The markets attempted to stabilize after an early drop, but
buyers began pulling back following cautious comments from new
Greek Prime Minister Lucas Papademos, who cautioned that the
financial crisis in Greece could be intensifying. We also had oil
prices popping back over $100 a barrel and late in the day, Fitch
ratings agency sent out a precautionary note saying the credit
outlook for U.S. banks could worsen if the euro-zone debt crisis is
not resolved in a timely manner. Volume picked up as well by the
close and is something we are taking note of.
The resulting headline from Fitch sent financial shares reeling,
with losses led by Morgan Stanley (
MS
), Goldman Sachs (
GS
), Citigroup (
C
), and JP Morgan (
JPM
).
Elsewhere, earnings results helping shares of Tyco International
(
TYC
) (
report here
) trade higher, bucking the overall market weakness. Shares of
Target (
TGT
) saw most of its gains dwindle away by the close following that
retailer's earnings release (
earnings report coverage here
). Meanwhile, shares of teen retailer Abercrombie & Fitch (
ANF
), were slammed, ending the day down nearly 14% today following
a disappointing earnings report
.
"Underwater" Mortgages on the Rise
The latest study from leading web real estate company Zillow.com
this past week shows almost 29% of homeowners owe more on their
mortgages than their homes are currently worth. The firm points to
the increased time required for foreclosures to sell as putting an
overhang on the overall health of the real estate industry. Current
estimates suggest it would take more than eight years to clear just
the 2.1 million homes in foreclosure or with seriously delinquent
mortgages.
The million dollar question is "When will real estate bottom?".
The data points above indicate it won't be any time soon. That's
doesn't mean an income investor interested in real estate can't
find good opportunities, but real estate is a numbers game. Do the
simple math: will the cash flow from the investment property cover
your mortgage and expenses? If so, then you may have a candidate. I
stress the word "may" in that sentence, because you still need to
factor in the possibility of being unable to find a renter. That
means you'd need to carry the mortgage on the property for several
months on your own.
And whatever you do, don't let a realtor convince you that
finding a good tenant is a piece of cake. It's always easier said
than done. In the end, we prefer dividend stocks to investing in
real estate anyway. And you're really interested in real estate,
another option is to think about investing in
Real Estate Investment Trusts (REITs)
.
The Fallacy of Price Targets
The business media has built a lot of appeal by delivering
so-called "actionable" market calls. I get nauseous whenever I hear
someone refer to the "guy on TV that says stock XYZ could reach
$100 a share in the next 12 months," and then proceeds to act on
those "as seen on TV" recommendations.
We cover a handful of major brokerage firm calls each day on
The Dividend Daily
, and commonly mention what the analyst sees as a price target.
However, when it comes to our own recommendations, we avoid any
sort of targets. Make no mistake about it: putting out a price
target is nothing but pure guesswork, and is not our game.
In fact, we will point out how ridiculous some of the price
target changes can be from time to time. For example, a stock will
drop from $60 to $20 and then an analyst will cut his price target
from $100 to $50, but keep the stock as an "Outperform." Anyone
that got thrilled enough to put money to work at $60, knowing the
analyst had a $100 target, got the short end of the stick. Sadly
enough, this phenomenon happens on a daily basis.
Keep these points in mind as we at Dividend.com help you
navigate through the regular ups and downs of investing.
A Dividend Capture Strategy for Active Investors
We now offer complete U.S. dividend data for all
Dividend.com Premium
members, so anyone that focuses on "Dividend Capture" trading
strategies should have plenty of good stuff to research each day.
Just check our enhanced
Ex-Dividend Calendar
, which is the best in the business, to search for upcoming
payouts.
Speaking of dividend capture, Dividend.com Premium members can
also access a 9-page report we published on the essential elements
to any successful dividend capture strategy. Be sure to check it
out here on the
Premium Homepage
.
Thanks for reading everybody. I'll see you tomorrow!
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
.