06-JUNE 01-2021

BusinessGood morning.
The idea behind a K-shaped recovery is that for those who weren’t impacted by the pandemic, things would be fine.  For those impacted, life would get worse.
That’s shaping up in many ways.  First, many of the job losses during the pandemic were lower-wage jobs.  High-level employees at some companies were able to take mere pay cuts instead, sometimes even getting stock options.  With stocks up in the past year but wages flat, the real trouble is coming now thanks to inflation.
According to Apartment List, rents increased 2.3 percent from April to May, the largest increase since the company began tracking those numbers in 2017.  While renters are facing higher rent payments, property owners have now had a year to take advantage of ultra-low interest rates to refinance.  The longer these imbalances go on in the economy, the more prolonged the K-shape of the recovery is likely to be.

Now here’s the rest of the news:

Analysis: Chasing Yield, U.S. Private Equity Firms Nudge Up Risk on Insurers –Reuters Staff,Reuters
The shift has caught the eye of regulators and raised concerns about a cash crunch if asset managers had to liquidate large portfolios in a hurry to meet insurance claims… [Read Here]

June 01, 2020

Outperformance can go a long wayGood morning.
The market eked out another 3% gain last week despite a rocky finish.  It was an unusual week as big tech faltered early in the week and financials began to lead.
However, as the week closed, it was back to what has been working.  As we closed out the month of May’s trading last week, we’ll have a chance to see just how resilient the market will be to data as the summer doldrums begin.

Now here’s the rest of the news:

 

June 01, 2019

Innovation, investing and gold … that either stops your heart dead … or gets your adrenaline flowing!

Let’s be honest, who out there really thought we could continue this bull run on the same trajectory it’s been following for the last year?

The fact that we’re seeing 1,000-point swings on the Dow in single trading sessions only speaks to just how far we have overshot reason and how deep we’ve strayed into the land of irrational exuberance.

Any way you look at it, the speculators are getting scared.  Is there any way we should look at gold differently?  Gold, and the companies that produce it, prospers during times of caution.  That hasn’t change in eighty some-odd-centuries.  Last year there was a new development within cryptocurrencies.  A lot of people checked it out!  Now, before you get angry and close out this blog, or throw your tablet out the window, let me explain: Evolution

The biggest problem with cryptocurrencies, and the biggest problem with physical gold, have one single solution.  Cryptocurrencies are inherently unstable investments because their value is under question.  Gold is a questionable investment because it’s heavy, easily stolen, not so easy to transfer or liquidate, and expensive to protect.

Just how well is that one company mated a cryptocurrency that’s backed by gold?

You tell me!  I would love to hear your thoughts, right now … right here!

June 01, 2017

Rich and Famous

Most people who call themselves “investors” really aren’t.

The average “investor” is really a trader.  He buys a stock with the hope that at some point in the future, he’ll find someone who’ll buy it for more than he paid.  He’s trying to time the market.  “Buy low and sell high,” right?

More often, however, people can’t stand the uncertainty.  Watching the market flip and flop all over the place leads to bad decisions.  People buy high and sell low.

But there’s an easier way…

Many investors overlook the fact that your true wealth is your income.

I’ll bet you have some idea of the total balance of your brokerage account – even without looking it up.  But you probably can’t quote the annual dividends your portfolio generates.

That’s a blind spot many investors have.  And it’s a mistake.  You shouldn’t measure your wealth by the balance of your bank account, but by the income it generates.

Income is what you live on.  Income is what gives you the freedom to enjoy your days, take vacations, or provide for your family and others.

When you buy 100 shares of a stock that pays $1 a year in dividends, you’ve just set yourself up for $100 a year in income.  With a little bit of investing acumen, that income stream should rise.

And a dividend is even more than just an income stream… Dividends are vital to the overall returns of your portfolio.  According to studies, dividends have accounted for about 43% of the performance of stocks in the S&P 500 since 1926.

That means if stocks return 7% a year, about 3% of that is dividends. That makes for a big chunk of returns.

That difference grows over time (an effect called “compounding”).  An investor who collected and reinvested dividends from 1940 to today would have earned 10 times as much as an investor who collected the capital gains on stocks alone.

Simply put, paying dividends is exactly what the stock market is about.

After all, a dividend can’t be faked.  Companies can employ a range of accounting tricks to beef up earnings.  They can come up with new grand “strategic plans” to paint a bright picture for the company’s future.  At times, some even engage in outright fraud.

But a dividend comes as real cash, straight from a real bank account.  It can’t be faked, cajoled, or conjured.  Only companies with sound finan-cial footing and real profits can pay dividends.  By focusing on divid-ends, you’ll immediately ignore many of the junk stocks out there in the market.

