Author: Andrew Packer

Income investing

GenExDividend Investor: Best Ways to Grow Your Dividend Snowball

Posted on by Andrew Packer

Buying and holding dividend stocks can pay out well over time. But with the use of a few simple strategies, investors can get the most out of the income that comes in from their dividend payments.

Studies show that half of an investor’s returns can come from dividends that are reinvested over the decades. So maximizing the value of a dividend investment portfolio can improve returns substantially, particularly when measured over an investment lifetime.

When it comes to dividends, a company’s board of directors elects what dividend to pay out, if any. For most companies, reinvesting into new growth opportunities is crucial.

That’s why many companies don’t pay dividends. And why those that do have first become large companies that generate more cash than they need to operate.

Investors who buy dividend-paying companies can use the cash from those payments rather than having to sell off shares for retirement income.

Dividend investing also focuses on the fact that great returns can take time. While a trade can work in the short-term, many who have made big short-term gains have lost it trying to replicate that success.

Finally, diversification is key. While many investors can get lucky with a concentrated bet now and then, that can also lead to substantial losses if the trade goes out of favor. Having a variety of investments provides safety from any one position having trouble.

 

To view the full video, click here.

Income investing

The Shadow Banker’s Secrets: Lessons From 2008: How to Protect Your Investment Portfolio From Market Crises

Posted on by Andrew Packer

The bear market of 2022 caught most investors by surprise. The selloff is today blamed on the Federal Reserve’s comments about how it would start raising interest rates. However, by the time they made the first rate hike, stocks had been selling off for months.

The market move higher in 2023 looks much like a mirror image. The view that interest rates would eventually stop rising, even if it’s not quite done yet, have pushed stocks higher.

These moves indicate that investors are often caught unaware from the impact of a changing market. With stocks trending higher now, investors should give some thought to protecting from the next inevitable downturn.

One characteristic of a market selloff is rising volatility. Markets make larger percentage moves on a daily basis. That can lead to wild swings in valuation. Investors who use strategies such as covered call writing can take some volatility out of their individual stock positions.

Real estate has seen some big swings during market selloffs, as investors likely still have strong memories of the 2008 real estate crash.

Investors can use insurance to protect their properties, and also focus on generating long-term income to weather a storm. As long as a property can cash flow, the likelihood of a foreclosure remains low.

 

To view the full interview, click here.

Economy

Minority Mindset: How to Make Millions From CHAOS

Posted on by Andrew Packer

The world is constantly changing. Understanding those changes, and when they can occur, can allow astute investors to make big profits. Most investors focus on the big moves that come from a recession.

The Covid crash in 2020 saw stocks fall 30 percent in just a few weeks. In 2008, the housing market’s weakness led to a major market crash, with some bank stocks down as much as 90 percent.

It’s clear that we get recessions every decade or so. The specifics change each time. And they often catch most investors by surprise. But they tend to lead to big market drops.

That can create profit opportunities for the buyers of put options. Those traders are betting on a price decline for a stock or market in the short-term. And at the bottom of a market, when it seems like stocks may drop lower, it could actually be an opportune time to buy.

Since recessions create opportunities to buy great assets at a discount, smart investors should embrace recessions rather than fear them. It also means having capital available to invest when the time is right.

Investors should look for panic in the market, find clear evidence of overselling. From there, they can look to step in and take advantage of the opportunity and profit from the market’s recovery.

 

To view the full video, click here.

Stock market

The Lead-Lag Report: Putting the Bulls on Notice

Posted on by Andrew Packer

While the stock market has trended up this year, there’s been a lot more mixed activity behind the headline numbers. That’s because some sectors have led, particularly any tech stock related to AI.

Other sectors have been mixed. That includes defensive sectors like utilities and consumer goods companies. And assets like Treasuries have been mixed as well, as the Federal Reserve has nearly finished raising interest rates.

Those defensive sectors are now trending higher at the same time, the first such move in 2023. Even during the debt ceiling drama and the bank failures earlier this year, these assets moved differently.

