As the markets were once again digesting the latest economic
data, the indices made an attempt to shoot higher, but couldn't
maintain much of the momentum, as the averages closed off earlier
highs.
A couple of earnings plays received some investor praise as
shares of General Mills (
GIS
) and Cracker Barrel (
CBRL
) had solid buying action for much of the session. Cracker Barrel
was up strongly on news the company raised its dividend payout by
25%, continuing the recent string of generous payout hikes. A
cautious Wall Street analyst call had shares of railroad plays like
Norfolk Southern (
NSC
) and Union Pacific (
UNP
) lower (timely call for a change as we just got a profit warning
from Norfolk Southern after the bell). On the flip side, shares of
Monsanto (
MON
) and Corning (
GLW
) gained on more upbeat comments.
What Gives?
It has been amazing to watch the global markets operate over the
last couple of years as the effects of Fed/ECB bailouts reverberate
through all sorts of asset prices. I have never seen such an
environment of treating bad news with market rallies as we have
seen. It's almost becoming a disappointment when the economic data
is actually better than expected. If you remember I recently quoted
a tweet from legendary money/bond fund manager Bill Gross pointing
out when all asset prices rise, money is being printed. He urged to
take caution. Now we bundle Mr. Gross's market commentary with
plenty of other research notes we examine to help us come up with
our own take on the markets of course. But, we do see and hear the
frustration felt by many investors.
The whole thing is taking on quite a picture of not even
complacency, but bewilderment in how little has been correlating
when it comes to asset values. Oil prices spike, but yet the
transport sector is doing amazingly well (up to the recent FedEx
warning that most analysts showed little concern for). Gold prices
are shooting back up, but so is the rest of the market. Apple (
AAPL
) shares continue to rise, yet anything remotely tied to Apple
products (let alone most of the entire stock market) rise as well.
I get the "coattail" effect, but haven't we all learned what is
good for one company almost always tends to eventually be good just
for one company. Apple isn't in business to help numerous other
companies ride on their coattails and they not react to that in
some fashion (vendors can expect to see how little value a company
like Apple or any other large company for that matter, places on
items that may be considered a commodity, and where they may be
able to fill their need cheaper elsewhere).
I understand there are money managers just chasing performance
and being reckless with other people's money, but at some point
things will make sense and the investing game will separate the
winners and losers as should be the case. It is easy to get lost in
the current investing moment, believing everything will win, since
the media's message is interest rates will stay low, real estate
prices will rebound to the old highs, gold hitting $2500 an ounce,
Apple going to $1000 a share. All this, with global tensions
reaching dangerous levels (China and Japan feuding, U.S. embassies
the target of protests worldwide, Iran/Israel in a potential
showdown, religious tensions the highest I can ever remember,
etc.). Now we get the market has a tendency to climb a wall of
worry, but one would think there would be a better correlation to
the current events we are seeing. It's as if the venture capital
approach (throw millions of dollars at a set of companies going
after the same market, since they all win right?) is becoming the
mantra in the public markets. The reality is not every company can
thrive and make real profits, yet in the private sector venture
capitalists take a bow for being a part of a company's funding and
companies receiving funding also take a bow, all without proving
the business model they are building even works. Heck, you can't
even find an analyst question the valuations of companies like
Amazon.com (
AMZN
) and Salesforce.com (
CRM
), which trade at over 100 times next year's earnings!
Maybe this time is truly different and we will have a financial
backstop for every potential high-profile business failure and you
can pay any price for any stock because prices can only go up. It's
certainly possible when it appears the answer to everything is
printing more money.
Our job certainly isn't to panic or scare anyone out of the
markets, but just to give a bit more clarity on what we are
actually seeing when we examine the overall state of the markets
and what it means to investors looking to put money to work. Stay
tuned!
An Important Note Regarding the Best Dividend Stocks List
We want to make sure everyone understands that the stocks on our
Best Dividend Stocks List
are the names we currently like for new investor capital,
regardless of what date the stock was first recommended on. If and
when a stock is removed from the list, we will clearly state
whether the stock should be sold (which is rare but occasionally
will happen), or simply held in one's account until we see a better
entry point or catalyst.
And here's one last thing to remember about what we do here at
Dividend.com: it's not just the names that we recommend that can
help you build wealth, but also the things we try to steer you away
from that are just as important. Forget about speculative or penny
stocks, chasing unprofitable IPOs, and listening to the manic
talking heads in the business media!
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Thanks for reading everybody. I'll see you tomorrow!
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, as well as a detailed explanation of
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