative easing.” This somehow becomes completely standard fare in the lexicon of finance in the last 13 years, and it is now uttered by people who I am 1,000% positive do not know what it is dozens of times per day in the media. There is nothing wrong with not understanding the obscure vocabulary of monetary economics unless of course, you are sitting around using the obscure vocabulary of monetary economics. But words have meaning, and today we’ll look at some of these words. But we will do more than define words today. After all, you deserve to get your money’s worth for what you pay for this Dividend Cafe subscription! My goal today is to walk you through the history of quantitative easing, explain what policy goal it is serving, what policy goals it is not serving, and what it means to you as an investor. By the time you are done with this read, I believe you will be a QE expert. And I assure you, as a fellow QE expert, nothing makes you more popular at parties than knowing the deep dive of quantitative easing! It’s a good thing I’m married … Okay, QE and why you should care, in this week’s Dividend Cafe! DividendCafe.com TheBahnsenGroup.com

Today I am going to do something an investment manager who writes about investing all the time ought to do more – I am going to talk about the market. Now maybe you think I do that all the time, and you’d be right. But truth be told, my investment writing is very purposely peppered with the stuff I think most matters to investors – behavioral practices, monetary policy, evergreen principles, foundational truths. The markets are to be found in and through all of it, but in Dividend Cafe, I rarely am just saying, “Hey, here’s the skinny on the stock market.” I do plenty of that day by day in the DC Today. What I want to do in the Dividend Cafe today is just look at the overall stock market – why we feel the way we do about it, why most people offering a short-term point of view are totally full of it, and how we view the present environment. I believe you will find these insights counter-cultural, and that ought to pique your interest. DividendCafe.com TheBahnsenGroup.com

I have always had a sort of unfair pet peeve with people talking about time moving either too fast or too slow. I think what I hate is the thoughtlessness of it – the sort of expected cliche when someone says, “wow, this year has flown by.” For one thing, it can’t possibly feel that way for everybody, yet it seems like everybody says it. Plus, it often times is just patently false – what people say they feel is the opposite of how I feel, and therefore I assume they must be wrong. I know, I know, but I already said it was unfair. The first half of 2021 did not “zoom by” and it also has not “dragged on” – for me. There are moments I can look back on and say “that feels like it was years ago” and there are other moments (perhaps more of these) that I do feel came and went quickly. At the end of the day, the holidays and the turn of the year were about six months ago. That much I know is true. As I do every year, I wrote a lengthy white paper between Christmas and the New Year to recap last year and to lay out our themes and perspectives for this year ahead. I prefer to wait for the next six months to do a deeper dive there, but I will check in this week on some of those perspectives. But primarily what I want to do in this week’s Dividend Cafe is give you a look at what has transpired so far this calendar year, and why. Accurately knowing what happened in financial markets is useful – and not to be taken for granted (remember, “what you know that just ain’t so” can be dangerous stuff). But I really want to explain today why things have played out how they have, and from there offer up a viewpoint on the future. Jump on into the Dividend Cafe … DividendCafe.com TheBahnsenGroup.com

David and Scott discuss the market matters of the day Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The weird week in the markets doesn't change what I want to be doing with each Dividend Cafe. As of press time, the market is up ~1,000 points on the week, with pre-market futures on this Friday pointing to a +100 point open. The day-to-day and week-by-week movements in the market are not the subject of the Dividend Cafe, but they are what we do each Monday through Thursday at The DC Today. This week it is tempting to dive more into the cluster of these infrastructure talks. On Thursday, there was a White House briefing that it was a done deal; on Friday, it appears to be falling apart; I can write about all this now, but I think by the time it hits your inbox, the deal may be back on, and by the time you are done reading it back off. Yet, in these "current events," there is, indeed, a "timeless principle" that warrants immediate application. A week ago, markets were experiencing nearly irrelevant levels of volatility - and the media declared it the new apocalypse as they went about drooling on themselves in a sea of inaccuracies about what the Fed did, said, and meant. A week later, markets have been rallying, and the new question is what to do about "investing at the top" (it is "new" in that the last time I heard this concern, was almost three weeks ago). So I want to dive this week into some fun history, some actionable application out of that history, and leave you with some crucial reminders about markets. These things will be useful whether the market is down a thousand or up a thousand next week. Come on into the Dividend Cafe ... DividendCafe.com TheBahnsenGroup.com

