Market Wrap-Up for Sept.10 (INTC, IP, KFT, UNP, PPG, more)

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This could be the week we get an official declaration of QE3 as the Federal Reserve's 2-day meeting takes place on Tuesday/Wednesday. The market will certainly take its queue from the commentary surrounding these meetings later this week.

In the meantime, we had a bit of a tough start to the week's action, as sellers took the lead from cautious Wall Street analyst commentary on shares of companies like Intel Corp ( INTC ), International Paper ( IP ) and Tyco International ( TYC ). We did see a bit of a bounce in several railroad names which caught some cautious commentary themselves last week. Union Pacific ( UNP ) and Norfolk Southern ( NSC ) paced the gains there. Lastly, Wall Street analyst upgrades helped shares of PPG Industries ( PPG ) and Kraft Foods ( KFT ) buck the selling trend.

Housing Recovery (Take 12)

Housing recovery watchers had another big weekend, as Barron's took their third swing at trying to call a housing market bottom. The very same author of this past weekend's article made a similar argument back in 2008 and 2009. Obviously, he was dead wrong those two times.


The most recent article makes plenty of the usual points for a housing recovery, but of course leaves out details as to why the data should be given a much closer look. I have been making the argument that in certain areas of the market, real estate has remained for the most part fairly stable with some upside as well (Manhattan, Silicon Valley-related communities). But for the vast majority of all markets out there, the upside has been fairly minimal (see: non-existent) as far as residential home prices are concerned.

My theory when it comes to killing an investment theme has always been:

If you want to guarantee lower returns on a investment asset, either 1) make a lot more of something, or 2) make it so affordable that anyone and everyone can and will buy it.

It's a supply and demand argument really. Housing has managed to hit both of those theme-killing points above. Builders went absolutely crazy with new home construction over the past several years, creating a glut of inventory. In unison, the lenders allowed anyone with a pay stub to buy a home. And now, with interest rates continuing to hit record lows, anyone who's financially able to buy a home has already done so, for the most part.

Finally, the ultimate problem that will continue to haunt real estate is a lackluster jobs environment. I have seen many studies that maintain the true unemployment rate is in the 13-16% area, and underemployment is probably double that percentage number. Underemployed people include those overqualified for their current job (and thus are making much less money than they "should" be).

No one seems to be asking the tough questions, like "Who will the baby boomers sell their homes to when it's time to retire and downsize?". Many near-retirees had a certain price they expected to fetch for their home penciled in years ago when they attempted their first pass at a retirement planning exercise.

Furthermore, how confident can we be about governmental oversight of job growth, when you still hear stories like the recent General Motors Chevy Volt plug-in hybrid vehicle? Reuters reported the auto giant is still losing as much as $49,000 on each Volt it builds. Throw in some attractive lease options, which GM has done, and I ask, how are they going to make money doing business like this? The tough part of this is the company was part of an enormous federal reserve bailout ($50 billion in taxpayer money) that remains way underwater (estimated at -$27 billion, when looking at GM's current market cap).

The reason I bring up real estate yet again is because many mom-and-pop investors yearning to put money into residential real estate will buy into the phony headlines and believe the coast is clear. Now again, if you can find multi-family or commercial properties where the numbers work (specifically the property can pay for itself each month and you are able to put money in your pocket comfortably), that is where you can at least consider buying an asset that is actually producing income (and hopefully profit)!

Those who are desperately looking for a place to put money to work have to remain disciplined. Doing something just to do something with your money is not a good investment strategy. Real estate tends to tie up a decent chunk of most people's liquidity for a very long time, so you have to buy right - or not buy at all.

I hope everyone had a chance to check out our Dividend.com Premium 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.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Stocks

Referenced Stocks: INTC , IP , KFT , NSC , PPG

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