The Next Bad Thing
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 10 June 2022
⏱️ 27 minutes
🧾️ Download transcript
Summary
I purposely wrote this week’s Dividend Cafe before the CPI number posted this morning at 8:30 am ET. Lots of traders were getting in front of this late Thursday, and a market that had rallied up +2,000 points in the last two weeks was down -1,000 points in the last five days and is now down a lot as markets open Friday.
We are in a period of short-term traders trying to front-run the Fed, but more particularly, trying to front-run those who they think are trying to front-run the Fed. What I mean is not as complicated as it sounds: The basic belief is that if inflation data looks worse, for longer, the Fed becomes more Volcker-like in their hawkish tightening, and that hurts risk assets; therefore, if we see a whisker of “more inflationary than expected” some will start selling, and we should sell before they sell.
Well, good luck with all that.
Today I am going to look at what could make this market get worse, not in a “traders are going to do this” kind of way, but in a real systemic, significant, macro kind of way. It will turn into a two-parter, no doubt. But let’s look behind the headlines of the day, the CPI print of the moment, and the Fed actions of next week. Let’s dive into the Dividend Cafe …
Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the Dividend Cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. |
| 0:10.0 | Hello and welcome to a dividend cafe from the wonderful New York City studio. |
| 0:20.0 | I am recording here on Friday morning and it's been |
| 0:25.1 | another whirlwind week in markets. And so I am kind of excited for this topic because, |
| 0:32.0 | you know, the markets had been up about 2,000 points in the last couple weeks. And then they |
| 0:37.4 | had given about a thousand points of that back, kind of front running the CPI number |
| 0:44.4 | that came out this morning. |
| 0:45.8 | In other words, the belief that if that inflation reading came in higher, it would mean |
| 0:50.5 | more fed tightening. |
| 0:52.0 | And then more people might respond to that. |
| 0:54.1 | So people wanting to get in front of folks who may get in front of this. |
| 0:58.7 | And if it sounds like I'm sort of being critical of that thinking, |
| 1:01.7 | it's not so much that I'm critical of it as just describing it for what it is. |
| 1:07.0 | And in the mere description, you can probably tell it isn't really what i believe in |
| 1:12.8 | or whatever think about doing um here's the thing i am interested in talking today |
| 1:19.4 | not about what the fed is going to do next not about what the cpi number showed this morning |
| 1:25.0 | and not about what day traders and speculators and, you know, |
| 1:29.3 | the last thousand point move down or the last 2,000 point move up or what all that stuff. |
| 1:35.2 | I'm interested in kind of where we are after this repricing that we've been talking about all year, |
| 1:41.1 | especially in the frothier parts of the market. |
| 1:47.3 | What it, where we are that could lead to another significant leg down, like what would be a potential catalyst to instead of a kind |
| 1:54.1 | of routine and so far pretty shallow correction or bare market, the S&P did get down 20 at one point. The NASDAQ is down over 20 now. |
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