We had an interesting week in financial markets … The Fed did exactly what they were expected to by any reasonable person – nothing more, nothing less. They acknowledged the economy is improving, they said they were “talking about talking about” slowing down their quantitative easing. And they indicated two years from now as a time where the fed funds rate may be 50 basis points higher than it is now (may it be so). And that was it. No actions, policies, or steps. No commitments, promises, or assurances. Just loose language around some policy measures that are (a) Brutally obvious, (b) Not remotely hawkish, and (c) Not nearly enough if the conditions people are saying they are worried about are actually present. So how did people respond? After three months of people saying “inflation is here” and the “Fed must act” – what happened? Commodities got hammered, and the yield curve flattened more than it has in ages. You can’t make this stuff up. But rather than re-hash what I think the Fed will do, or what they should do, or what is going on in the inflation ad nauseum discussions, I think this week’s Dividend Cafe needs to better unpack what the real, actual, accurate under-current is to all of this. More or less, every single topic being discussed right now has as its true foundation the reality of debt. The accumulation of debt. Concerns about debt. Plans for more debt. Questions about servicing of debt. The promise of debt. The fear of debt. The cost of debt. For a four-letter word where 25% of its letters are actually silent, this is a pretty potent word in 2021 economics. And it is the subject of this week’s Dividend Cafe. Let’s dive in. DividendCafe.com TheBahnsenGroup.com

With the key market insights of the season, David L. Bahnsen takes questions from the public. Hosted by Scott Gamm of Strategy Associates. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

We had a reasonably boring week in the markets (as of press time, which is after the market open on Friday, the Dow is modestly down on the week but no up or down day this week was particularly significant), but it was somewhat less boring in economic news. What I want to do today is look at the variety of economic news circulating and apply a market perspective to it. My view is very simple as to the dangers around most conventional methods of receiving that news and most conventional methods of applying that news to investment practices: The news itself is prone to sensationalism, and the application of the news is prone to over-reactionism. Put differently, the incentive structure behind how most people receive their news is flawed (and in this case, I am talking about economic news, but my statements here are true in all forms of news). And the incentive structure in how investment applications are delivered is substantially flawed, not to mention divorced from personal financial reality. I unpack all of that this week, and do a look at the current news, and provide wise investment applications for you - within our framework - where the incentives are right, the temperature is moderate, the perspective is sober, and the culture is fiduciary. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

For now (even from my spot out of the country), I do keep my weekly streak alive with the Dividend Cafe. Going back to the week of Lehman’s bankruptcy in September 2008 I have missed just one weekly commentary, and this weekly podcast really is one of the things I love most about my job. Today’s may be a little shorter than normal, and it is primarily Fed-oriented, but I am quite happy with some of the subject matter covered and hope you find it simple, readable, and useful. If it turns out that this week’s Dividend Cafe speaks to you more than normal, perhaps I will have to open an office in the spot I have recorded it so that the magic can be repeated. DividendCafe.com TheBahnsenGroup.com

