As of today's close, the markets have staged a 1,000 point swing
to the upside from last Tuesday's intraday lows on the Dow. The
massive rally has been helped by numerous rumors of European
TARP-like bank bailouts. Is this a true basis to become bullish on
the markets? Investors overseas are hoping history will repeat as
we saw U.S. markets begin to rebound sharply in the spring of 2009
following the U.S. TARP program. The one not-so-shining takeaway
from today's 300 point rise on the Dow and nearly 90 point jump on
the Nasdaq, was the abysmally low volume. As I've said all too
often before, we'll take the gains as it helps many a
poorly-positioned trader get back some of what has been lost.
However for dividend investors we need to see better confirmation
in our data before getting giddy about more names to our
"Best Dividend Stocks"
Looking at the action more closely, financial names gained back
some of Friday's losses, with Morgan Stanley (
), J.P. Morgan (
), and Goldman Sachs (
) all pushing higher. Bank of America (
) was up just a bit today, even as news the company will be issuing
multi-million dollar severance packages to several departing
executives (despite the bank's current financial struggles).
Whether you support the "Occupy Wall Street" protestors or not,
news of multi-million-dollar severance packages from embattled
banks certainly gives a bit more headline news leverage to their
Elsewhere, we saw more of the beaten-up names begin to recoup
some of the damage from last quarter, including Dow Chemical (
), Freeport McMoran (
), and Deere & Co. (
On one last note, gold prices (
) were also sharply higher today. I noted this could be the case
with a Euro-TARP initiative being rumored. If gold does put
together a strong rally but fails to reach a new high, the
long-term trend for the yellow metal could become very tenuous.
Momentum Stocks/Trading - Leave It to the Pros (actually only
10% of them)
Nothing changes when it comes to my rants on business media
today. Regardless of the headlines, the coverage is always about
the stocks "investors" should be owning going into the earnings
reporting seasons (translation: what stocks should be rented to
ride any upside surprises in). Unfortunately there is no scorecard
kept for the numerous well-known momentum stocks that have
absolutely crushed portfolios for some. Look at these three for
The recent three-month high for Netflix (
) - $300, now trading around $125.
The recent three-month high for Illumina (
) - $76, now trading around $27.
The recent three month high for Sohu.com (
) - $90, now trading around $57.
It's not just the non-dividend stocks that have been in focus
when it comes to losses. Look at these high-beta
low-dividend-yielding plays we have been warning readers about.
Freeport McMoran (
) - recent three-month high of $56, now trading around $35-$36
Carbo Ceramics (
) - recent three-month high of $180, now trading in the $116-$118
It is said (but not completely documented as far as we can find)
that only 10% of traders can make a living sitting in front of a
computer day-in, day-out, trying to beat the markets. Those are
horrible odds for anyone looking to trade full-time.
Now when you see rallies like we have this morning, it's
tempting to buy stocks hoping for double-digit dollar amounts like
some are seeing so far. However, most days aren't anything like
today. Most of the time, traders are trying to grind out wins in a
market that moves sideways. Granted, the volatility has been
extreme since machine trading has played a bigger and bigger role.
However, the sudden moves tend to ruin many strategies, especially
for technical-style traders who watch certain moving averages for
signs of stocks being over-bought or over-sold.
Dividend stocks may seem boring and have certainly been
portrayed as such by the business media, but slow and steady has
been the winning mantra for decades. Much historical data continues
to back what we advocate is the best way to outperform the markets:
owning high-quality dividend stocks. I know there will still be
investors that want to roll the occasional dice, but please use as
much discipline as possible and never leave yourself vulnerable to
taking big losses. Use sell-stops at all times if you decide to
test your carnival-style luck at winning the daily trading
Trading tends to be all about emotion of catching the next big
move, up or down. Think about how many things people do well when
it comes to money when there is a lot of emotion involved. The easy
answer: not many!
Commitment to Excellence
Speaking of emotions, it was a tough weekend for sports fans on
the east coast as the Phillies and Yankees were both eliminated
from the MLB Playoffs. Fans of those teams naturally point to
complacency and the lack of fire for failing to take their talents
to a World Series championship. It's often very difficult in sports
to get our arms around the real reasons some teams win and some
don't (as well some players that perform well in a big spot and
some don't). Either way, the conversation tends to be filled with
We also heard about the passing of legendary Oakland Raiders
owner Al Davis this weekend. Davis was a well-known figure who
tended to run his franchise with an iron fist. He was also known to
coin the phrase "Commitment to Excellence," and the Raiders won
three Super Bowls during Mr. Davis' tenure.
When I look at my kids' daily lives, I am always hoping they
perform to the best of their abilities, regardless of the
situation. As much as we like to see success in their sports'
achievements, it is the academics I love to praise more whenever
possible. It can be tough to bring the same emotion when it comes
to motivating the academic muscles, but whether you have children,
employees, a spouse, or just yourself, you can not afford to lose
sight of the most important factors affecting your life.
In the words of Al Davis, a commitment to excellence should be a
daily routine we can not take for granted. At Dividend.com, we
don't lose sight of this fact. It is impossible to nail every call
or analysis you make, but if you hit a majority of them, good
things will happen. This only comes with preparation, discipline,
and the drive to succeed.
Did You Miss Our Weekend Updates?
I hope everyone had a chance to check out our
members-only weekend articles, including new features that
highlight some of the biggest winners and losers from the week that
was, such as analyst upgrades/downgrades and earnings/story stocks.
These articles are a great way to catch up on the week that was in
the markets. We also have a rundown of how various Dividend ETFs
performed on the week.
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