The DC Today - Tuesday, February 6, 2024
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 6 February 2024
⏱️ 9 minutes
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Summary
Today's Post - https://bahnsen.co/4bqijHA
Markets traded modestly higher following global markets, particularly China, where broad indices closed higher by over 3%. Markets in China have given up over $7T in market value since peaking in March of 2021, and last night’s move had less to do with actual news than I think it just did with an oversold bounce on potential stimulus. I do suspect there will be more from the government there to stimulate the economy and a severely over-levered real estate market sooner rather than later.
Slower growth in China, means less Yuan to recycle back in US Treasuries, as that share of ownership continues to decline. There are still plenty of long-dated liabilities that need to be funded domestically with pensions and insurance companies and the like, but the supply this year will be massive with $8.9T in maturing Treasuries. Add on another $1T or more in deficits, and we will need to see over $10T absorbed in markets this year. This, along with the fact that government interest payments have already doubled from $350B in 2021 to now $700B, just has me skeptical that the Fed will continue to sell $60B a month with QT for a whole lot longer.
It was less of a data-driven market day, other than a host of Fed President comments, which I will sum up to effectively ‘…yeah, what he said…’ reiterating Powell’s Fed policy comments last week about more time needed with rates.
Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the DC Today, your daily market synopsis of the Dividing Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. |
| 0:14.2 | Hello, welcome to DC today. Brian Sightel with you this Tuesday. It is February the 6th. And a bit of a quiet day in markets. |
| 0:24.6 | We traded up this morning, maybe 50 points or so off the open following China's move up overnight. |
| 0:32.8 | There was really not a lot of news there either, frankly. But with the market that's just had a tough go of it for the last two years, it's wiped out about $7 trillion worth of the market cap. I just really think it was more of a bounce in an oversold condition. But there was some hint at maybe a meeting with the president there would solicit some stimulus into the market. |
| 0:57.2 | There was a sovereign wealth fund that bought some exchange traded funds there too. |
| 1:01.2 | So again, not a lot of news, but the market in China was up 3%. |
| 1:04.2 | So global markets followed a little bit from that. |
| 1:08.5 | And most of our market action today was positive. We actually |
| 1:11.5 | closed up 141 points on the Dow, which in percentage terms these days is really not a huge move, |
| 1:19.5 | but about a third of a percent, roughly. But closed at the highs for the session. So not all bad, |
| 1:26.5 | NASDAQ even eked out, basically a flat return slightly positive on the day. So not all bad. NASDAQ even eeked out, basically a flat return, |
| 1:29.4 | slightly positive on the day. So all and all, fairly modestly positive trading on the day. |
| 1:35.7 | Not a lot of data out today. There was, you know, a couple of Fed presidents speaking today, really just reiterating what Powell said last week. |
| 1:48.6 | So there's some follow-through in that rates need to stay longer here for a period of time to show more proof in numbers and data that inflation is, in fact, at 2%. |
| 1:59.4 | One of the things I noted was, you know, with the slowdown |
| 2:03.9 | in China, economically speaking, and market related, there has been less yuan, less local |
| 2:10.9 | currency to be recycled back into U.S. treasuries and the U.S. dollars. And so that percentage |
| 2:16.4 | of ownership continues to decline in China. And it's |
| 2:21.1 | notable just because there's a good amount of supply coming this year. I say a good amount |
| 2:25.1 | because there's about $10 trillion coming to the market in 2024 of new treasury issuance. |
| 2:31.5 | There's an $8.9 trillion amount that's coming due or maturing, and then |
| 2:36.5 | with deficits that are going to be somewhere north of a trillion, you get to that $10 trillion mark |
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