There is no shortage of investment symposiums to attend in my business. Whether it be events put on by the big firms I have worked for over the years (UBS, Morgan Stanley), or symposiums sponsored by various money managers and asset management firms, or just independent groups putting on their own show, I am quite sure I have attended over a hundred such events in the last two decades or so, and probably spoken at a couple of dozen myself. While there is always something to be learned at every event, some are surely better than others. The quality of the events, the quality of the speakers, and the candor of the speakers in the message they deliver can vary a great deal. I consider myself an incorrigible consumer of information and perspective and have been obsessed with growing my capacity for investment and economic thought since the turn of the century. These events can be a waste, or they can be utterly thought-provoking or somewhere in between. One develops an instinct over the years for which events and organizations and speakers will be worthwhile and which will not. And this brings me to the subject of this week’s Dividend Café … I have already revealed where I am going with this the last couple of weeks, so there’s no need to hide the ball. The Mauldin Strategic Investment Conference took place (virtually) in mid-May, and it most certainly represents one of the truly spectacular conferences I have ever been a part of in terms of content, speaker quality, and diversity of thought. I chose to turn my major takeaways from the conference into a Dividend Café because I basically think Dividend Café exists for me to share what is most on my mind with our clients … And I assure you these takeaways from the conference are what is taking up most of my headspace these days. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I thought I would do something really fun with this week’s Dividend Cafe, but just as soon as I typed that I realized that, like beauty, fun is in the eye of the beholder. But what “fun” thing I was going to do was write a full recap of the recent Mauldin Strategic Investor Conference that took place from May 5 through May 14, and use that recap to capture some of the profoundly important takeaways that I want to share with readers of the Dividend Cafe. However, for that to be “fun” for me I need to do it thoroughly, and this week was a hysterically insane week here in the California office between projects, portfolio work, client meetings, morning research, DC Today, and all the normal things. I also got inspired by another few things this morning, and so I am going to call an audible and use next week’s Dividend Cafe as my Mauldin SIC recap, and use this week’s for a whole different kind of fun. Now, I kind of lied. I said that I was saving my Mauldin SIC recap for next week (and I am). But the truth is that some of the things I get into this week are itches that were somewhat scratched at the conference. So consider this a tease into next week, and I promise I will make it all worthwhile next week. I disagree with a lot of what I heard at the conference. I agreed with a lot more. Anyone who agrees with everything that everyone says is a compass-less fool. But that conference did for me what I earnestly want the Dividend Cafe to do for you every single week – foster thought and consideration. The conclusions that come out of that? Well, to that end we work. DividendCafe.com TheBahnsenGroup.com

David L. Bahnsen and Scott Gamm discuss the market happenings of the day. DividendCafe.com TheBahnsenGroup.com

Anyone who knows me personally knows that I loathe melodrama. And hopefully, anyone who has followed my writing for any period of time, especially my financial writing, knows that I hate click-bait, hype, exaggeration, dramatic hyperbole, shock and awe, and other such media-friendly tactics designed to scare, provoke, or just plain manipulate us. I believe almost every day I am writing The DC Today is a boring day in the grand scheme of things. Markets may be up or down a lot on a given day, but as a goals-based investment advisor, with a few exceptions, those day-to-day movements in markets are almost entirely irrelevant. Some days have legitimate policy news, and every day has some aspect of economic information or perspective (Fed, housing, COVID, energy, etc.) that I genuinely love sharing. But it would take a lot for one of my daily investment pieces to warrant some kind of a, “not this is a day that changed history!” This week saw the highest levels of market volatility we have seen all year. It was primarily in high tech and small-cap and more growthy/saucy parts of the market, but the Dow had a couple of big down days, Japan got whacked, and it was the kind of day where financial TV media ratings are up 40% or so from the norm. And I am of the belief that this was a big, profound, and potentially impactful and historic week. At least, I think it will prove to be. I just don’t think the bigness of this week had anything to do with market volatility. I don’t think it had anything to do with tech, with the Nasdaq, with Japan, with the CPI number, with bond yields, or anything else in that vein. So what do I mean? Why am I being “dramatic”? And what does it mean for you as an investor? Jump on into the Dividend Cafe … (and no, this is not melodrama or clickbait; I am just out of room in my intro letter) … =) Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

One of the questions I get asked the most is, “what scares you right now?” Clients ask it every now and then, or some version of it, but I also get asked in various TV interviews that ever-so-compelling question, “what keeps you up at night?” There is one particular problem with the question I want to address in this week’s Dividend Cafe, and I want to provide a really thorough answer to it. What is the problem with the question, “what is keeping you up at night?” The problem is that the real question the person asking means to ask is, “do you think the market could go down?” It’s a dishonest question, but probably not intentionally so. It’s a couched way of basically asking something reasonably worthless and unhelpful. Why is it worthless and unhelpful? Because the market can always go down, and anyone asking the question knows it, or anyone invested in the market ought to know it. But, but, but you say – aren’t there times where it is extra super-duper extra likely to go down? And wouldn’t that have you worried? The answer to those two questions is, “of course not, other than in hindsight,” and “not at all.” But, but, but, I say – if one ever just asked the question, “are there macroeconomic conditions that bother you, that you really dislike, that even though they don’t foolishly lead you into market timing or false prophesy or clickbait dis-ingenuity, you really are troubled by?” Well, that question I can answer, and I will … DividendCafe.com TheBahnsenGroup.com

