It was quite a downer of a day in the markets following news of
the tragic shootings in Colorado overnight. Stories like these make
us realize how life can change in an instant. Our thoughts and
prayers go out to the families affected by the tragedy.
Moving on to market-related news, a downgrade of Spain's debt by
Egan-Jones helped send overseas markets tumbling, putting added
pressure on the U.S. indices.
Looking at some of the names making headlines today,
) and Ingersoll-Rand (
) felt pressure following their earnings results. In contrast,
oil-service giant Schlumberger (
) was up on their earnings numbers. General Electric (
) shares ended with slight gains on the session as
the company reported results
and mentioned a split-up within their energy divisions. Finally,
momentum traders who were long Chipotle (
) and didn't sell right after yesterday afternoon's earning release
got hit much worse as the shares closed down nearly $87.
Interestingly enough, Whole Foods (
) also got hit hard as investors who are paying 40 and 50 times
earnings these days may be second-guessing that methodology.
Clearly, the risk is high when playing the momentum/trading
The Lump Sum Dilemma
I recently read an interesting New York Times piece regarding
the dilemma facing many General Motors retirees. In an effort to
get ahead of mounting pension expenses, the company has offered a
decent number of retired workers the option to forgo future monthly
pension checks in exchange for a one-time lump sum payout. In some
of the examples, the former white-collar workers who collected
pensions in the $4-$5K a month range were offered bailout amounts
The right option for workers to choose varies from case-to-case.
Some will prefer the proposed lump sum amount, figuring they can
invest the money and get a good rate of return. There's also the
risk of the worker dying sooner than expect, which effectively ends
their monthly pension benefits. This possibility makes lump sums
look more attractive.
On the flipside, some are fearful they may not use the lump sum
of funds properly. Retirees have essentially no way to produce
decent guaranteed returns (CD's, savings accounts) with yields
hovering at all-time lows. If they make some bad investment
decisions, then what? Another factor not mentioned in the article
is the very real possibility that new-found money could become a
big hassle for certain folks with particularly needy offspring. I
can just imagine a line forming outside a retiree's house, filled
with kids and grandkids looking for hand-outs from grandma or
grandpa's generous pension settlement. Most parents have a tendency
to jump in and help financially whenever they can, but often at the
risk of putting their own retirement security in jeopardy.
So you see, there are several ways to look at the GM pension
story. What would I do? I'd take the money up front and invest it
the best way I know how: in quality dividend-paying stocks that
offer the best risk/reward going forward. Other than that, I would
want to find opportunities where the rate of return makes it worth
diversifying into other areas (other businesses, real estate,
etc.). I can't say it enough: the road to wealth is paved with
Beat The Markets with Dividend Stocks
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A Look to Next Week and a Weekend Preview
Looking ahead to next week, third quarter earnings will be in
full swing once again, as we are expecting results from McDonald's
), Boeing [[BA], 3M (
), and Exxon Mobil (
), just to name a few. The focus will likely be on the economic
data as well as the latest Wall Street analyst calls.
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
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