The Dividend Cafe

Bahnsen Group, CIO and Founder David L. Bahnsen has a lively discussion of the markets and the economy with Scott Gamm from Strategy Associates. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I wrote this week’s Dividend Cafe on Thursday morning, something I haven’t done for a Friday publication in a long time. For virtually all of 2020 there was a huge focus on making the distributed commentary as “current” as possible before submitting. Markets were moving so quickly that if the focus of the commentary was on what was happening in the markets, any delay between submission and distribution was likely to result in some part of the message being “obsolete” by the time it got to you, the readers. Indeed, as I type this beautiful Thursday morning, I have no idea what the markets will do on Thursday, let alone Friday. But I don’t particularly care, for reasons I will explain inside the Dividend Cafe. I have been writing the weekly market commentary since the financial crisis, and a large portion of you know. I am grateful to all of you who have stuck with the reading of this for so long. It has really always been written “as I go” throughout the week, sometimes with a lot of weekend reading the week before driving some of the message, and almost always with bit by bit writing throughout the week leading to the eventual finished product. I may get inspired on a Monday morning about emerging markets and write something then, and find a development in rate policy on Tuesday and write more still, then. It has always been the culmination of many hours of reading and writing work throughout a week. Well that brings me to this week’s Dividend Cafe, and the topic of the here and now. Some reflections are in order, and I hope my reflections will resonate with you to some degree, and even provide some investment application that speaks to your situation. So without further adieu … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

November 3 has come and gone, and while the results may not yet be fully etched in stone, we have a pretty good feel for where things are headed. I suspect there are two camps of you who read the Dividend Cafe, and I do not refer to partisan leanings. What I mean is that I imagine many are excited to not hear about the election any longer, and then there are many who want to wrap their arms around everything as fully as possible (as far as what it all means to the economy and markets, etc.). I want to do a bit of both, personally. I want to accommodate that latter group today, providing as much useful analysis of where we go from here as possible, and then I look forward to having a lot less to say about the political implications of, well, most things. The fact of the matter is that the political dynamic (a) Always affects markets to some degree, not just in a week like this one; and (b) Always has much, much less of an impact than people believe it does. Policies matter. And there are impacts in both macro and micro parts of the economy and investment markets that stem from policy decisions. But many investors have been utterly confounded over the years (including this week) by markets seeming to respond differently than they expected in response to some political outcome. Investors who find themselves surprised by a market reaction to a particular political outcome that is different than they expected it to be can be forgiven since truth be told, market reactions confounding people’s expectations is the normal state of affairs. Much of it has to do with the ability of markets to have already priced in a certain outcome before it happens, meaning what seems to be a market response to something is really the market now adjusting to something else – that the market was ahead of the news headline. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Post Election Perspective on Markets with David L. Bahnsen and Scott Gamm Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I thought it appropriate to devote this weekend’s Dividend Cafe to the election, now that this long-awaited event is almost here. I thought about calling it an “Election Eve” edition, but considering 82,042,050 people have voted as of press time pre-market on Friday, which is about 64% of the total number of people who voted in all of 2016, it hardly feels like “election day” is “election day” … Hopefully it will just be the day they count the votes. One way or the other, we are well into voting (28.3 million people have voted early in-person; 53.6 million people have returned mail-in ballots; 36.7 million people have outstanding mail ballots; and then there are all those who vote on Tuesday). And we are getting closer to this year's election being over. It has been the strangest election season I can remember when all is said and done. But today in the Dividend Cafe we’ll make it a little more personal, a little more specific, and with apologies to those looking for me to throw punches, a lot less tribal. Opinionated? Yes. Fiduciary? Above all else. Objective and fair? To that end I work. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

There are a couple things going on right now at The Bahnsen Group that make this a very fun time of year, and a very fun edition of the Dividend Cafe. I wrote last week about the annual money manager due diligence trip I have done since 2006 and how important it is to our business (and to our clients). The meetings of the last couple weeks, this year, coincide with the launch of our “Operation Magnify,” the largest portfolio undertaking we have ever experienced at our firm. So today’s Dividend Cafe takes the reasons Operation Magnify became necessary, juxtaposes it with this COVID moment (what it supposedly means, what it most definitely does not mean, and what some think it may mean), and then applies lessons learned from our recent meetings and collaborations. I am aware the world is mostly focused on the election event coming up a week from Tuesday, November 3. There very well could be ample uncertainty and market volatility that comes as a result of the election (or the non-result). It would be difficult for me to devote much more attention to that subject than I have. But the topics I want to dive into today are leaps and bounds more relevant to investors, long-term, than whatever uncertainty volatility the election results create. And like many understandings of the connection between politics and our portfolios, I believe the topics I am addressing today are riddled with misunderstanding. “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.” (wrongly attributed to Mark Twain). Let’s jump into the Dividend Cafe! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

