The market liked the better-than-expected jobs number early on
this morning (the unemployment rate fell to 7.8% compared with the
8.2% analysts expected estimates), as stocks jumped up quickly. The
euphoria did fade some as the indices closed mixed on the day.
Overall, it was gains across the board for the markets as the first
week of the 4th quarter came to a close.
I am hearing lots of chatter questioning the legitimacy of the
jobs numbers report, but whether or not you believe the numbers,
you still have to do your investment analysis and decide where
things are headed - and how to commit your capital accordingly.
Looking at today's big stock movers, payroll processors like
Automatic Data Processing (
ADP
) and Paychex (
PAYX
) ended up on positive analyst commentary. Elsewhere, it's clear
that investors are continuing to chase performance, flocking to
where the momentum is. Home Depot (
HD
) and MasterCard (
MA
) are just two examples of recent winners that continue to gain.
Both stocks lack much protection from a dividend yield standpoint,
HD at 1.88%, while MA offers a paltry 0.25% yield. If profit-taking
were to take over at some point, the momentum traders would likely
head to the exists on these names in droves. Investors should
proceed with extreme caution if they are anxious to play the
momentum game. Finally, it was a tough day for Apple (
AAPL
) shares on what marked one year from Steve Job's passing. The
stock's recent weakness does have some market watchers a bit
nervous about how some of the other tech bellwether could fare in
the near term.
Play to Win - All the Way Through
As Major League Baseball gets set to start its annual playoffs
later today, plenty of teams are sitting home watching, despite
opening up their checkbooks to buy some of the best players
possible (the Angels and Dodgers come to mind). Looking at the Los
Angeles Angels' case specifically, the team went out this past
winter and gave $315 million worth of contracts to two players
(Albert Pujols and C.J. Wilson), but then proceeded to make a
defensive move when it came to another contract situation. There
are certain rules about games played for rookies, and how that
affects the date they can become arbitration-eligible (which
coincides with the player's ability to make his first big
payday).
The Angels decided they were going to hold back their stud
prospect Mike Trout for the first 20 games of the season and try
and take advantage of the arbitration eligibility rules. In effect,
this move bought them an extra year of control over Mike Trout,
delaying his eventual big payday. Unfortunately for the Angels, the
team went 6-14 in those first 20 games, only to see their fortunes
turn around the moment Mike Trout was called up.
Trout ended up with amazing stats, and is an absolute lock for
the Rookie of the Year award (he even has an outside chance to win
MVP, the most coveted individual award for a position player in
baseball). The Angels, however, finished two games out of the wild
card race, and were just a few more wins away from finishing in
first place in their division. Had the Angels not tried to get cute
with regards to Mike Trout and how his contract rights would look
years from now, it is quite possible they would've made the
playoffs this season. Instead, they'll watch on television as other
teams that spent way less money than them compete for the World
Series trophy.
It's funny how a story like this is similar to how many
individuals approach their own strategy to building financial
freedom. Despite the extreme importance of keeping one's finances
in order, people still sometimes sell themselves short. After
putting tons of time and money in one's career, investments, etc.,
it's integral to not pinch pennies in the wrong places! Equally as
important is to not overextend yourself financially, which could
force you to make cuts in areas that deserve more of your
hard-earned capital.
Everybody Wants it All
You'd be shocked at how many people are unable to pinpoint
obvious blemishes in their financial game plan. Young couples, for
instance, often times grossly overspend when it comes to living
arrangements. Renting a two-bedroom apartment for $1,700 a month
and spending the rest of your earnings on entertainment goodies
(electronics, restaurants, etc.) is a fast-track to a mountain of
debt. Yet these same young folks will get frustrated by how much
their job is paying, how much they hate their boss, etc. Then they
go on Facebook and see what their friends are spending money on, or
planning to do, inspiring them to ramp up even more spending. All
the while, they're digging their money hole deeper as the bills
continue to add up.
It's a classic case of putting the cart before the horse, or as
my old boss used to say, "He's the type of guy who puts on a fancy
shirt first and then he shaves."
The Decision is Yours
You can make moves like the Angels did, and decide you want to
make the commitment to win (or in your case, build financial
wealth), but you should avoid trying to cut corners and pinch in
areas that you should be spending smart. Whether you choose a
service like
Dividend.com Premium
, or any other investment service, don't ever make price be the
reason you are hesitating to take that next step. If you can't
respect yourself enough to use the best tools and information
necessary to build that nest egg, then don't be envious of those
who are willing to make those crucial sacrifices (both financially
and by putting the time in to learn). Eventually those who make
these smart decisions will succeed and have little to no debt, all
the while surrounding themselves with those share their same
ambitions.
Looking ahead to the next week for stocks, fourth quarter
earnings will start to shuffle in, with results from the likes of
Yum! Brands (
YUM
), Alcoa (
AA
), and Wells Fargo (
WFC
), just to name a few. The focus will also continue to be on the
economic data, the Presidential election, and as usual, 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
.