Latest market updates and news from David L. Bahnsen of The Bahnsen Group DividendCafe.com TheBahnsenGroup.com

Tell me what you think about these two statements: (1) Markets are dynamic, ever-changing forces. They are never predictable, their outcomes are never assured, the inputs are constantly adjusting with the ebbs and flows of different circumstances and facts that have to be monitored, studied, and adjusted as needed. (2) There is nothing new under the sun. I believe these two statements are both true, and I believe that the apparent contradiction between the two actually represents one of the great challenges and obligations for professional investment managers. And that is the subject of today’s Dividend Cafe. We live in interesting times. We live in unpredictable times. And we live in times that offer a milieu of circumstances which combine the novel with the redundant. And for all of the uncertainty about the future and the debate in the present, there does exist a past that can, at a bare minimum, help inform us in the present and in our preparations for the future. The “new” must be informed by the “old.” And that is what we are going to discuss in the Dividend Cafe today. DividendCafe.com TheBahnsenGroup.com

This week’s Dividend Cafe took a funny twist over the last 24 hours. First, I ended up flying back to California from New York late Thursday night for a Friday matter that came up (I was supposed to fly to California on Sunday). This substantially altered my reading and writing plans for this commentary, along with work issues. On Thursday the market had a little reaction to the shocking – shocking – news that the Biden administration was looking to raise capital gain taxes on high-income brackets. I say “shocking” because it had been, well, you know, on their campaign website all of last year, and discussed and mentioned 37 times since his inauguration. And because nothing in the announcement came with Bernie Sanders replacing Joe Manchin in West Virginia or Elizabeth Warren replacing Kyrsten Sinema in Arizona. And by the way, as of press time Friday morning, the market is down a whopping ~150 points on the week – a rounding error – after a few up days and down days mostly offset each other this week. Still, though, the cap gain tax issue does matter, so I wanted to address it this week along with a few other things that seem to be a source of worry right now for many investors. But you can’t spell “investor” without “t” and I found that out the hard way when I arrived at JFK’s Admirals Club yesterday and the “t” button on my keyboard was not working. I had a DC Today to finish, and ambitious plans for 5+ hours of work on a cross-country flight. Well, I did all I could, but just so you know, a lot of words in the English language have “t” in them – a lot. And doing a “Ctrl-C” and “Ctrl-V” for all your T’s is enough to make someone want to ask for the bartender (I don’t drink, so had to settle for my typing productivity being, well, diminished). But the use of an iPad Bluetooth keyboard, a munted attempt with the munted keyboard, my desktop at my California office, and a brand new Surface Pro laptop I had overnight shipped the second I discovered the trouble have all coalesced together to make this Dividend Cafe possible. And to think my dad wrote 500-page books on a typewriter!!! Jump on into the Dividend Cafe! DividendCafe.com TheBahnsenGroup.com

Replay of our National video call, April 19, 2021, covering the market performance, energy, and potential changes to the tax code. DividendCafe.com TheBahnsenGroup.com

This week’s Dividend Cafe is going to dive into the “abnormalcy” of the economic contraction during COVID, the abnormalcy of the economic recovery we are currently in (and will be in for months to come), but then also the “normalcy” of pre-pandemic economic life, and what that means on the other side of this. I will humbly suggest that despite the changes in the economic landscape brought about by the fiscal and monetary monstrosities of the last year, “normalization” will mean “resuming our obsession with the question of _____” That __ is what today’s Dividend Cafe will fill in. DividendCafe.com TheBahnsenGroup.com