And by focusing on one specific number, you can make sure that the company is likely to keep paying out its dividend…

It’s called the “dividend-payout ratio.”  This is the percentage of earnings the company pays out as dividends, usually on an annual basis.  You can find dividend-payout ratios for most stocks on Yahoo Finance under “Statistics.”

You’re looking for sustainability in a dividend-payout ratio…

For example, a dividend-payout ratio of more than 100% is, by definition, not sustainable.  At that pace, the company will eventually run out of money.  Usually, a dividend-payout ratio of more than 100% is due to an accounting quirk that has reduced the company’s earnings on paper for a quarter or two.  Less often, it may indicate a special dividend was paid in the last year.

Of course, a dividend-payout ratio that’s too low suggests the company isn’t returning much money to shareholders.

As a rule of thumb, payout ratios in the range of 30% to 60% suggest that the company pays a generous dividend that still leaves some breathing room in the case of short-term market fluctuations.

It’s also helpful to read statements from management to find its “targeted” dividend-payout ratio.  When management announces a target and hits it consistently, it shows the company has the earning power to stay on track.

If a dividend-payout ratio makes you leery, it’s a sign to dig deeper.

The dividend-payout ratio can tell you a lot about an investment – including whether the company delivers consistent payouts.  And that’s vital for anyone investing in income.

Here’s to our health, wealth, and a great retirement,

REW

IMG_0712
Come From Aways, Do You?

More Posts

01-JANUARY 26-2022

Good morning. In spite of 7 percent inflation rates right now, consumers are continuing to spend.  While their overall confidence has dropped, the actual spending itself shows that the economy, largely dominated by such spending, is likely to continue moving higher this year. If inflation rates start to decline in the coming months, the market could be setting up for a solid return as the current fears abate.  Given the latest data showing that consumers continue to be interested in buying homes, automobiles, and appliances this year, even a small change higher in interest rates will unlikely derail the economy’s

01-JANUARY 25-2022

Good morning. On Friday, the stock market broke its 200-day moving average lower for the first time since July 2020.  Stocks are looking at oversold levels going into the weekend, with many names down much further than the overall stock market index.  But yesterday’s wild trading saw a massive drop reverse into a gain at the close. This reversal could be a sign of capitulation by sellers, and that the worst of the current decline is over.  With leveraged traders already wiped out, and plenty of cash from retail and institutional investors on the sidelines, the market could see a

01-JANUARY 24-2022

Good morning. Markets had $3.3 trillion reasons to be volatile last week.  That was based on the notational value of options expiring on Friday.  That included $1.3 trillion for individual stock positions alone, the second-highest on record.  Traders repositioning those trades ahead of expiration last week may have contributed to the big selloff, which finally started reversing on Friday as Treasury yields started coming back down. Given the growth of options trading, this phenomenon of added volatility into options expiration weeks may continue for the foreseeable future.  While February’s contracts are far lower in value, the next big hump will

01-JANUARY 23-2022

Today! January 23, 2021 “Creativity is an action, not a feeling.  Your work is too important to be left to how you feel today.”  –Seth Godin Power Thought That Raises Awareness Whenever we’re talking about personal transformation — whether it’s physical (lose weight), financial (get out of debt), mental (overcome anxiety), spiritual, relational (repair a broken relationship), etc. — what we’re really talking about is change.  And for most, that can be scary.  In fact, many people don’t even entertain the idea of change until the pain of not changing becomes unbearable. In other words, you have to be ready and willing

01-JANUARY 22-2022

Today! January 22, 2021 Good morning. The trade war.  The pandemic.  The election.  All the big catalysts that can move markets up or down are now off the table.  So what’s next?  Until a new catalyst emerges, expect markets to drift. With markets in a long-term uptrend, the drift will likely be higher.  Individual names can still have some big news on corporate announcements and earnings reports.  And look for potential catalysts that could provide the market’s next big move, whether higher (stimulus) or lower (war, pandemic, today’s high valuations). Now here’s the rest of the news: A “Cash Panic”

01-JANUARY 21-2022

Good morning. Fears of rising inflation are likely to peak this year.  That’s good news.  And with news that major spending bills would be broken up, the likelihood of further fiscal stimulus to drive inflation higher is also likely to help there. In other areas, however, the economy is showing signs of a slowdown.  Jobless claims have risen to a three-month high.  Home sales have slowed after a massive boom in the past 18 months.  And now, expectations are that the trans-Pacific cargo trade are now rising to a three month wait time on average.  With a longer wait time

01-JANUARY 20-2022

Good morning. While the stock market has largely been focused on rising interest rates in the past few weeks, the start to earnings season this week has been subdued.  Many of the big banks have started to report numbers.  And banks should be faring well even with higher rates of inflation going on right now. However, bank earnings have overall been lacklustre, as many banks have reported trading losses that have offset the gains made from a big year for mergers and IPOs. If bank earnings aren’t enough to get the markets excited and moving higher, chances are we’re in

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment

Send Us A Message