We look at the state of the markets with the election a couple weeks away, what we mean by “post-COVID” market realities, and spend time reviewing some of the major takeaways of our recent meetings with New York City portfolio managers. Links mentioned in this episode: DividendCafe.com TheDCToday.com TheBahnsenGroup.com

Late in 2006 I was running a practice at UBS Wealth Management and using their equity management team out of Chicago for a lot of my equity management services. I would go to Chicago and meet with them at least a couple of times a year and found the process collaborative, informative, and intellectually engaging. But all of my other money manager relationships were in New York City, so when UBS asked me to go to speak to their new advisor class in November that year (in Weehawken, NJ, where their operational headquarters are that they inherited from the old Paine Webber), I decided to schedule a few meetings with other portfolio relationships. I was only overseeing $100 million at the time, 4% of the assets we manage now, yet it never occurred to me that I may have a hard time scheduling appointments. As a pure aside, this trip double-dipped as a recruiting trip for another major Wall Street firm who was pushing me to join them in the opening of a new Newport Beach office for their firm. I met with their legendary CEO, a fellow named Ace Greenberg, and heavily considered their extremely flattering offer. The name of that firm … Bear Stearns. In March 2008, they would be dead and gone, sold to the loving arms of JP Morgan for $2 per share (from over $150). Suffice it to say, I didn’t join them after those enticing meetings. God was watching. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I did something today I have not done with Dividend Cafe, ever. I just wrote it. I just sat down and started typing, and wrote it, all the way through. I didn’t cover ten or fifteen or twenty topics like I usually do. And I didn’t write some parts on a Saturday and other parts on a Tuesday, adjusting for new market action on Wednesday, etc. I wrote in one sitting an entire treatise on what I believe is the great paradigm to understand in the years to come for investors. Don’t worry, I went back and added some sub-titles to “break it up” a bit, but it really is one topic all the way through. I really hope it will inform you, guide you, challenge you, and to some degree, edify you. I also hope it will provoke you to reach out with any questions you may have. We invest for the world that is, not the one we want. And some years, the delta between those two seems wider than other years. Jump on in, to the Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

I wrote the majority of this week’s Dividend Cafe before the news had broken that President Trump and First Lady Melania had tested positive for COVID. We wish them a speedy recovery, of course, but don’t have much to say about “market implications” of such, other than the obvious – more uncertainty, more volatility. I will hold off on political and market implications for a few days, for obvious reasons. There are lessons from the COVID era that will stick with us forever. Most of them, mind you, if not all, were not new lessons - they were reminders - reaffirmations of timeless lessons and principles. I am not sure the way we were reminded of some of these lessons felt familiar. Markets do not often drop 36% in 31 days. But these general principles all held true, in spades. In this week's very important Dividend Cafe, I am going to write about some of those lessons (not all of them), and transition that into an opportunity to MAGNIFY what we believe at The Bahnsen Group, what we are doing now, and how we are using the COVID moment to optimize client portfolios for the years to come, all by just MAGNIFYING what we have always believed. This Operation Magnify that we have been developing for months is both a proactive and reactive process. We want to take new realities to their logical conclusions and apply them into an investor's portfolio, and we want to create an entirely consistent process and infrastructure by which we assess and administer this on behalf of our clients. If you are not a client of ours, it really doesn't matter. The moment you are living in is a moment of paradigmatic change for investors. Viruses and the risk of viruses have always existed. "Tail risk" events that shock and awe markets have certainly always existed (and always will). But there are fundamental realities that have changed - many of which were well under way pre-COVID, I assure you - and the discussion in Dividend Cafe today is useful even for those not under our care. The same is true of your approach to investing, and that is where we are going in today's Dividend Cafe. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

It is a bittersweet moment for me to present my last ever missive of COVID and Markets. Okay, it is a lot more sweet than bitter. I truly believe the essence of the markets lesson from COVID has been learned, and that the ongoing story of economic recovery, policy response, and all the various implications of things will live in for some time to come. But included in that essence is the reality of living with COVID, protecting the most vulnerable, and engaging trade-offs around reasonable safety measures for public health vs. the existential and economic need to have a functioning society. There are a lot of resources out there producing a truly intelligent, sober, and informed perspective on COVID medically, which really do seek to neutralize the panic-porn sensationalism so many have fallen into. This can’t be one of those resources. I don’t have the expertise or bandwidth to fully dedicate myself to COVID/medical information. It has been integrated with my work for six months, and I am proud of what I have learned and what I have presented, but it was always, always, always intended to be a part of the broader economic and markets story. I am a markets guy, with every ounce of breath in my body. And the COVID part of COVID & Markets is no longer on my front page, and shouldn’t be on yours either. So I have to be honest. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

with your host David L. Bahnsen, CIO and Managing Partner of The Bahnsen Group Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

