I guess I am lucky that I came to the realization early in my adult life that my convictions and beliefs were reinforced and enhanced when I challenged them and when I read material outside the comfort zone and echo chamber of constant agreement. I do make an effort to know the perspective that people are coming from when I read them, whether it be research-intensive, macroeconomic, or broadly philosophical – but I seek to understand what someone is saying from their perspective the best I can, even when I disagree with it. That exercise forces me to know the right arguments in defense of my position, something I cannot do if I have not made an effort to understand the arguments that exist against my own position. I do not believe people have to feign neutrality when they read material they disagree with, but investment analysis and macroeconomic commentary require humility, objectivity, and teachability.
~ David L. Bahnsen, March 25, 2025

There is a lot to say here, and I have done entire Dividend Cafe commentaries dedicated to the subject. No, I do not believe there is any world in which tariffs will be good for the economy or domestic manufacturing. The one argument that I have tried to be open-minded about is that the threat of tariffs would lead to certain outcomes that would be useful for various policy objectives. But the threat of tariffs and the implementation of tariffs are two different things. Tariffs do not drive up domestic manufacturing – they impede total trade. And where they allegedly decrease U.S. imports to enable more domestic manufacturing they also decrease U.S. exports, which puts downward pressure on domestic manufacturing. There are other reasons proposed for tariffs (i.e. “fairness,” “reciprocity,” “revenge,” “fentanyl,” “human rights,” etc.), but the idea that tariffs drive higher domestic manufacturing has not been demonstrated in history by either select, targeted tariffs or by mass, universal tariffs.

I will likely be covering this topic yet again this coming Friday.
~ David L. Bahnsen, March, 24, 2025

Taxation occurs when income is generated regardless of withdrawal or reinvestment of it. In your hypothetical, it would depend on whether that $10MM was all non-qualified or whether a portion was located within retirement accounts. It also varies dramatically depending on the investment portfolio, asset allocation, and location of assets between qualified and non-qualified accounts. However, to keep things simple and to honor the question as to what I believe you are after - a typical $10MM portfolio that was all non-qualified, had a balanced allocation and was producing roughly 5% in income from a diverse asset class base would hypothetically result in some combination of the following income tax paradigm:

25%: Tax Exempt interest from Municipal Bonds
20%: Ordinary income from Private Credit and a combination of Ordinary/Capital gain from other Alternative Funds
50%: Dividend Income, of which roughly 50% would be Qualified Dividend Income taxed at capital gain rates and 50% would be ordinary dividend income taxed as ordinary income.
5%: Interest Income taxed as Ordinary Income.
When you break all this down, it likely gets you closer to an effective rate, closer to capital gain tax rates rather than ordinary, but again that depends on account structure and allocation and your tax bracket. We can toggle between asset classes and income sources to accompany various tax considerations for each client (including overseas).
~ Brian T. Szytel, March 20, 2025

Domestically, it’s been Value over Growth, given extended valuations. The more defensive dividend payers, in particular, have fared even better. The delta between the two is over 10%. Developed Europe is outperforming the S&P 500 YTD after what was basically 15 years of going nowhere. The delta there is closer to 20% this year. The bond market is positive a few percent this year, with both rates coming down and some moving towards safety.

On the geopolitical side and opportunities, European industrial and defense names have moved meaningfully higher in anticipation of increased defense spending with less US support and an eventual rebuild effort in Ukraine itself. That said, with valuations already stretched at this point, I think patience will be a virtue here. There are, however, European dividend names we have screened with single-digit multiples, lower payout ratios, and higher yields than their US counterparts. This is something we have found attractive and more actionable in real-time. There is opportunity in every market, and this one is no different. That said, approaching any of this on a bottom-up basis rather than positioning around what may or may not happen on the geopolitical side alone is as important as ever.
~ Brian Szytel, March 19, 2025