The title of this week's Dividend Cafe comes from one of my favorite quotes, ever. "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." ~ Mark Twain (I attribute to Mark Twain because everyone does, but ironically given the substance of the quote, even this appears to be untrue, with most scholars believing there is no reputable source for who quoted these exact words). The underlying message here is never more relevant than in investing, it seems to me. Plenty of people don't know certain things, and that has some impact at given times. But I am quite convinced that far more damage is done, not at the things that are that people don't know, but the things that people believe to be true (and act upon), when in fact they are not. DividendCafe.com TheBahnsenGroup.com

David and Scott recap Q1 2021, discuss economic outlook looking forward, and explore opportunities for investors in current markets. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The actual event that I am discussing may be totally foreign to you, despite the fact that it has dominated the financial news for five or six days. There is a good reason for this if, indeed, it is true for you. The event has proven to be a really weak “news” story in my mind (not for lack of trying), but even apart from the broader news hype, it has further proven to be a weak “financial news” story, and that really, really comes not for lack of trying. This news story begs for us to address the subject of “contagion risk.” After listening to this episode, you will know much more. DividendCafe.com TheBahnsenGroup.com

Who would have guessed that at the one-year mark of the worst market drop since the Great Financial Crisis, one of the hottest topics in financial markets is whether or not we are in a “bubble.” Am I the only one that sees a tiny bit of irony here? A year ago, the conversation was entirely focused on whether or not millions of American people were going to die, how long the entire American economy would be shut down for (hint: it lasted longer than 15 days to bend the curve), and whether 18,000 in the Dow would prove to be low enough. Painful times, painful memories. Today I want to look into the very idea of bubbles, evaluate as intelligently and objectively as I am able what is going on in markets right now and what is not going on, and see if we can’t offer a little clarity into a subject that I think gets quite polluted by poor punditry. Of course, if it weren’t for poor punditry, wealth advisors like us would have a lot less cleaning up to do. Join us in the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Zoom Replay of National Call Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

If you want a better understanding of the present state of the equity land, this is a good Dividend Cafe for you. If you want a realistic assessment of the risk of correction, this is a good Dividend Cafe for you. If you want to know what to make of higher bond yields, this is a good Dividend Cafe for you. And if you want more clarity on what the Fed is doing and not doing, this is a good Dividend Cafe for you. DividendCafe.com TheBahnsenGroup.com

Both anniversaries are vitally important and warrant special attention. One of them may surprise you or at least represent something you have forgotten. Hopefully, that will all change after you hear this podcast.DividendCafe.com TheBahnsenGroup.com

Everything is about the Fed, bond yields, and inflation right now. Sometimes I mean that as if I am describing what really does matter, and other times I am just describing what "all the rage" is about. "Everything is about" may mean what "everything is about," or it may mean what "everyone is talking about." In this case, we have the weirdest of circumstances where "everyone" is talking about the right thing, but doing so in the wrong way. Allow me to break through some of the ambiguity. On a daily basis you will find media reports expressing shock and awe about a 10-year Treasury bond at 1.5%, and it's fair enough to note the speed with which yields have moved in recent days. But the coverage really has an implicit message in it that I believe needs to be shunned. And as is always the case it seems, getting to my destination requires a few detours along the way. DividendCafe.com TheBahnsenGroup.com

Investing options are growing at a rapid pace with some what were once fringe investment areas are now making it mainstream to the tune of tens of billions or dollars. With what is happening, what does today's investor do or not do to make wise investment choices? Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

So when I launched The DC Today, it freed me up to use Dividend Cafe to be more “singular topic” focused, and I really do believe that makes for a better commentary. I have mostly not used this weekly commentary for “ad hoc” market discussion or current events, and I think this approach has enabled me to go a little deeper into topics that I believe are essential in their relevance. I plan to continue this approach until I get inspired otherwise (or overwhelmed with hate mail, whichever comes first). This week, though, I do a little bit of both. The “singular topic” is a really important one – and that is seeking a better understanding of what really drives asset prices over time. There is a need for improved knowledge here, not just amongst mom and pop investors but apparently amongst the professional class as well. But I have been in New York City away from my family all week, which means one thing about my evenings back at my apartment – instead of hanging out with my wife and kids, I am just sitting there, unrepentantly (and some would say pathetically) reading more and more research. And this leads to one thing – more fodder and inspiration for the Dividend Cafe. Ergo, I cover a few “odds and ends” this week as well. Whether it is the discussion of market forces or the tidbits covering a healthy array of other topics, I truly hope you will enjoy today’s edition of the Dividend Cafe. Let’s dive in … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