There are a lot of places to go on the map right now. Markets were not just "up" throughout most of June/July/August, but they were "boring" in the way they did it. Limited volatility. Total transcendence to some of the silliness in how the media covered COVID. And a pretty consistent slow-burn to the upside. September has now invited normalcy back, and by normalcy, yes, I do mean frothy, over-valued tech positions getting re-priced (and that process could be in very early innings from where I sit), but also just plan going up and down - the standard bi-directional definition of volatility. We have a number of things going on in markets right now that will be discussed in this week's Dividend Cafe, and I suspect the conclusions I draw will be really satisfying for some, and really unsatisfying for others. I am hearing more and more people talk about certain things that seem obvious to them. This is the most bullish thing you could hope for if you are a contrarian (or a half-way decent hedge fund manager). In this week's Dividend Cafe we will look at ... • What all may be wrong or not wrong with markets • Five facts to focus on through the weeks and months ahead • Cash levels are still very, very high - but what does that mean? • Whether or not 2009 has anything to teach us right now • All the things happening in the economy (must read) • Politics and Money, and now the Supreme Court? • And of course, the Chart of the Week And with that, let's dive into the Dividend Cafe ... Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market had been pointing to a modestly positive opening all night and into the very early morning futures action, but around 5:30am turned south, again led by technology. The market opened down 250 points, and then went up 500 points (so up 250 on the day), and then bounced around throughout the day. It closed up just +50 points or so with all indexes about the same on the day in percentage terms. The timing of the downturn this morning came right as the weekly jobless numbers came, but truth be told there was nothing unsurprising at all in the jobs data, so I doubt that was related. More or less, I think the markets are zigging and zagging because that is what they do – and notoriously so this time of year. I do not expect anything different for the next couple of months. Lots and lots of COVID info today, and plenty on housing etc. — off we go! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market dropped 500 points yesterday but today rallied back ~140 points. One big tech name today was a huge part of the S&P/Nasdaq rally … The market drop yesterday (at one point down nearly a thousand points, but closed down ~500) allegedly started with a report that a number of global banks had “moved illicit funds” over a 20-year period from 1997-2017. No doubt, this was but one factor with talk of another lock-down in the UK being another, and concern about greater political (and societal) drama (in the aftermath of the Justice Ginsburg passing) being another. Let’s go around the horn today with ample COVID information and perspective, and plenty on the public policy front, housing, and Fed as well … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

• The big unknown of corporate profits in the here and now and future • Impact of perpetual quasi-COVID lockdowns • The ambiguity of the present economic condition • Operation Magnify • Why financial services are under-valued, but not for the reason many think • A sober assessment of the state of stock buybacks • Why corporate bond yields matter so much to stocks, and everything else • Night trading more important than day trading? • Politics and Money: A new poll you haven’t seen in the news • Chart of the Week: Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market dropped 130 points today (Dow). Futures were down 300 when I woke up this morning and the market opened down 300, then actually went up on the day, then fell over 300 again, then zigged and zagged into the close before closing down 130 (-0.47%). The Nasdaq was down 1.25%, and it remains off right around 10% from its high. The weekly jobless claims came in at 860,000, as expected, but continuing claims dropped by almost a million, landing at 12.6 million (now half of that 25 million high we had early on). There is a lot today – from Housing to the Fed to policy to oil – the way I like these missives to go – but starting off with all the COVID news that is fit to print … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

COVID Health Information • The seven-day average of 34.7k new daily cases is down 48.4% from the July 22 peak. • The BioNTech/Pfizer vaccine project has said they believe it is “likely” their vaccine will be distributable before the end of the year. They obviously cannot predict what the FDA approval process will look like but there seems to be a lot of confidence in the direction of their vaccine trials. They recently expanded their trial pool from 30,000 to 44,000. • Madrid’s hospitalizations through the so-called “second wave” of Spain are 1/7th (14%) that of what they were in the spring. I hate being so redundant with you but often the news itself is redundant. The cases are less severe, the people are healthier, the treatments are better, and so forth and so on • New cases in Denmark have tripled, whereas in Sweden they have barely moved. As for what could possibly be causing this dynamic, I guess I would refer you to:all the media reports covering this prior issues of COVID & Markets. • JP Morgan has determined that productivity does, indeed, fall for employees working from home. In other news, I have determined that the sun is hot. • The University of Pittsburgh School of Medicine has a promising development you may want to read more about. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Download White Paper HERE - https://thebahnsengroup.com/dividend-cafe/special-election-issue-dividend-cafe-sept-11/#download Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

