Yesterday's market reversal was carrying the same cautious tone
into today's early session, but we did see some investor interest
following the release of recent Federal Reserve minutes, which
hinted at the possibility of further monetary easing. This
certainly helps fuel a resurgence in the price of gold and other
commodities. The net result is likely more continued bad news for
savers who are not putting money to work.
Earnings results did push the averages, with results from Dell (
DELL
), Analog Devices (
ADI
), and Eaton Vance (
EV
) pushing the needle lower, while solid numbers boosted companies
like William Sonoma (
WSM
) and American Eagle Outfitters (
AEO
). Aside from those story names, the selling we saw in the tape
moved across various sectors. Some of the well-known names moving
lower included Vornado Realty Trust (
VNO
), Caterpillar (
CAT
), and Northrop Grumman (
NOC
).
Unemployment Rises in 44 States - and the Real Estate/Stock
Market Reality Check
Government data released this past Friday showed jobless rates
rose in 44 states during the month of July, as opposed to 27 states
for the month of June. When I read definitive data like this, it
certainly gives me pause to join the chorus of rebounding real
estate sales and improving job hiring sentiment.
So why do we see so many calls for a real estate recovery that
seems non-existent? Well, we all know the real estate industry has
been a big source of economic spending (advertising) as well as a
real battleground for political lobbyists. Just a few days ago,
news the Republican Party was willing to add the mortgage interest
deduction back on their platform showed just how influential
builders and realtors are in getting voters aware of potential tax
implications headed their way. It also shows how much weight they
still pull in Washington.
Unfortunately for stock investors, Wall Street doesn't have the
same standing these days when it comes to influencing politicians
to lower taxes. If either party shows an inclination to side with
Wall Street, let's say keeping capital gains rates at current
levels, they could be asking for a tough campaign. Politicians tend
to buckle quickly if they know their campaign stance is not of the
popular vote. Of course, we all know politicians aren't exactly
honest in their campaign promises, so any proposed tax hikes or
cuts could fall quickly by the wayside once the elections end.
I'm certainly no shill for Wall Street, but when you look deeper
at how poorly assets have performed for many (real estate vs.
stocks), stocks have at least rebounded to 4-year highs. Those who
managed to avoid speculative equities and value traps, and stick to
quality dividend-paying stocks, have seen tremendous portfolios
gains. Outside of few elite markets, the same can not be said for
real estate.
In fact, demographic trends facing the U.S. would caution
against a huge snap-back in real estate values, especially with the
unemployment picture we have today. We have two decades plus of
growing retirees who will likely be looking to downsize from their
current living situation (and they mostly should as part of an
overall smart financial retirement strategy of having less fixed
costs), and will be adding to the supply of homes for sale. Whether
or not we have a bulging shadow inventory of bank-owned homes that
many claim, the supply/demand ratio remains tilted to one of
continuing supply.
Again, I am not speaking out against home ownership more than I
am asking individuals to look at the facts when it comes to your
investment dollars. There are solid real estate investments out
there if you can locate positive cash-flow situations or have
experience in the foreclosure side of renovating homes and
re-selling or renting them out. But when it comes to residential
real estate, there are still very few markets where price
appreciation can be counted on.
Unfortunately all the media hype in the world can not willfully
move the real value of what we own (homes, stocks, etc.) - not that
the business media doesn't attempt it. So you can not overlook the
facts provided by influencing data points. With more and more
citizens relying on government assistance and slowly dropping out
of the employment picture, do you think these folks are worrying
about buying homes? These people are just trying to survive from
day-to-day and week-to-week. For actual real estate appreciation to
take place in a majority of markets, we need a major positive trend
shift in the job markets. We don't currently see it yet and that's
the fact.
Do we think stocks are immune to danger with the points I am
making above? Certainly not, but there are some industries and
companies that should be able to shoulder a sustained search for an
economic bottom better than others. Our job is to find those names
and continue to monitor them when it comes to investors deciding
where their hard-earned capital should be aimed at. This year's
Presidential election will no doubt have market-watchers (including
us of course) trying to come up with all sorts of scenarios to how
investors should be positioned going forward. Stay tuned as we'll
be sure to pass on our views.
An Important Note Regarding the Best Dividend Stocks List
We want to make sure everyone understands that the stocks on our
Best Dividend Stocks List
are the names we currently like for new investor capital,
regardless of what date the stock was first recommended on. If and
when a stock is removed from the list, we will clearly state
whether the stock should be sold (which is rare but occasionally
will happen), or simply held in one's account until we see a better
entry point or catalyst.
And here's one last thing to remember about what we do here at
Dividend.com: it's not just the names that we recommend that can
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Thanks for reading everybody. I'll see you tomorrow!
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