David L. Bahnsen joined by Scott Gamm to discuss the market happenings of the day. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I think there is some “economic vocabulary” in today’s Dividend Cafe that might – might! – be a turn-off to some, but will be overcome easily if you bear with it. And more importantly, there is a practical takeaway through it all that I hope you will find very rewarding. I can see myself taking a more “multi-topic” approach to Dividend Cafe in the weeks ahead as opposed to the last several that have purposely “drilled down” into a particular theme that warranted special focus. That said, I find that five or six different topics seem to have a lot of overlap these days. I can think I am talking about government spending one paragraph and economic growth another, and voila, the third paragraph is talking about how government spending impacts economic growth. Economic and market commentary these days is one giant Venn diagram. Such is the case with so many things I cover today. I prefer writing where all the dots are connected by the end, and maybe you will think I pulled that off by the end. But what we have today is a lot of charts, a good amount of information, some perspective that I confidently believe will aid your understanding as an investor, and maybe, just maybe, some cohesion to it all that adds sensibility when said and done. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I do some fun things today in the Dividend Cafe. We dive deep into the dilemma facing income investors, those who want and need cash flow from their portfolio. It is a conversation that can (and does) go in a number of different directions. I hope you find it riveting. And we talk a bit about bubbles, about history, about market fads and market risk … And of course, we look at the present economy and make some bets on where things are going. I hope it will prove informative for you. A lot of topics that somehow are all loosely connected to one another, in this week’s Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Your hosts David L. Bahnsen and Scott Gamm tackle the important finance and economic news of the day. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Last week, I wrote about investors’ reality (especially professional investors) being a by-product of the era in which they came to be. The intent was to set the table for how much of my investment worldview was formed. I live with a deep fear of excess valuations, and I live with a deep cynicism of the madness of crowds. Both of these things come from years and years of abundant research. But at the foundation of that research was the experience of living through something that provoked such impulses. I won’t re-hash all of it this week. What I want to do this week is go beyond those two topics (i.e., valuations and crowd madness). We will look at these two things and seek to understand something about both concepts, but more importantly, we will seek to apply what it may mean to the present investing landscape and what it doesn’t mean. This week’s Dividend Cafe wants to analyze a handful of present investing landscape realities, consider the lessons of history, assess where certain things are clearly different right now, and apply what it ought to prudently mean for real-life investors with real-life goals and real-life emotions, right now. It is, indeed, our thesis that a rotation is in motion within investment markets. But I believe that means something very different than what many are saying it means. This week’s Dividend Cafe seeks to provide clarity around what is a truly important subject in 2021. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

It is appropriate and perhaps entirely ironic that the subject of this week’s Dividend Cafe comes in a week where we have seen some of the most bizarre, insane, and silly market activity, ever, and that this bizarre, insane, and silly activity is accompanied by totally incoherent commentary from various pundits, politicians, and “pros.” Whoever said investing was all math and science is an idiot. But the drama of this week’s market, and even the circumstances around the big headline story of the week (which has actually morphed into a multi-faceted story), really do serve as a reinforcement of the major principles, beliefs, and applications I want to highlight in this week’s commentary. I began writing this Dividend Cafe last weekend, and had conceptualized my thesis well before the drama hit the tape into the week. And I haven’t altered that thesis or even the way I unpack it at all. To the extent some of this week’s Dividend Cafe connects dots with other news stories, great. But my purpose in this week’s commentary is not to make sense of a four-day story, but a four-decade story. And I really hope it will help you in your journey and understanding as an investor. I have long believed that all professional investors are irreversibly shaped by the era in which they grew up as an investor. This is more true of the lessons learned in that era that proved to be negative lessons than positive ones. Put differently, the major events that damage us in our formative years teach lessons that don’t go away easily. I want to do a little history this week, talk a little investment biography, and ultimately, offer some lessons about my outlook on the present investing era that ought to transcend anything you will find in a chat room, on social media, or in the madness of the moment. It’s a low bar. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Strong discussion on the market happenings shaping the lives of investors with David Bahnsen, Managing Director and CIO of The Bahnsen Group and Scott Gamm of Strategy Voice and Associates Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In this episode, the point I am making is more than just “politics is overrated in evaluating market conditions” (even though that is very true). I not only believe this subject of Inflation vs. Deflation is more important than anything else in understanding the 3-year, 5-year, and 10-year state of financial markets, I also believe it is a welcome reprieve from what is just overdone, over-covered, over-saturated, and ready for a break. Inflation vs. Deflation Part II – jump on in to the Dividend Cafe. DividendCafe.com TheBahnsenGroup.com

