Monday - September 21, 2026

0:00Welcome to the dividend cafe weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Well, hello and welcome to the Monday dividend cafe. I am your host David Bonson. I was sitting on the ground in La Guardia this afternoon where you may have heard that there was some sort of radar outage across the skies of the tri-state area and somehow I ended up getting out and so now I am recording quickly because I just got to my hotel in Chicago where I will be in meetings all day and then returned to New York City tomorrow night. But because of the time, brevity situation before my dinner meeting tonight, I am going to go through today's events quickly. It's an interesting day because there's plenty in all of our normal categories I want to go through and we're just going to do our kind of normal around the horn. I will tell you that if you missed the dividend cafe on Friday, we did unpack the Fed's decision

1:04to hike rates and really walked through what it doesn't mean. We did also walk through what it does mean and I encourage you to check out Friday's dividend cafe about the Fed and the rate hike. I have a couple more comments about the Fed today. It's opened up 300 points this morning and then closed up 366 but had dipped right after the open and then just sort of spent the day getting back to that level kind of all throughout the day going a little bit higher after that initial dip. But the doubt isn't going to tell the story because the S&P was up 1.5% and the NASDAQ up to an quarter but it was behind a really big rally in just a handful of names and sectors, the foundation services up nearly 4% meta alone being one of the largest holdings there. I think was a 10 or 11% in that broad. That sector up 3.86 on the day technology was up over 2% but then it had energy down over 2.5% of course it had been rallying in the last couple of weeks.

2:05Look, I do want to point this out and I'll get more data throughout the week and Brian and I will include it in daily recaps as we go but I got to point out the S&P is now within a whisker of its all-time high and as that has been happening the breadth of the market has totally collapsed and that has not been the story for a lot of this year but I bring it up because I think it is a very big deal when you have about 75% of the S&P 500 above its own 200 day moving average and that drops to 50% while the market is going higher it speaks to a total collapse of breadth and that leads to the problem of that concentration and unsustainability of a market index being carried by such a small amount. Too much lift expected from too small part of the overall index. The 10 year bond yield closed to at 495 so it was down about 5 basis points so you got a little bit of a move in bonds higher as yields came down on the long end.

3:10The top performing sector I mentioned was communication and technology and the energy drop was related to oil prices being down about 4.8% today coming down from the very high $100 level to the still high $95 level but nevertheless that brought some of the energy space down. There's a chart I want to put up real quickly here that may look a little confusing but what I'm essentially showing is the significant expansion of margin debt, people that have borrowed from their portfolios and we look at past points where margin debt went way higher and markets ended up collapsing and I agree historically with the contrarian nature of this as a historical indicator. I am not doing this time it's different right now but I am pointing out one thing that just factually is different that early in my career margin debt was largely a byproduct of people leveraging from their own portfolio to buy more of their own portfolio and that

4:15is very different in the last 10 to 15 years where brokers and custodians have made credit available for non-purpose lending tax payments real estate as mortgage underwritings become a much bigger hassle. People borrowed against their own portfolio to buy their houses and things like that and I know from my own experience observation and optics being inside of this that used to be 0% of what we saw happening on margin and now it's all of what I see happening on margin. So I just don't know that the margin debt increase is the same level of contrarian indicator that it has been historically when people were borrowing with collateral to buy more of the collateral and that is something I think is worth pointing out as potentially different. There's a link in DivinityCafé.com today to where I talked about this very dynamic on CNBC. I think it was a couple of months ago I believe that was in late June or early July and that link is there.

5:15All right. I'm going to put up a second chart real quickly here as well that does speak. I don't have caveats for you here. This is just a contrarian indicator. You can do with what you want. Massive explosion of inflows into the technology sector and ETFs and this is the largest that we've ever seen. So just giving you the visual of what's going on there will leave that be. All right. Moving out of market news into some of the kind of news stories. First of all, the president announcing Friday I believe it was. He wasn't going to let CNN, MSNBC, or Politico in the White House. They filed suit. That appears to be headed to spring courts. So kind of a little dust up there. The state attorneys general who are blocking the Paramount Warner Brothers deal have come to an agreement. They appear now that they're going to be letting that deal go forward to some of the legal impediments that were potentially disrupting that deal are being removed. And then whether you're a baseball fan or a private equity fan, there's some big news worth mentioning in that Apollo is taking a 16% interest in the New York Yankees and

6:20that implied valuation puts the team worth over $12 billion. On the public policy front, the president announced Saturday morning that he was creating an AI task force and coming up with an AI czar to lead it. I talked to a couple of people today. It doesn't appear that there's been any coordination or discussion on this with the Commerce Department or the Treasury Department. It does not appear that technology sector folks who have been involved in advising the administration up till now are aware of this. We don't really know what this task force is going to do or how they're going to do it or who's going to be on it. But nevertheless in response to some of the things that took place a week ago, this is kind of interesting news. There is some speculation that they may create this out of the pentagon as opposed to using civilian oversight. So I'm going to be watching that for a number of reasons. Canada and the European Union are having talks about Canada joining the EU as an associate member.

