The Big Picture |  |
- 10 Thursday PM Reads
- What Does It Take to Get a Job at Google?
- QOTD: Too Few Arthur Andersons
- Infographics: Where Data Meets Design
- 30 yr auction solid, some left with no other choice
- Earnings Estimates & Valuation Drivers, Q4 2011
- Obama’s Rating Soar After Punching Wall St Exec in Face
- 10 Thursday AM Reads
- European problems still come down to Italy and Spain
- Dividend Investing
| Posted: 13 Oct 2011 01:30 PM PDT Today’s afternoon train reading :
What are you reading? > Occupy Wall Street Comes to Boston
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| What Does It Take to Get a Job at Google? Posted: 13 Oct 2011 11:30 AM PDT |
| QOTD: Too Few Arthur Andersons Posted: 13 Oct 2011 11:00 AM PDT Quote of the day:
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| Infographics: Where Data Meets Design Posted: 13 Oct 2011 10:30 AM PDT |
| 30 yr auction solid, some left with no other choice Posted: 13 Oct 2011 10:01 AM PDT In contrast to the weak 10 yr auction yesterday, the 30 yr auction was solid as the yield was 4 bps below the when issued and the bid to cover of 2.94 was well above the 12 month avg of 2.61 and the best since March. Also, direct and indirect bidders took the most since April ’10. Bottom line, if you’re a pension fund or an insurance company and the Fed tells you that short term rates are staying near zero for another two years and that they will do all they can to keep long term interest rates low, you buy as many 30 yr bonds as you can, irrespective of the pathetic yields. It’s because you are left with little choice. It’s another example of how artificially manipulated interest rates leads to poor investment decisions and a misallocation of capital.
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| Earnings Estimates & Valuation Drivers, Q4 2011 Posted: 13 Oct 2011 08:36 AM PDT Great chart from JPM showing the state of earnings heading into Q4 2011: > click for ginormous chart All data as of September 30, 2011
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| Obama’s Rating Soar After Punching Wall St Exec in Face Posted: 13 Oct 2011 06:44 AM PDT I think that is supposed to be Anthony Scaramucci:
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| Posted: 13 Oct 2011 06:30 AM PDT Here is what I am reading this morning:
What are you reading? > Oh, and we’re also gonna raise your bank fees…
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| European problems still come down to Italy and Spain Posted: 13 Oct 2011 05:38 AM PDT While we’ve been discussing the extent of another restructuring of Greek debt and how the EU will deal with the collateral damage to its banking system, the real goal of a resolution in Europe is to keep the debt crisis from further inflaming Spain and Italy. But, because of the nature and large size of both of their economies, their destiny is in their own hands if they choose to seize it. Italy’s 10 yr bond yield is rising to 5.80%, a 10 week high after they sold 6.2b euros of debt with various maturities stretching out as far as 2025, below the 6.5b euros hoped for. It comes right before Berlusconi’s political fate may be sealed tomorrow in a confidence vote. Mario Draghi, the soon to be Italian head of the ECB, who continues to buy Italian debt, has put Italy on notice that the deficit cutting plan they recently enacted is not big enough. In Asia, China reported less than expected export and import growth. Due to the nature of their economy, many imports are in turn built into future exports. Specifically, export growth to their largest trading partner, Europe, rose 9.8%, down sharply from a 22.3% rise in Aug. Stocks in Shanghai did rise though after initiatives announced to help small and medium sized businesses that are losing access to credit. The Hang Seng rose too and is up 15% in 6 trading days. For the 2nd day in 3, the yuan fell sharply in the face of US Congressional desires to punish China’s currency policy, ignoring what our Federal Reserve has done to the US$ for many, many years. Australia reported Sept job gains twice expectations. AAII: Bulls 39.8 v 35.2 Bears 36.4 v 45.7
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| Posted: 13 Oct 2011 05:30 AM PDT
Comment In our current uncertain and volatile environment, investors are seeking safety. So, it should come as no surprise that dividend stocks have gained in popularity especially since many blue-chip stocks pay higher dividend yields? However, any case for a new era of dividend investing may be a bit overstated. Dividend stocks should simply be viewed as a slightly less risky form of stock investing. As such, we should expect dividend-paying stocks to outperform during bear markets and underperform during bull markets. By comparing the S&P Dividends Aristocrats Total Return Index and the S&P Equal Weight Total Return Index, we can see this is indeed the case. The S&P Dividends Aristocrats Index measures the performance of stocks in the S&P 500 that have consistently increased dividends for at least 25 consecutive years. The index is equally weighted, so we compare its total return to that of the S&P 500 Equal Weight Index. During the bear market from October 11, 2007 to March 6, 2009, dividend-paying stocks outperformed the S&P 500 Equal Weight Index by 11.6%. On an annualized basis, dividend stocks returned -35.74% versus -46.10% for the S&P Equal Weight Index. .  . During the bull market from March 6, 2009 to May 2, 2011, dividend-paying stocks underperformed the S&P 500 Equal Weight Index by 42.4%. On an annualized basis, dividend stocks returned 44.38% versus 56.64% for the S&P Equal Weight Index. .  . Finally, during the bear market from May 2, 2011 through last Thursday's close, dividend-paying stocks outperformed the S&P 500 Equal Weight Index by 8.19%. On an annualized basis, dividend stocks returned -18.34% versus -34.30% for the S&P Equal Weight Index. .  To be sure that these past few bull/bear markets were the rule and not the exception, we also compared total returns of these two indices on all days when the S&P Total Return Index was up versus all days when the S&P Total Return Index was down. With data going back to the beginning of 1990, dividend-paying stocks returned an average of 66 basis points per day on days the stock market was up. The S&P Equal Weight Index returned an average of 77 basis points per day on those same days. On days the stock market was down, dividend-paying stocks returned an average of -67 basis points per day. The S&P Equal Weight Index returned an average of -80 basis points per day. Rather than being concerned with reaching for yield, the charts and data above suggest dividend stocks outperform during bear markets and underperform during bull markets. However, if investors are savvy enough to know which way the market was heading in general, why even bother distinguishing between dividend-paying stocks and non-dividend-paying stocks? Source:
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