MONDAY – Aug. 11, 2025

Dear Valued Clients and Friends –

A very traditional “around the horn” day in the Monday Dividend Cafe – nothing I like more.

Dividend Cafe did a comprehensive look at the current state of the economy, a deeper dive into the labor market, and left open the question as to where the economy is going.  The written version is here (my favorite), the video is here, and the podcast is here.

I really, really enjoyed talking about the national debt, why I am not a big fan of tariffs, my thoughts on central bank independence, and much more with former Speaker of the House, Newt Gingrich.  This is a worthy listen (on TBG YouTube page here; at his podcast page here).

Off we go…

Market Action

• The market opened up +75 points today and gave that back and then some throughout the day.
• The Dow closed down -200 points (-0.45%) with the S&P 500 down -0.25% and the Nasdaq down -0.30%.

*CNBC, DJIA, Aug. 11, 2025

• Nvidia is now 8% of the S&P 500, the highest weighting of any one company in the S&P 500, ever in history.  At 58x earnings, that is also the highest P/E that the largest company in the S&P has ever had.  In 1994, General Electric was the largest company in the S&P 500. It was trading at 8x earnings then and was a little over 3% of the index  =)
• I am a little confused by those heralding “net debt/equity market cap” being at record lows as a positive thing.  Why would the assumption be that that ratio highlights low net debt (the numerator), instead of an excessively high market cap (the denominator)?  It seems people forget that there are two numbers in a ratio.
• The ten-year bond yield closed today at 4.28%, flat on the day.
• Top-performing sector for the day: Consumer Staples (+0.17%).
• Bottom-performing sector for the day: Energy (-0.79%).

Top News Stories

• President Trump and Vladimir Putin are scheduled to meet in Alaska this Friday.

Public Policy

• So the latest announcement on the tariff front was that semiconductor companies would pay a 100% tariff, but that large companies like Apple, Taiwan Semiconductor, Texas Instruments, and others (with some U.S. manufacturing, which of course they all have some) would be exempted.  The high bark (of a 100% tariff) with the low bite (since no one will be paying it) was well-received by public equity markets.  The challenge, of course, is that some will be paying it, because many smaller businesses outside the large, public markets do not have the resources that the massive players have.
• I lack the words for what to say about this deal with Nvidia and AMD paying 15% of revenues to China to the U.S. government.  I do expect it will stop emails from hitting my inbox saying, “don’t you understand the goal is to not do business with China anymore,” since, well, that didn’t go so well for those who believed it.
• Speaking of “decoupling from China,” the President has asked China to “quadruple” purchases of U.S. soybeans.
• The Intel CEO is headed to the White House to speak to the President about his demand that the Intel CEO step down because of past dealings with China.

Economic Front

• President Trump extended the delay on tariffs with China for another 90 days.

Housing & Mortgage

• The plans for some form of privatization of Fannie and Freddie are moving even faster than I hoped, with word now out that an IPO of the common equity is planned for later this year.  Presumably, the IPO would sell off a portion of the government’s 79.9% stake in the common equity of the two firms, a move that would have no buyers whatsoever if the government was not planning to abandon its preposterous preferred claim that sits on top of the common stock.  There is some ambiguity as to whether or not we are talking about one IPO or two IPO’s (combining the two companies or not), and there is some ambiguity about exactly when the conservatorship would end.  I am watching this very, very closely, as, like all things these days, the devil is in the details.
• Mortgage applications for both purchases and refinances remain very, very low (for obvious reasons).  Housing starts and new permits have been very, very low (keeping prospects for new supply low).  These two areas are where reduced rates become most pertinent and questionable.  Can a lower short-term rate (the Fed Funds rate, the Fed looks primed to cut again in September) help pull down long-term rates (the mortgage rates that have stubbornly held)?  Lots of economic implications are on the line in that question.

Federal Reserve

• The President named Stephen Miran, who had been head of the CEO (Council of Economic Advisors), to serve in the Fed position left vacant by Adriana Kugler’s recent resignation.  Now, this term ends at the end of January, so whether or not he stays in this seat after that remains to be seen.  It is theoretically possible that Miran can be in his seat (Senate-approved) before the September FOMC meeting.
• Chairman Powell’s seat (as Chairman) ends in May, and it is assumed that he will not stay after that (though technically, even though his chairmanship ends in May, his board seat goes through 2028, but tradition is for the chairman to leave when their chairmanship ends).
• Betting markets now have Christopher Waller as the most likely to be the next Fed chair, but there really is little conviction in the various candidates being floated (a couple of weeks ago, betting markets had Secretary Bessent in the lead, and President Trump ruled it out last week).
• Fed Governor Michelle Bowman has come out and said that we need three rate cuts by the end of the year.  Other Fed governors have joined the fray, calling for rate cuts (including some that I am positive are not currying favor in the Trump administration).

Oil and Energy

• WTI Crude closed at $64.01, up 20bps on the day.
• Oil prices, upstream energy stocks, and midstream energy stocks were all down last week, even as the broad market rallied.  The big annual midstream sector conference kicks off in Las Vegas this week, and that is generally an interesting time to announce new projects, updated forecasts around cash flows and leverage ratios, and make the case for why the market is undervaluing your stock.
• Interestingly, the results during this earnings season have been quite good as far as we are concerned, yet most stocks sold off even after great results, implying a market expectation that was well above forecasts for whatever reason.  The Canadian names have been exceptions, doing quite well throughout these quarterly results.

Ask TBG

On Deck

You know what to do with questions!  Have a good Monday night.

With regards,

David L. Bahnsen
Chief Investment Officer, Managing Partner

The Bahnsen Group
www.thebahnsengroup.com

The Dividend Cafe features research from S&P, Baird, Barclays, Goldman Sachs, and the IRN research platform of FactSet.