David reminisces about the 9/11 and the aftermath of the city and the people of New York City. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market dropped 400 points today despite opening up over 200 points. The 600-point intra-day reversal was led by the Nasdaq’s almost 400-point intra-day reversal, bringing the recent peak-to-trough drop now to ~9.6%, so not quite 10% correction territory on a closing basis. There was not a particular catalyst to the sell-off. The weekly jobless claims number came an hour before the market opened and the tick down did not begin until ninety minutes after the market opened. The fact that the Democrats blocked the Republican stimulus bill from coming forward for discussion was obviously not a surprise. The selling pressure in big tech just hasn’t settled yet, and that is where we are. Weekly jobless claims stayed around 850,000 on the week, and continuing claims stayed around 13.4 million … Okay – around the horn we go! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market dropped for the third day in a row, again led substantially by the sell-off in big tech (the Nasdaq is down 10% since last Wednesday’s late day high). The Dow is down ~1,600 points since mid-week last week, about half of the drop in the Nasdaq in percentage terms. Futures were pointing up ~200 points last night, but today the market opened down 400 points and chopped around throughout the day, taking two turns down in the final two hours of trading. Expect a bit more markets and economic coverage in this week’s missives than normal because the Friday Dividend Cafe will be exclusively focused as the special election issue. We are entering a new phase of the COVID economic recovery that I believe will move slower than the first half has moved. A lot of the low-hanging fruit of job recovery and activity-resurgence has taken place, but normalized conditions are a ways off and will likely see a slowdown in pace of recovery from here. COVID Health Information • I am sure the Labor Day report of just 27,000 new cases yesterday was low around holiday reporting issues. The 7-day moving average is dropping ever so slowly. • The 7-day rolling average for daily mortalities is down 12% from the week prior and down 22% from a month ago. • The leaders of nine major pharma companies, all engaged in leading vaccine efforts, sent a public letter vowing to take no shortcuts en route to a COVID vaccine. • Incredible news (I will keep this updated as long as Dr. Bostom keeps maintaining the source report): 26,000 alleged COVID positive cases on college campuses now; zero hospitalizations Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In this week’s Dividend Cafe we will address all of this and more: • Market week in review – is this the tech correction we have been anticipating??? • A vast and thrilling ride through the world of zero% interest rates, and what this new monetary regime means for the economy, the future, and oh yeah, all investors! • A tale of two economies • Something to really worry about • The danger of stock splits • The Pro and Con case for the bank sector • Economic Report Card for the Week (special attention to today’s jobs report) • Politics & Money – update on the election betting odds, scenarios for election night, and general volatility expectations • Chart of the Week – a little history of Nasdaq corrections … A perfect way to launch your Labor Day weekend … Let’s jump in, to the Dividend Cafe! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