7:21That's obviously in response to some of the hostile trade position going on with the US. President Trump has threatened more tariffs on Europe if that were to happen. Economic front industrial production number came out today and it was flat in August. We were expecting about a 0.3% increase on the month, but manufacturing declined on the month even as utilities output advanced. So that led to a flat number in the IP number. Retail sales were up 1.2% in August. That's about 6% even year over year. And building materials did see a decline. We know some of that slowed down with housing construction. But other categories like gas stations, internet, restaurants, bars also increases. On the housing front, the NHB home builder sentiment came out. So fell another 3.6, extremely low 32. 50 is where you're just like even anything above 50 means positive sentiment in below 50 is negative and it came in at 32. Present situation dropped on the month, but the future outlook dropped even more.

8:28Perspective buyers traffic is stayed the same, but when I say the same, it's at a brutally low 23 buyer traffic. Weakened in every geographical region in the country, 38% of builders cut prices in the month. The average price cut being about 6% of the listed sticker price, 66% used sales incentives to move product. So I would like to find a green shoot out of all the data, but I can't really find one. Housing starts declined 2.6% in August. They're down 1.2% a year ago. However, this green shoot here is that single family numbers were better, but multi-family starts are way down as we continue to work through what in a lot of regions of the country was a pretty big over build in multi-family. On the Fed front, to go to the Divinity Cafe from Friday for that full coverage I did, I read a couple reports over the weekend and just inspired a little bit further comment I wanted to make. First of all, Goldman Sachs disagrees with me.

9:29They believe that the Fed will do their second rate hike at the October meeting right before the election. And having read their report and an additional report from Renee and now, I am now kind of in the camp. First of all, I said in Friday's Divinity Cafe that there was no reason for the Fed not to. I don't think that it is a bad optic. I don't think it matters, but I just thought that they would be treating it as a bad optic. But I think I'm underestimating Chairman Warsch there. If they decide they need to hike rates, I think they're going to do it at the next October meeting in Goldman Sachs agrees on that front. So I've moved my view on that. An underrated element of Chairman Warsch's comments last week and I want to read this word for word from today's Divinity Cafe. He was publicly and convincingly disputing the very idea of a precise neutral rate that can be ascertained by mere mortals, even ones with PhDs. I think this is a highly underrated part. Chairman Warsch disputing that some neutral rate is discoverable by the body that is the

10:29Federal Reserve or the Federal Open Market Committee. This reorientation of monetary policy to something driven by financial conditions is going to take time, but will be profoundly impactful. I also want to point out that his mocking of the idea of data dependency, calling it a dangerous preoccupation because of the noise of data, is music to my ears, but I think it's something I need to write about more in the future as well. By the way, on central bank side, outside of our Fed and Chairman Warsch and all of that, the bank of Japan increased their policy rate by a quarter point, bringing it up to the whopping 1.25%. Just remember, that's a paltry low number, but Japan has been at 0% if not negative in their policy rate for the basically last 20 years. I mentioned crude oil past close to $95.49. Midstream energy stocks were down a little bit last week, despite oil and natural gas being up. That's largely because of the correlation with income oriented stocks where a lot of yield

11:31oriented stocks were down last week with bond yields moving. Canadian midstream, by the way, did very well last week. I just want to point out that diversification that we believe in between the Canadians, US corporate companies that are in the midstream space and then MLPs, that trifective exposure to midstream continues to be what we believe in and smooths volatility over time. All right, I'm going to leave it there. clients will have a really robust weekly portfolio holding support Wednesday morning in their inbox per usual. This week has got some more fun action in it. Friday's dividend cafe is going to be a new exploration of certain elements around the energy sector. We want to make a case that both bulls and bears will want to read as it pertains to energy. There's links, there's fun things at dividendcafe.com, but I'm going to leave it there here on this Monday night from beautiful Chicago, Illinois. Thank you for listening, reading, and watching the dividend cafe.

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