That could be a sign that market risk is rising. And that moving to a defensive, or risk-off, position may be wise. It may not mean an immediate or large market drop.

But following a big rally, it could mean a few weeks of pausing and pulling back before trending higher. Traders with leveraged long positions may want to scale back on those trades for the time being.

Those looking for safety right now could look at utility stocks. These companies have underperformed so far this year relative to the S&P 500. But that trend could shift in a market selloff. And the space offers decent valuations and moderate income while investors wait out a potential market storm.

 

To read the full analysis, click here.

Stock market

Elliott Wave Options: Zig-Zag Pattern May Reach Above 4600?

Posted on by Andrew Packer

The market continues higher, following its strong gains for the year so far. It’s even defied expectations for a summer decline, which tends to be in line with historical monthly trends.

Stocks even continued higher following a rebalancing in the market index. The goal of rebalancing was to take some of the weight out of the tech stocks that have led the market this year.

It’s now possible on a technical basis that the market could continue higher with a zig-zag pattern. The market has reached a potential point of resistance when looking at an Elliott Wave pattern. However, stocks could break through that resistance and move higher.

If so, the S&P 500 could rally a bit more, hitting 4,600, as it did on Thursday, before a potential correction. If there’s a correction, stocks could drop to 4,320. That’s a drop of a bit over 5 percent that could play out in the final weeks of summer.

Earnings season may help push stocks higher. This year, investors have expected the economy to perform poorly. Yet it’s held up well, with a strong labor market and corporate earnings.

However, as inflation remains high, and pressures to keep it high remain, investors shouldn’t expect the market’s runaway performance to continue indefinitely.

The Treasury market remains somewhat rangebound, which suggests that the bond market sees more reasons to be cautious than stocks right now.

 

To view the full analysis, click here.

 

Income investing

Dividend Growth Investor: Seven Dividend Growth Stocks Rewarding Shareholders with Raises

Posted on by Andrew Packer

Up, down, or sideways, no matter what the stock market does, the underlying companies behind those stocks continue to operate. And many successful companies tend to operate in a way designed to reward shareholders.

One way is with the payment of dividends. These simple cash payouts reflect the fact that some of the cash coming into the business should be returned to the owners of that business.

Companies with a history of at least 10 years of dividend growth are likely to continue making increasing payouts every year. While only a handful of the thousands of companies pay growing dividends, investing in them over time can lead to great returns.

Recently, seven companies with a history of dividend growth increased their payouts for 2023.

That includes Enterprise Products Partners LP (EPD). They’re an energy services provider for natural gas and oil, largely thanks to a network of pipelines.

They’ve grown their dividend to $0.50 per share each quarter. While only a 2 percent increase, it’s the 25th year that Enterprise Products Partners has done so.

There’s also consumer brands company J.M. Smucker (SJM), known for jams, coffee, and pet foods.

They just raised their dividend for the 26th year, with a 4 percent increase. Shares now yield about 2.9 percent.

 

To read the full list of seven companies that just raised their dividends, click here.

Income investing

New Money: Big Short Investor’s Warning for the Commercial Real Estate Crisis

Posted on by Andrew Packer

Some have warned about the dangers in commercial real estate for years. Starting with the pandemic and the rise of work-from-home policies, office space occupancy has dropped.

Meanwhile, commercial real estate tends to be refinanced every few years, unlike a fixed-rate home mortgage. With interest rates at their highest levels in 15 years, it’s possible that there could be trouble ahead for some office spaces in some markets.

Steve Eisman, a fund manager who profited from the implosion of the U.S. housing market in 2008, sees big danger for office real estate today.

The potential crisis will likely roll out over a period of years. That’s because each company invested in office properties has their debt due to roll over at different times.

And the trend is unlikely to change. Some cities, such as tech hub San Francisco, has seen demand for office space drop by two-thirds from its pre-pandemic level. Unless office buildings are converted into other property types, there could be some long-lasting scars.