COVID Health Information • Confirmed cases in the U.S. are running about flat this week to last week, which leads some to say, “oh good, cases are not further increasing,” and it leads others to say, “see, the rate of decline has flat-lined.” It would seem to me that neither posture is the most astute given all we have learned, particularly in the context of applying COVID to our economic and market and societal realities. But as long as the focus is wrongly put on cases versus the other metrics we have learned are more systemically significant, that debate will likely continue. • If one were inclined to earnestly follow the case growth numbers, though, and I certainly provide them here (despite my insistence that they are of little use I still play along), it would be noteworthy that while case growth has flattened, testing is actually up 6%, with the positivity rate is down to the 5-handle we were waiting for. In other words, adjusted for testing, cases are continuing to decline. • If there is one “prediction” I can offer here (and if there is anything NO ONE should be doing around COVID based on the last four or five months, it is making predictions), it is that we will see cases on college campuses in the coming weeks – cases that will create little or no hospitalizations – result in the next round of headlines and hand-wringing (and everyone can decide for themselves if such will be justified or not). P.S. – 546 positives art University of Kansas – zero hospitalizations; Ohio State University 882 positives, zero hospitalizations. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The extraordinary drop in new cases has slowed down, as expected. New cases seem to have flat-lined even as hospitalizations and mortalities continue declining, pointing to the increasingly less symptomatic and lethal nature of COVID cases currently being tested. Color me confused by analysts and experts who are confused by the low mortality metrics coming out of European countries in their late summer increase of new cases. I would think everyone would have expected the low mortality rates Europe is seeing based on the experience of the U.S. this summer (better treatment, healthier infections, less severe virus, etc.). The CFA Institute published a provocative article last week from Laurence Siegel (Director of Research at the CFA Institute Research Foundation) and Stephen Sexauer (CIO at the San Diego Employees Retirement Pension) looking at the dangers of COVID that are not specific to COVID (Bastiat’s law of the unseen versus the seen). This chart in particular grabbed me. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In this week’s Dividend Cafe we will: • Review the week that was in markets • Really spend the time we need looking at what the Fed has done, will do, and will never, ever do • Provide five key investment implications to the monetary regime we now live in • Do a “Euro”pean history lesson for you, and look at what that means for investors now • Provide an explanation of how business investment works, what the hold-up has been, and why it matters • Politics and Money – a look at this week’s Republican convention • Chart of the Week Let’s jump in, to the Dividend Cafe! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market rose 160 points today, perhaps from a mix of reasons (Fed talk, hurricane control, and COVID testing news – see below). The S&P was up just a tad, and the Nasdaq was actually down on the day. I do feel like today’s missive is a meaty one, so I hope you will enjoy reading it as much as I enjoyed writing it. I confess, this “every other day” missive schedule has been much more manageable for yours truly! Okay, let’s go around the horn … COVID Health Information • Confirmed new cases are now down over 37% from the July peak of a month ago, and are down over 12% on daily average basis from last week. The case decline is rapid, and while I am of the opinion it must be hospitalizations and case severity that drives public policy, not merely the existence of cases, the actual decline in cases adds ammo to the arguments for greater freedom of movement and activity (an economic plus). • The only states not seeing rapid decline in hospitalizations are Alaska, Hawaii, Montana, and West Virginia – more or less the overall national trend and data reality where there is a real COVID presence is in overwhelmingly declining COVID hospitalizations. • And even apart from the dropping hospitalizations, and dropping cases, the hospitalizations-per-confirmed cases has dropped substantially from the spring levels, unambiguously supporting the notion that the recent infections affected a less vulnerable and more healthy group, and lending support to the idea many epidemiologists have proposed that the virus is losing potency. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market dropped 60 points today but the S&P and Nasdaq were both up. It was a pretty mixed day across sectors and market categories. I am going to write more about it in Friday’s Dividend Cafe but the news today that Secretary Mnuchin and Trade Representative Robert Lighthizer spoke with Chinese Vice Premier Liu He yesterday, and that all commitments of the phase one trade accord were reaffirmed, is substantial (at least for now in containing potential tail risk). One of the advantages in this new schedule to my missives is that it gives me the chance to better broaden the scope (not ignoring the other categories besides COVID health data). Today we cover all the bases, and they are worth your read. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Up to date information regarding Covid and Markets with a focus on the impact of the pending elections and Federal Reserve guidance. With David L. Bahnsen and Scott Gamm. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

This week we look at … • The week that was in the market (and get ready for the final week of August ahead) • Really, truly unpack why dividend growth investing is so important, and why the dividend itself is such a small part of that, and yet such a big part of it • The deflationary nature of debt, and how all that works … A special feature! • Valuations in the stock market, here, and in third world countries • China. Enough said. • The state of the economy (as we do every week) • Politics and Money (as we also do every week, even when it hurts) • … and so much more With our thinking caps on, let’s jump in to the Dividend Cafe! Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market was up ~50 points today with the S&P and Nasdaq up higher than the Dow on a percentage basis. Markets had been down last night in very late night futures ~200 points, allegedly on Fed comments regarding yield curve control (please). Then markets evened up, allegedly on reports that China trade talks were re-scheduled (please). Then markets dropped a bit after the weekly jobless claims came in worse than expected (maybe). And by the end of the trading day, markets had grinded out an up day, and big tech led the way. The weekly jobless claims number came in at 1.1 million, far higher than the 960k we got down to last week and the 925k expected this week. Continuing claims, though, declined by another 636,000 though, bringing that number below 15 million. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market was down about 65 points today, but the S&P and the Nasdaq were up, and in fact, the S&P closed at a new all-time high today. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

