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06-JUNE 01-2023

Good morning.
Following a parabolic move higher in recent weeks, tech stocks with a focus on AI finally had a pullback.  Traders should expect the pullback to continue.
Why?  Parabolic moves in stocks tend to unwind the last and fastest part of the gain.  This has happened with cryptocurrency-related trades in 2017 and into 2022.  And some SPAC companies went public on a surge of interest that took shares from an IPO price of $10 to over $100 in some cases.  Yet today, a few of those companies are declaring bankruptcy.
Traders can bet on a further drop in tech.  Longer-term investors can sell covered calls on holdings, or take some killer profits if they’ve been in the space, while waiting for a better entry price from the lofty valuations that have occurred in the past few weeks.

Now here’s the rest of the news:

June 01, 2022

Good morning.
While the market has been in selloff mode since November, we’re starting to see signs that things have gotten oversold.  The market finally had a rally last week following a seven-week decline, a record number for weekly declines.
Even better, insider buying activity is picking up.  Corporate insiders are granted shares, so they tend to overwhelmingly be sellers.  But when buying activity picks up, that indicates that it may be time to buy.  Insiders are now spending as much on buying stocks as they were amid the Covid crash in early 2020.
So while sentiment is still negative, traders might want to look at buying some beaten-down bargains here for a further possible rebound in the months ahead.

Now here’s the rest of the news:

Home Prices Spike By A Jaw-Dropping Amount
Home prices continued to surge higher in March, as buyers raced to lock in homes before the average mortgage rate hit 5%.  Home prices rose 20.6% in March from the year before, an even higher rate than the 20% growth seen in February… [Read Here]

Is This The End of The Craziest Stock Bubble Ever?
Electric Last Mile Solutions, an EV startup that went public in June 2021 via merger with a SPAC, disclosed Friday, afterhours – when everyone was already off for the long Memorial Day Weekend – that it would run out of money sometime in… [Read Here]

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

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