The Risk that Meets the Moment
The Dividend Cafe
The Dividend Cafe - The Bahnsen Group
4.9 • 572 Ratings
🗓️ 10 February 2023
⏱️ 21 minutes
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Summary
Link to Dividend Cafe: https://bahnsen.co/3jErUVn
I wrote last week about the multi-year (and indeed, multi-decade) beliefs we have about macroeconomic conditions. In a nutshell, I made the case that we face a form of “Japanification” where the diminishing return of fiscal and monetary efforts to goose our economy from the impact high debt has had on its growth leads to yet more debt and also less growth, all as part of a feedback loop.
I wrote the week before about the uncertainty of what will happen in the economy this year and presented the most objective cases I could both for and against a 2023 recession. The market seems to be voting against a severe recession this year so far. This causes me to believe a recession is more likely. Many of the most famous “perma-bears” of our land have heavily leaned into the assurance of a severe recession. This causes me to believe one is less likely. (I really do crack myself up).
A fair question out of the “longer-term” outlook we have (Japanification) and the “shorter-term” outlook we have (recession possibility without recession certainty) is why we see Dividend Growth as an extremely compelling solution in these scenarios. Dividend Growth Equity investing is “risk investing” (there is no maturity date where a par value is promised by the federal government). There are plenty of forms of risk investing, and I want to explain why I believe dividend growth is uniquely suited for these moments.
So jump on into the Dividend Cafe …
Links mentioned in this episode: [DividendCafe.com] https://bahnsen.co/3jErUVn TheBahnsenGroup.com
Transcript
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| 0:00.0 | Welcome to the Dividing Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. |
| 0:12.2 | Well, hello and welcome to the Dividend Cafe. I'm actually recording in the Newport Beach studio, but heading on to Austin, Texas. |
| 0:19.4 | I have a speaking engagement on the lovely |
| 0:23.0 | subject of woke capitalism on Friday. And so I'm recording this before I go. And I'm really |
| 0:30.5 | excited about this topic because I think that the last two dividend cafes set up a sort of |
| 0:37.1 | macro view of how we're thinking about the economy. |
| 0:40.5 | Two weeks ago, it was short term. It was 2003. It was recession talk, making the argument for |
| 0:48.2 | why a recession seems very likely and the arguments for why a recession could be avoided or at least be rather non-severe. |
| 0:58.4 | And playing out with that sort of short-term outlook and humble agnosticism we think ought to look |
| 1:05.2 | like as one thinks about the present economic environment and an investment approach around that. |
| 1:12.1 | But then last week I wrote about the more longer term macro view, and this is hardly new to people who have been reading and listening and watching Diven Cafe for some time. |
| 1:22.3 | It is the great, I think, study of my professional life to evaluate the impact into the into American economic |
| 1:32.3 | life of the excessive indebtedness were taken on and the response to the way in which we treat |
| 1:38.1 | that. The impact that continued fiscal medicine and monetary medicine has and the downward pressure on |
| 1:46.1 | economic growth that I believe that represents as form of a sort of negative |
| 1:51.2 | feedback loop where the medicine and the disease all get mixed up together and |
| 1:57.6 | I refer to this process as Japanification I think that when you have a short-term |
| 2:04.1 | view that we've talked about with recession, a longer-term view regarding Japanification, |
| 2:08.4 | that it's fitting to then do a refresher. And for those of you that are newer to Dividend |
| 2:13.6 | Cafe, it's kind of a whole new set of teachings around why dividend growth |
| 2:21.1 | makes sense to us in this environment. |
| 2:23.7 | There are some that would suggest an entire risk-off approach makes more sense. |
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