• Market Recap of the week that just was • A little reality check on interest rates • A report card for earnings season for Q2 • Anyone remember China? • Commercial real estate lending • Restaurants looking for some help – and possibly going to get it • Is our monetary system working? • Economic report card for the week (jobs, retail sales, consumer credit, and more) • Politics and Money – a bit more of a look at Kamala Harris as the VP pick and what it means to markets and policy (and so, so, so much more) • Chart of the Week Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market dropped 80 points today though at one point was down ~200 points before rallying over half of the ddrop back in the final hour of trading. The weekly jobless claims came in below one million (963,000 to be precise), below the symbolic million mark for the first time since the COVID moment began, and well below the 1.1 million expectation. Continuing claims came in at 15.5 million, down 604,000 from last week. The numbers aren’t “good” – but they are “getting better” – and they are “getting better more than expected” … COVID Health Information • It certainly is reasonable that there are differing opinions as to “where” the herd immunity threshold may be reached, and whether one believes it is a lower number or higher number, the “variable” that sits in the middle is T-cell immunity which is a somewhat unknown component in getting to the total number. Nobel laureate and Stanford Professor, Michael Levitt, has been an incredible resource throughout this whole affair, and has provided the most reliable forecasts thus far about “excess mortalities” and other key measures. He has placed the herd immunity threshold at 15-20% (though again, others place it much higher, with varying differences as to where the T-cell immunity level sits in the equation). The University of Oxford study has placed the number closer to 25%, again, because of exposures many have already had to other coronaviruses, as well as what immunity exists from natural (t-cell) resistance. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Market futures were up another 250 points at 3:45am this morning and I immediately thought, “Oh, does Iran have a working vaccine now?” (If you are missing my joke, see yesterday’s missive on Russia). But in all seriousness, markets continue to be trading with very positive sentiment, and with no regard for a stimulus deal (more on that below). The markets ended up today nearly 300 points, and the S&P and Nasdaq each did even better. I simply do not believe the market cares (right now) about a stimulus deal, and the markets digestion (all summer) of the COVID reality has been remarkable. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Market futures were screaming higher yet again when I woke up at 3:30am PT this morning, and if the headlines were to be believed (they often aren’t in financial media), it was because the market was reacting to Russia’s claim to have a working vaccine for COVID-19. The market opened 300 points or so, stayed up most of the day, but then sold off late in the day (dropping from +300 to -100). The Nasdaq and Big Tech were actually down all day today, even when the Dow was up 300, and the Nasdaq ended off 1.7% today. Energy, Financials, and REIT’s were still positive on the day. The market was not rallying on Russia vaccine news, in case you were wondering, and today was an extremely mixed bag of conflicting signals and confusions. COVID Health Information • So speaking of that Russian vaccine registration, here are the facts. First, we are talking about Putin and Russia. Let’s just leave that out there as the fact on which all other facts sit. Second, the registration is conditional; trials are actually still ongoing. Third, production has not yet begun. Fourth, no trial details or doctor/scientist reports have been released, let alone peer-reviewed. Fifth, would you take this vaccine? • The total number of Americans hospitalized WITH COVID-19 (which is categorically different from being hospitalized BECAUSE OF COVID-19) has dropped to below 50,000 people nationwide. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

This is the replay of the Market Outlook National Video Call with David L. Bahnsen and Scott Gamm from August 10, 2020. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In this week’s Dividend Cafe we will: Summarize this week’s action in the market, with a summary of the better-than-expected July jobs report Look at the intense pursuit for a COVID vaccine and what that means for markets Add a little detail and caveat to the current market rally, and big tech’s role within it! Discuss what it will taken to energize midstream energy Correct the record on Q2 GDP growth Think through the growing tensions with China Simulate the stimulus Look under the hood of the current state of the economy (pretty extensively), covering manufacturing, auto sales, hotel traffic, restaurant traffic, and all the things … Politics & Money – the polls are tightening, and we look at a long-held theory about predicting the Presidential winner … Chart of the Week – our cup runneth over with optimism for dividend growth, thanks to present conditions, and past lessons Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market was pointing down over 100 points in the morning futures this morning, but reversed into positive territory when the weekly initial jobless claims came in at 1.18 million vs. the 1.42 million expected (the lowest weekly claims number since the March lockdowns began). After a grind throughout the day, and this time led by technology, the market closed up 185 points. COVID Health Information • New cases were down 25% week over week and, once again, all the talk is around what data may be missing with various weather and tech challenges around the country. Testing itself is down 20% and I am now in both camps as to why that is – that the decreased testing is both a reflection of improved conditions (less symptoms means less test demand), and some glitches and delays around weather and capacity, etc. • One analyst I adore postulated that less people are getting tested because they have seen media reports how long lines and delays to get tested (and get results). I am not sure what to make of that, but I can’t rule it out. • With a h/t to the reader who turned me on to this, I am shocked that the Clark County, Nevada data (i.e. Las Vegas) is not getting any kind of national attention (okay, I am not actually shocked). Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market rallied 375 points today, again closing at its highest point of the day as late trading added momentum to the market. Clearly expectations are high for a stimulus deal, there was a bit of curve widening helping banks today, and earnings season was substantially better than had been anticipated. I would love to credit the vastly improving COVID picture with some of the Dow move higher, but the COVID challenges this summer didn’t do much to harm the market, so I don’t think one can have it both ways. (Note the time ledger on the Dow chart; I started today on the eastern time zone but closed the day on pacific) The ADP jobs report did show 167,000 new jobs month over month, but one would think the number would be higher given the losses of the lockdown. The strong comeback number in June versus this more tepid comeback number in July seems to indicate a slowdown in re-hiring, not surprising given the policy measures taken in July. As is often the case, I can’t explain why but today’s missive has been one of my favorite to prepare. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market was up 164 points today, though the % move up in the S&P and the Nasdaq was less. There was a little move up to start the day, then a flat range for most of the day, followed by a dip, and then a rally into the close. My own feeling is that investors are a little hesitant to be unexposed into a close out of fear that a stimulus deal may get announced while markets are closed … (it isn’t impossible, but I doubt that it is imminent). The “hurricane” set to come through NYC turned out to be a rain shower, and something tells me this won’t be the last time a doom & gloom prediction for New York City turns out to be wrong this year. Speaking of NYC, they have LESS THAN a 1% positivity rate right now with high levels of testing, and that positivity rate has been less than 2% for almost two months! Their new cases are almost not registering at all (57 yesterday, same as some small towns in the midwest). Hospitalizations were just 15 yesterday – again, 15 is a fraction of what towns 1/100th the size are experiencing. And mortalities have been zero many days recently, and not more than ten in a day for several weeks. So I am pleased to see all of this in NYC, and hopeful that it leads to steps towards economic revitalization, not the opposite. Now, with NYC’s health status out of the way, let’s jump everywhere else we normally go. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