The Crux of the Matter If you believed that interest rates were going to be 0-2% would you invest capital differently than if you believed they would be 5-7%? If you believed that inflation would run 1-3%, would you invest differently than if you believed it would run 4-6%? Does one’s view on interest rates and forward-inflation impact their expectations for P/E ratios (market valuations)? If credit is going to tighten (ease of access to capital and cost of capital), would that alter one’s allocation to corporate credit, private equity, public equity, and a host of other risk asset classes? Would one’s view on the U.S. dollar potentially influence their allocation to domestic vs. foreign assets? And regardless of how one’s views on interest rates, inflation, credit, and currency impacts the decisions, they make on investment decisions, will all of these things impact the expected return on all asset classes (whether or not it alters your weightings in such asset classes)? And if these things impact expected returns in various asset classes, does that have practical significance to one’s financial planning, accumulation goals, withdrawal goals, and other such tangible dimensions of wealth management? The answer to every question above is YES, and pretty much all emphatically so, which means that every person reading this has a real dog in the hunt when it comes to the great economic debate of our time: Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Where to begin, indeed. It may have been exactly the kind of week investors wanted to start off 2021, but it certainly wasn’t the kind of week anyone wanted to start off 2021 from the vantage point of our country, her peace, her well-being, and her example to the world. The concept of a city on a hill is not working well, and this patriot feels total exasperation and desperation. But I do know the readers of Dividend Cafe do not come to this publication for perspective on national conscience or psyche, especially not my clients. I believe there is a lot in this week’s Dividend Cafe that you will want to read, that matters to investors, that can better inform your beliefs and understandings in financial markets. So I am going to do what I normally do, and welcome any questions and comments any of you may have – as always. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In-depth discussion of the Year Ahead, predictions made last year, and the impact of the Senate race. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Our very special annual white paper is here, wherein we exhaustively recap 2020 and the year that just was (yes, even beyond the obvious stuff), and provide our key themes and perspectives for the year ahead. Reach out with any questions, and feel free to share/forward as you wish! Contact us at www.thebahnsengroup.com for your copy. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Last Friday, December 11, marked year number 25 since December 11, 1995, when my father passed away. His name was Greg Bahnsen, he was 47 years old (the age I will be next year), and he was my hero and my best friend. I have to imagine many of you have experienced things (including losses) that do not feel like they were as long ago as they actually were. I know those cliches are tired, but it just simply does not feel like it has been 25 years since my dad died. Yet it has been, and I imagine when another 25 years go by, I will be saying and feeling the same thing. Time becomes a weirder thing as we get older, I suppose (some of you will have more expertise in this than I do), and I am sure that time dynamics get even muddier when we are talking about a loss. Last weekend as I was isolated away working on a project, I spent abundant amounts of time reflecting on this and many other things. Regardless of what it feels like, 25 years has gone by since dad died, and my entire life being upended and forever changed. Over these last 25 years, not just in my own personal life, but across society, the news, the world, the culture, and yes, the economy and markets, there are a whole lot of things that have barely changed or haven’t changed at all. But, there also are certain things that reflect substantial change. Not just “evolutionary” change, but real paradigmatic change. And the biggest of those changes is the subject of this week’s Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

National Call with David L. Bahnsen and Scott Gamm Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

