DC Today is a daily missive from the Dividend Cafe of The Bahnsen Group. While the Dividend Cafe’s weekly market commentary is meant to be long-form, macroeconomic, and principle-driven, the DC Today’s purpose is to provide a daily synopsis of markets, politics, and current events. It will be short, sweet, and hopefully, informative. Our goal is to bring you the latest and most relevant market information and insights, written only by us. Please feel free to share The DC Today with your friends and family. And of course, we always welcome your feedback as to how we can make it more relevant and practical for you!


Dear Valued Clients and Friends –

A big rally day today across the board, with markets closing at new highs, particularly in technology stocks primarily fueled by AI euphoria.  I honestly can’t remember a time when the point move in the Nasdaq was almost on par with that of the Dow, up +460 and +456, respectively, in what is more and more feeling like 1999.

Japan, however, is feeling more and more like 1989, closing at an all-time high today, surpassing its market peak of 12/12/1989, about a month after the fall of the Berlin Wall, when instead of trading stocks, I was trading baseball cards.  You read that right; it has taken the Nikkei 34 years to gain a new height following the largest asset bubbles in the modern era.  Do valuations matter?  Yes, indeed, they do.

More on it all in the video link below.

What’s On David’s Mind

Economic data is a funny thing.  On the one hand, food services and groceries saw substantial price inflation in 2022, and even with that curtailing or leveling off in 2023 (the 12-month CPI for food inflation is currently +2.6%), it remains much higher since COVID as the +10% increase in 2022 didn’t go away.  What is interesting, though, and my own diet and eating habits are willing to testify to this: Food inflation is not monolithic.  Dairy products, meat, eggs, fish, and poultry all saw deflation in 2023 (prices ended the year lower than they started), while “food away from home” (restaurants, etc.) saw a +5% increase in prices.  Fruits and vegetables were only up +1.1%, while beverages were up +3.4%. Additionally, the 2015, 2016, 2017, 2018, and 2019 numbers were all so minimal (less than 1.5% per year on average) that even with the 2020-2022 numbers, the ten-year average for food inflation is still only 2.3% …

At the end of the day, no one needs statistics from me to know how they feel about food prices and other inflation data that speak to real-life circumstances.  If one goes to Subway or McDonalds a lot, they are paying a lot more than they used to.  If one goes out to nice restaurants a lot, they are paying a lot more than they used to.  But the mixed bag of data is clear – this is more about supply and demand and consumer choice than anything else.

How do we know this?  For the fifteen years before COVID, what was the portion of disposable income spent on groceries?  About 7%.  What is it now?  About 7%.

Market Action

*CNBC, DJIA, February 22nd, 2024

Dow: +456 points (+1.18%)
S&P: +2.11%
Nasdaq: +2.96%
10-Year Treasury Yield: 4.33%, flat on the day
Top-performing sector: Information Technology – up a stunning +4.35%
Bottom-performing sector: Utilities (-.77%)
WTI Crude Oil: $78.43/barrel (+.67%)

Key Economic Points of the Day 

  • Initial jobless claims were better than expected at 201K versus 217K expected, and continuing claims also beat in a continuation of a robust employment picture in this country.  If the participation rate would just increase more, we would solve both tightness in the labor market and add to GDP; we just need more to find inspiration in David’s new book Full-Time, Work and the Meaning of Life.
  • February Flash PMI came in roughly in line with expectations and in expansion territory at 51.4.  Inside the numbers, services were on the weaker side, but the manufacturing component increased the most since September of 2022, and both were north of 50.
  • Existing home sales were slightly better than expected, up 3.1% for the month and now down -1.7% from a year earlier.

Ask David & Brian

“Good morning, David and Brian!  I have been seeing the return of capital in some of my distributions and was initially under the impression that RoC = bad. I read an article or two recently stating that RoC can be good.  I understand that RoC can be bad if you are cannibalizing the assets of the security to support a payout that the underlying business cannot support. It seems like the only upshot is for tax purposes (I.e., the distribution does not count as “income” from the perspective of the IRS but reduces cost basis). Do I have it right, or is there some important nuance I’m missing?  Thanks for all of your insights. I read the newsletter daily and really value the work you do. The education and perspective on dividend growth have been tremendously helpful over the past few years.  Have a good one!
-Dustin A.
In the only cases where our holdings may have a “Return of Capital” distribution (basically REITs or MLPs), they are not actually returns of capital (erosion of principal base) but rather a tax technicality (a feature, not a bug).

In other words, the offsetting impact of depreciation allows a reclassification to cash return that is sheltering it from tax.  The real net operating income generates the dividend, but the particulars of the tax structure of REITs and MLPs allow offsetting classifications that create shelter.  It is cosmetic, not economic, and all beneficially so.  The underlying companies in the cases we have this taking place (MLP holdings within UMI, Blackstone Real Estate Income Trust) are worth more, not less, after these distributions.  They are not eroding or cannibalizing the assets of the company.  One hand giveth and the other hand is richer.

On Deck

  • Dividend Cafe will hit your inbox tomorrow.
  • A quiet day in the economic calendar tomorrow before more action in the coming week.

Send questions, and we’ll have answers at the ready. Enjoy your evening and the weekend to come.

With regards,

Brian T. Szytel
Co-CIO, Senior Managing Director, Partner

The Bahnsen Group

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

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About the Authors


Founder, Managing Partner,
and Chief Investment Officer

David is a frequent guest on CNBC, Bloomberg, and Fox Business and is a regular contributor to National Review and Forbes. David serves on the Board of Directors for the National Review Institute and is a founding Trustee for Pacifica Christian High School of Orange County.

He is the author of the books, Crisis of Responsibility: Our Cultural Addiction to Blame and How You Can Cure It (Post Hill Press), The Case for Dividend Growth: Investing in a Post-Crisis World (Post Hill Press) and his latest, Elizabeth Warren: How Her Presidency Would Destroy the Middle Class and the American Dream (2020).



Brian manages lead relationship management, investment strategy, financial and retirement planning, and advanced estate planning strategies for our clients. Brian has a diverse professional background with over 15 years of financial advisory experience including UBS, Smith Barney and most recently at Morgan Stanley where he was promoted to First Vice President.

Brian holds the Certified Financial Planner™, and Accredited Investment Fiduciary™ designations, along with the Series 7 and 66 securities and the California Life and Health Insurance License. Brian received his Bachelor’s degree in Business and Economics from The University of California at Santa Barbara.

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