COVID Health Information • There is discussion of testing coming down in the last few days and it will be useful for validation of case reductions and so forth if the testing does not slow down – for the case declines to be accompanied to steady or growing testing, not reduced testing. The best way to measure that is in the positivity rate, of course. • Much of the testing reduction, though, appears to be related to the hurricane near Florida. I elaborate on Florida data below in the F.A.C.T. section. • The data point that is most disconnected from testing, the result lag problem, and even mortality reporting is Hospitalizations. Nothing drives policy decisions more than hospitalizations. If by the end of this week we continue to see hospitalizations and ICU’s declining, regardless of testing and cases, I believe we will see some of the more onerous restrictions start to be lifted as August kicks into full gear. • The International Journal of Infectious Diseases has published a study evaluating data in Japan to evaluate the effectiveness of school closures in limiting transmission of coronavirus. The report is a tough but brilliant read, and ultimately concludes that school closure was not an effective policy act in constraining transmission. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

In this week’s Dividend Cafe we will … Give a quick summary of the market this week Do a deeper dive into all the rage in big tech Question if big tech is the only game in town to invest in innovation Look at health care spending in Q2 and why it may shock you Analyze the dollar’s decline Explore the power of the Fed, in very practical terms … Wonder out loud what is going on with the Main Street Lending program The highlight of the week – What to think about Equities Right Now Walk through the full Economic Report Card of the week Politics & Money – the Biden VP pick, investor fears, and the fate of a new stimulus deal Chart of the Week – why China tensions are not going anywhere, and most people like that! … and much, much more … Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

COVID Health Information • The seven-day average of new tests is now 820,000, a new high (by far). Nationwide, the increase in cases over the summer is practically in line with testing increases. It is the select states where positive cases outpaced increases in testing. • Add Johnson & Johnson’s Ad26.Cov2-S to the list of vaccine candidates showing very positive results. Their trials thus far were limited to monkeys, though a clinical trial has now begun in Europe and the United States. The full study has been peer-reviewed, and is available upon request. The source of excitement here is that the strong antibody response is coming from a single dose … They are targeting phase 3 trials for September • A source of mine had been sending me daily updates throughout the last few months on one of New Jersey’s premier hospitals and their COVID exposures, particularly when they were seeing hundreds of patients per day, suffered extraordinary losses, and were having to re-purpose facilities to meet demand. At some point it waned, then they shut down the COVID wing, then the COVID patient load of standard inpatients and ICU steadily declined. Well, today, I got an update. For the first time, this hospital does not have a single COVID patient. Praise the Lord. • Not a lot of change in the general messages of the chart quadrant today. Cases are declining; hospitalizations are declining in the troubled places and flattening elsewhere; a few smaller states are seeing some mild growth in cases off of very low levels. The questions in front of us deal with society’s ability to “live” with this virus, and to continue mitigation against severity and mortality. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

