It was another mixed bag for the markets today, as the indices
continue to diverge on a daily basis from a "value" focus to a
"momentum-based" investing/trading approach.
Apparel maker PVH Corp (
PVH
) continued to push toward new all-time highs, as the company
increased its earnings guidance once again, but late-day
profit-taking pushed to stock to little changed. The stock's
dividend is unfortunately miniscule at just 0.16%, so it's not a
name income-focused investors can wrap their arms around. In other
news, fertilizer play Mosaic (
MOS
) finished lower following the company's earnings release.
Wall Street analyst upgrades helped shares of PNC Financial (
PNC
) and Family Dollar Stores (
FDO
) end the day in positive territory. Elsewhere, we were watching
other big names move in opposite directions with the likes of Time
Warner Cable (
TWC
) and Phillip Morris International (
PM
) attracting buyers, while shares of Yum! Brands (
YUM
) and Blackrock (
BLK
) saw some investors head for the exits.
"You Won't Even Feel It"
I clearly remember the fear of going to the doctor's office as a
kid. Knowing I'd be getting some sort of vaccine shot, I'd always
ask my mom if the shot would hurt. Without fail, she'd answer "It's
be so fast, you won't even feel it." Time and time again I hoped
for that claim to prove true, but alas, I felt the sting of every
one of those shots.
Fast forward to today, and we hear plenty of similar economic
anecdotes from the Federal Reserve. Current policies center around
printing massive amounts of dollars to get the U.S. out of its
economic funk. "It won't even hurt," they say.
We all know that printing money equals inflation, but Washington
would have us somehow believe otherwise. If you look only at the
suspect inflation metrics that regulators publish, then sure,
inflation isn't happening. The real world tells a much different
story, however.
Want proof? How about the data point from AAA reported
yesterday, showing the national average price of gasoline reached
daily record highs every day for six consecutive weeks. The average
price this past Monday of $3.78 a gallon was 16 cents more
expensive than the previous record for Oct. 1 in 2008. The effects
of continuously rising commodity costs aren't just detrimental to
consumers, either. Manufacturers and transports are also seeing
costs rise significantly, and in turn, pass these costs on to the
consumer. By Federal Reserve standards, though, we shouldn't feel
it!
At some point I realized asking my mom about pain from the
doctor's needle was pointless. I'm guessing consumers are going to
start having the same reaction, if they haven't already. Whether
it's pulling up to the pump or checking out at the grocery store
(food companies keep reducing the size of the packages, but the
prices remain the same or even go higher), just getting by is
getting harder for everyone. So when it comes to analyzing economic
data points these days, I suggest believing your wallet, not the
regulators.
Buying Power Erosion
As the Federal Reserve continues to punish savers, investing in
income-producing assets is one of the few options investors have to
remain ahead of real-life inflation. A report from Allianz Life
Insurance Company of North America a while back on "Transition
Boomers" (age 55 to 65) found that one-quarter of the group was
uninformed about the effects of inflation, while more than 40%
lacked a realistic idea of when retirement planning should begin.
Now here's an even bigger shocker from the report: forty-three
percent of respondents said they will not focus on retirement
income strategies until they are less than five years from the
start of retirement, with 16% waiting until six months to one year
prior.
With inflation always pecking away at your buying power,
investors need to move beyond the traditional "safety" of near
zero-interest banking products (CD's, savings accounts, money
markets, etc). Quality dividend plays are able to continue to grow
profits in times of higher inflation, and then pass the proceeds to
shareholders in the form of higher dividends, allowing many to
outpace inflationary effects. Whether you are of retirement age or
not, you must consider this information pertinent to planning your
future income options appropriately.
Income, Income, Income
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income-producing investments the markets have to offer during time
of heightened volatility. We want to make sure we have only the
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