It was an up, up, and away day, courtesy of the ECB today, and
not our own Federal Reserve for a change. I have much more to say
on the worldwide printing presses and how investors should approach
the current environment later in today's newsletter.
Some of the big movers in today's tape included Men's Wearhouse
), which was higher following
the company's raised earnings guidance
. Wall Street analyst upgrades worked like a charm, moving stocks
like Stanley Black & Decker (
), Honeywell (
), SunTrust Banks (
), and Cisco Systems (
) higher. The one negative spot we noticed were shares of Seagate
), trading lower following a negative earnings outlook from one of
"When all assets go up, money is being printed. Careful."
The line above was a tweet from PIMCO's Bond Guru, Bill Gross,
at the end of August. Mr. Gross' comments pretty much sum up where
things are with how the economic crisis is being dealt with
(creating more money out of thin air).
Following Japan's lead into the financial abyss is something
that other countries (including the U.S.) are hoping to prevent.
Unfortunately the measures to get the results desired have a way of
taking on all sorts of risk. Did you see the latest data on auto
sales and who is making up the majority of car buyers these days?
Subprime borrowers received 56.46 percent of loans on used cars in
the most recent quarter! Lenders and financial institutions never
really learn, do they? But what's there to worry about, when the
Federal Reserve has the health of the banking system at the top of
their priority list (way ahead of taxpayers of course)?
Some economists out there that would love to see the U.S. have
actual inflation concerns (not that we aren't see this on the
consumer side) that could push the Federal Reserve to raise
interest rates. Unfortunately my guess is that inflation will
remain a consumer issue and one that the Federal Reserve doesn't
quite see in the numbers they choose to report. The way the
government ignores the inflated prices of real-life items (food,
gas, etc.) is comical, and reminds me of the pro wrestling matches
I used to watch as a kid. Somehow, the referee always failed to
notice the "foreign object" the villain used to hit the good guy
with. The fans would be screaming for the ref to take action, but
of course the villain had already tucked the object back into his
tights before the referee turned back around. Similarly, the
government is playing the "oblivious" part to a tee.
The strategy of bailouts worldwide has done wonders for the
equity markets, especially here in the U.S., but there is always
the risk of what happens when we don't get the desired market rally
every single time. For dividend investors, the best approach is to
continue on the current course of looking for the best ideas
possible to commit money to on a monthly basis. We will certainly
see shares of companies we like get carried up along with the
economic bailout rallies. As this happens, we will continue to reap
the benefits, but more importantly, we will continue to monitor the
stocks we like to make sure the risk/reward remains favorable for
any new monies. Investors trying to jump in and out of the markets
are only creating more work, frustration, and risk for
If we see the rallies fade and the markets begin to head south,
the strategy of finding the best names for new capital will remain
the same. Running back and forth to and from the sidelines is not
the right strategy for most investors. Trying to time the highs and
lows of the market will do nothing more than freeze one from making
moves period. Once that happens, investors need to regroup and
think about what builds wealth over time. The answer? Consistently
buying assets that generate income, hence, our focus on quality
25 Years of Dividend-Increasing Stocks
We recently updated our list of dividend stocks that have been
paying out dividends for 25 years or more. Be sure to check out
the latest list of names here
Dividends Really Matter
Financial blog DailyReckoning.com recently took a look at the
difference dividend payouts made in the overall return investors
saw throughout the prior decades. Here are some of the
- The Nasdaq is down 28% since the end of 1999. Even the "blue
chip" S&P 500 stocks are down 15% during that time frame…until
you add back those "boring" dividends. With dividends included, the
S&P 500′s 15% loss flips to a 6% gain.
- Without dividends, the S&P 500 index would have produced a
loss for the 25 long years from August 1929 to August 1954. Then
again, without dividends, the S&P 500 produced a 5% loss during
the 13 years from September 1961 to September 1974. But with
dividends included, the S&P's loss became a 46% gain.
- Over the course of the last half-century, dividends have
contributed more than half of the stock market's total return -
56%, to be exact.
Of course, you can't discuss the potency of dividend investing
without making mention of how awesome compound returns are. I can't
stress enough the power of compound interest: you take a small
amount of money and turn it into a large amount over time. Finding
the right companies at the right price points which not only grow
earnings, but also grow their dividend payouts as well!
New Watchlist Article Out Today
Be sure to check out our weekly Top 50 High-Yield Watchlist
Names post that is out today, exclusively for
members. This list gives readers a good idea of what stocks we're
watching behind the scenes here for potential upgrades.
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