COVID Health Information In the “F.A.C.T.” section below, you will see what I believe is the most important data point this summer around the Arizona/New York case data … Yesterday’s new cases vs. the Tuesday of last week declined 4.5%, making it the third day in a row of week-to-week decline, something that Pantheon pointed out to me this morning has not happened since late May. The 7-day moving average of new cases is down 4% since its peak. The California and Texas hospitalization reporting is totally screwed up, and so national trends are distorted when two of the largest states can’t get their reporting straight. Where states had a hospitalization issue and are not struggling with reporting, the trend is very clear that hospitalizations are declining, ICU’s are declining (though not as much as hospital admissions), discharges are increasing, and stay time in hospitals has been cut in half from what it was in April. I want to provide all data, good and bad, so I have been including each day the facts around case growth in some states like Oklahoma, Alaska, Rhode Island, etc. And while the empirical fact of case growth, not case decline, has been pointed out there, I think it adds to the honesty of the presentation to mention that the “case growth” there has come off of very, very low bases. A fascinating look at Sweden’s situation with some quotes from the “Anthony Fauci of Sweden” (Anders Tegnell) throughout. I read a fascinating study this morning from the Mayo Clinic concluding that there have been substantially lower COVID infection rates for those who have received vaccines in the last five years for non-COVID related diseases such as polio, Hepatitis, geriatric flu, and others … Happy to send to those interested (a heavy read). Sometimes the thing to do when forecasts are off is not be critical, but be grateful. And also, to learn for the future … DividendCafe.com TheBahnsenGroup.com

COVID Health Information • Cases were down 8.3% from the same day last week, and these two consecutive days of week-over-week decline represent the first two days of such in about eight weeks. • Testing is up, case growth is dropping, so positivity rate is dropping. All data points have more room to go, though. • The vaccine candidate from Pfizer/BioNTech have begun stage three trials and are targeting a regulatory review by October. Moderna is also in a large, final-stage trial for their candidate. • Dr. Francis Collins, the Director of the National Institutes of Health (Dr. Fauci’s boss), has provided some stunningly useful insights in understanding the greater resistance to COVID embedded in the society than we previously thought. T cell resistance based on past exposure to other coronaviruses (sometimes the cause of colds we have all had) is explaining a larger immunity and resistance than previously understood. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

This is the replay of the Market Outlook National Video Call with David L. Bahnsen and Scott Gamm from July 27, 2020. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Today's Dividend Cafe reminds of the uncertainty that exists around the world today. Europe may seem to have rectified some parts of their uncertainty, but they invited new uncertainties in doing so. The U.S./China tensions are not solving themselves, and you may have read somewhere that COVID case growth hasn't solved itself yet either (highly contagious viruses are interesting, that way). It is a both unavoidable and unsettling reality of life right now - many conditions, globally and not just domestically, are uncertain. In answer to this uncertainty, the Dividend Cafe provides a little refresher of some of the most basic investment principles we believe in, applied to the methodology The Bahnsen Group has built its business around - dividend growth. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Data this week has been quite a mixed bag with some of the encouraging data being more encouraging than I expected, and some of the negative data being more negative than expected. “Sustained outright declines in new cases are not that far off” [Ian Shepherdson, Pantheon Macroeconomics], but right now we are just watching the new case curve peak, and disparate results in different states makes it all tough to analyze. The chart and information I provide at the top of our FACT section below is, I think, the most important part of today’s missive. Fundamentally, these three realities have all held up incredibly true: (1) Case growth has been mostly amongst the young and healthier, and (2) Treatments have substantially improved since March/April. I was fascinated to see that Sweden had 132 new cases countrywide yesterday, while Australia had 468. It is just an interesting contrast between a vigorous lock-down and shut-out of visitors (Australia), versus the encouragement of a herd immunity build-up. Sweden’s new cases and mortalities are now so low that all eyes are really on whether or not they get a sort of “second wave.” The chairman of the Scientific Advisory Committee of the National Institute of Epidemiology in India stated yesterday that Dehli, India is fast approaching herd immunity, another massive world city showing huge positivity in seroprevalence tests and therefore a large part of the population already infected. Major League Baseball season officially kicks off tonight, and while fans are not allowed for now even with masks and distancing (no comment), it is symbolically and substantively delightful that the Yankees will be teeing off on the Washington Nationals tonight. I expect big ratings. Really big. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

The market was up 165 points today, mostly on a flat/choppy day that simply escalated in the last two hours of trading. The general mood was that reports the Republicans are open to extending the federal unemployment benefit at a $400/month level through December drove the last day market move higher, but I am skeptical. It is certainly possible, but it strikes me as utterly incomprehensible that the market would not have known Republicans were going to do something like this. Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com