Despite millions being without power, market players were feeling good at the start of the week as the averages jumped throughout the day (albeit on low volume though - quirky rally but we'll take it). We're also coming off a strong day on Friday, as some market participants got ahead of what they felt would be a better-than-expected weather result. The up-stocks, down-gold trade was working once again today, but I'll get to more on gold later on.
There wasn't much company-specific news out this Monday morning, but Wall Street analyst upgrades moved the needle north for shares of Blackrock ( BLK ), Pfizer ( PFE ), and Bristol-Myers ( BMY ). We also saw a relief rally in the insurers following the weekend's weather events. Shares of Allstate [[ALL], Chubb ( CB ), and Travelers ( TRV ) paced the gains. I am still watching the transports closely, and we are seeing a decent rally in names like FedEx ( FDX ) and Union Pacific ( UNP ). It could be tough for the markets to build much steam without the transports participating a bit more strongly.
An interesting Gallup poll out last week showed 34% of Americans say gold is the best long-term investment, more than say so about four other types of investments. Real estate (19%) and stocks (17%) were far distant second choices. These results goes hand-in-hand with what investing has been about for years - chasing performance. Unfortunately retail investors tend to join the party late and forget to leave before the best part is over. Five years ago, real estate would have likely been at the top of the survey results list, and years before that, stocks (dot-com/tech bubble) would have been in the top spot.
Getting back to gold for a minute, does this survey indicate the yellow metal has topped? Probably not, but when you approach majority numbers (as gold is), there will be a point where the story is over-exposed and whoever wanted to own gold in some form, already will. At that point, coming up with new buyers becomes very tough. Some would argue gold has international demand and the run could last for a long time (a few years, but rarely much longer). The same has been said for real estate and momentum stocks from years past.
At some point, gold will join stocks in correcting, and that is when the true test of investors appetite for gold will begin. Our advice would be to keep trading Gold ( GLD ) if you want exposure, and raising your stops if prices rise. At the same time, because of the rising bullishness, we would put in sell-stops to avoid getting crushed in any severe price corrections. I wish I can say to buy it and hold it for a long time, but without the support of healthy dividend income, gold simply remains a trade for active investors. When the inevitable run is over, investors will realize they never wanted as much as they thought, as was the case with many who held on to tons of Cisco Systems ( CSCO ), Yahoo ( YHOO ), and JDS Uniphase ( JDSU ) during the tech mania. You can also throw in all the real estate buyers that used to sleep outside of condo openings to put their 3% down on multiple units to flip for fast profits. When the dust settled, they realized the investment wasn't as good as they thought it would be. It was too late at that point. Remember, the party will end, it's jus a question of when. A trade is a trade. Don't forget it!
No other investment can compare to the longevity of quality dividend-paying stocks when it comes to long-term performance. A little while back, USAToday.com did a nice job pointing out how the S&P 500-stock index has gained 209% the past 20 years, but when you factor in reinvested dividends, the return actually jumps to 370%. Reinvesting dividends is a great idea if you can afford to let your money build up. If you are older, collecting dividend checks is probably a better option to provide regular income. Another huge benefit with dividend-paying stocks are the increasing dividends over time, which offers hedge against inflation.
I hope everyone was able to avoid much damage from this weekend's Hurricane. We had lots of rain and wind, but fortunately missed any major damage to our office and residences. I'm hoping many of you had a chance to check out our Dividend.com Premium members-only weekend articles, including the new features that highlight some of the biggest winners and losers from the week that was, including 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.
Thanks for reading everybody. I'll see you tomorrow!
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