• Over the last 42 days, the market is up very close to 4,000 points • Over the last 42 days, Joe Biden has won the Presidency • Over the last 42 days, reported COVID cases have grown • Over the last 42 days, weekly jobless claims have picked back up • And once again, over the last 42 days, the market is up very close to 4,000 points Now, I could write you a Dividend Cafe today reiterating a couple of things I have already written 100+ times in 2020 (and they would be no less valid now than they were then) – that the Fed has implemented monetary policies that have indisputably served to boost the valuations of risk assets … that the COVID doom & gloom in the press has unimpressed markets as markets learned the more detailed nature of the virus’s risk and specific vulnerabilities about seven months ago … that markets are forward-looking and with a vaccine on the horizon see a better 2021 looming … that economic damage has been limited in this painful year to a rather vulnerable but less systemically impactful part of the economy … and so forth and so on. And if I wrote that Dividend Cafe, I would hope it would be useful, fruitful, and informative in some of the market lessons it would contain. However, it would very likely miss the most important thing one could say about this market, and frankly, one of the most important lessons one can learn about the nature of capital, period. So that is the ambition of Dividend Cafe today. To explain why the market has been behaving as it has been, not just in the context of the four or five things uttered a couple of paragraphs ago, but in light of a huge lesson for all. And to do this, I will share a story with you that I hope somehow, someway, delivers the message with clarity. Jump on into the Dividend Cafe … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Early December is a tough time of year for my writing inspiration. I have soooooo much I want to say about 2020, but we really aren’t done yet, and this year as much as any other, affirms the reality that a lot can happen in a few days, let alone a few weeks. I also have a lot I want to say about 2021, but my “forecast” and “positioning” perspectives for the year ahead are also better served later in the month or early next month. Patience is a virtue, and as much as I am excited to delve into a yearly review and yearly projection, we are a few weeks off still. But it isn’t like there is nothing else to write about. Markets ended November and kicked off December this week with a move higher (as of press time, which is pre-market Friday, the Dow is up +330 points on the week, and futures are pointing to a +125 move higher. Congressional leaders in both chambers and from both parties are in heavy discussions about a new stimulus/relief bill. The incoming administration is announcing more and more of their incoming policy team. World energy markets are re-calibrating around clearer (and more improved) supply/demand dynamics. And, of course, the reality of a highly contagious respiratory virus continues to work its way through society, with various policy and economic ramifications coming in its wake. Every year the first couple of weeks of December have a few things in common – we are too far away from recapping the year we are in, we are too far away to start making the year ahead predictions, tax-loss harvesting needs to be executed, various holiday and seasonal events and tasks take center stage, and yes, regular market and news “stuff” takes place. This week’s Dividend Cafe will jump around a bit but offer a bit of history, a bit of present market tension, and of course, a bit of looking into the future. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

David L. Bahnsen with Scott Gamm - Market Outlook National Video Call Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I have to say there's nothing more important than the basic conversation of optimism vs. pessimism. Not only is the topic of extreme importance to me personally, existentially, emotionally, and spiritually, but I was convinced then, as I am now, that there is lasting investment significance to the topic – one that matters to the financial results of real people with real goals and real objectives. If you fast forward from the levels of uncertainty that existed in markets (and in the society) 6-8 months ago, some may conclude, “okay, well now I am an optimist, because we see a couple vaccines coming and a lower mortality rate than we feared then, but then we saw no such thing, and pessimism was in order.” And if pessimism vs. optimism is to be determined by circumstantial conditions at a moment in time, it is fair enough. If optimism is to be recovered as a hindsight tool for use after conditions have improved, I can understand that assessment (i.e. pessimism when one doesn’t know what is going on; optimism once they see things having gotten better). But of course, that is not what it means to be an optimist or a pessimist – to form a viewpoint or personality impulse (dare I say, a character impulse) as a backward looking response to then-known conditions. In today’s Dividend Cafe, we are going to unpack this more, and seek to understand why this topic is not just relevant to investors, but perhaps at the very heart of what it will mean to be a successful investor. I am optimistic that you will find it rewarding. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com