A few office property sales have borne this out so far. One recent deal went for about $200 per square foot, down from $1,000 per square foot. That’s an 80 percent decline. And it’s steeper than the drop housing suffered in 2008.

While the office market is smaller than the housing market, a rolling crisis over the next few years could weigh on economic growth. But it will also provide a much better buying opportunity.

 

To watch the full video, click here.

Technical Analysis

Tastylive: Markets Can Crash at Anytime. My Two Tools to Manage That Risk

Posted on by Andrew Packer

Market risk can vary depending on circumstances. However, the use of statistics can mitigate much of that risk. Most traders will look at the potential move of a stock, option, or other trade based on a standard deviation.

Typically, 68 percent of all outcomes will occur within one standard deviation. Two standard deviations will cover 95 percent of data. That’s the tool most used by traders, since it should result in a trade playing out in the expected way most of the time.

At three standard deviations, 99.7 percent of all observations should occur. Anything outside of that level is considered “tail risk.” It’s typically tail risk that tends to play out when markets have a big drop.

For instance, in 2020, the S&P 500 dropped from about 3,300 to 2,100 in the span of a few weeks. That’s a significant tail event. Likewise, the rally in April to June saw a recovery of that drop in just 50 days.

Traders noticed that there was a negative skew to the market – indicating market fear over the speed of the decline. The normal distribution model didn’t hold.

Investors should look for negative skew when determining a market crash. And when there’s a market rally off of a crash, there tends to be a positive skew, which can lead to big returns for buy-the-dip investors and option buyers.

 

To watch the video, click here.

Economy

CME Group: A Bumpy Inflation Ride Ahead

Posted on by Andrew Packer

Inflation has come down substantially over the past year. Since peaking at over 9 percent, it’s now down to 3 percent, a decline of two-thirds. Getting the last of inflation out of the economy, and keeping it away, however, may be a bit bumpier than the ride so far.

That’s because the year-over-year data has showed a big decline. But the month-to-month data has showed less of a decline. And it may even rise slightly in the months ahead.

That could be due to chances in base effects. Overall, the impact is likely to keep inflation near the 3 percent range through the end of 2023. That’s 50 percent higher than the Federal Reserve’s target rate of inflation of 2 percent.

One big driver is shelter inflation. Rents have had a considerable jump higher in recent years. And housing prices have only cooled slightly. Mortgage rates have jumped from 3 percent to 7 percent in the past year and a half. That’s caused potential homebuyers, first time or otherwise, to rethink their housing plans.

Ultimately, the Fed is still behind the wheel here. They may push for higher interest rates to get back down to that 2 percent level. But doing so may cause the economy to slip into a recession. Investors need to pay more attention to the Fed’s moves in today’s market.

 

To read the full analysis, click here.

Economy

Deep Knowledge Investing: Mixed Economic Data – Still More Rate Hikes

Posted on by Andrew Packer

Markets appear to be heading towards a “soft landing” after all. That’s better than a recession, as a soft landing means slowing economic growth without negative growth. The biggest reason for the move is likely due to the mixed economic signals right now.

For instance, the job market is holding strong, although overall growth has now stalled out. Manufacturing data continued to show a drop, a potential sign of danger ahead.

Ultimately, the mixed data now suggests that the Federal Reserve will make good on its promise to raise interest rates.

For instance, the Fed tends to look at factors such as employment. With an unemployment rate under 4 percent right now, the job market is holding strong. If the Fed cuts back now, it risks a strong jobs market driving wages higher, which could fuel inflation.

Consumer spending likewise remains strong overall. It has shifted a bit in recent quarters, however. Consumers have been spending more on travel and hospitality, and less on goods.

While the Fed has rarely achieved a soft landing in prior interest rate hike cycles, they have had a few successes, like in the mid-1990s. Such a move could be playing out today. And investors may not want to be fully fearful going into the final two rate hikes of this cycle, instead looking to 2024 for a possible recession.

 

To read the full analysis, click here.