Author: Andrew Packer

Income investing

Dividend Growth Investor: Twelve Companies Committed to Returning More Profits to Shareholders

Posted on by Andrew Packer

While the markets have had a few strong weeks, the data suggests that may not continue. For most investors, who simply want to buy stocks and profit from the upside of companies, that leaves a few opportunities now.

One such opportunity is to invest with companies that pay growing dividends. This strategy keeps investors focused on a company’s long-term prospects. And buying when stocks are down can lead to better returns than buying such companies at or near a market peak.

Recently, a dozen companies have announced dividend increases. These higher payouts will provide shareholders with more cash each quarter.

And while many companies have had trouble with strong growth this earnings season, dividend payers have been slow-and-steady companies likely to further pay out over time.

One such example of a dividend grower right now is Republic Services (RSG). The company owns and operates waste management service centers and infrastructure. The company recently raised its dividend from $0.46 to $0.50. And it’s increased its dividend annually for 19 years in a row now.

Other companies raising their cash payouts now include firms operating in real estate, tool manufacturing, and insurance.

These businesses aren’t as exciting as growth plays. But with growth out of favor right now, dividend payers continue to provide value for investors.

 

To view the full list of companies raising their dividends now, click here.

Stock market

Game of Trades: This Is a Worse Reading than the Bottom of 2008

Posted on by Andrew Packer

The S&P 500 has had a 14 percent rally off its recent low, following a six-month period of dropping. Does that mean the pain is over? Given a number of economic indicators, it appears that there are a number of reasons to be cautious.

One overlooked indicator is looking at the percentage of fund managers taking higher than normal risks right now. This indicator is now at an even lower level since October 2008.

That’s an astounding data point. After all, in late 2008, the financial system was within hours of collapsing. The home market was imploding as job losses exploded higher. Today, there’s no sign of such extreme stress.

However, given the market’s recent surge higher, this record-low sentiment reading may indicate more downside in today’s markets.

Typically, investors get the best deals by going against the market’s current sentiment. But trader betting on a potentially quick rebound in markets may prove disappointed right now. And following the market’s rally of the past few weeks, this may not be the ideal time to buy into stocks.

One indicator that the worst is over will be a drop in 30-year Treasury yields. That likely won’t happen until well after the Federal Reserve lowers interest rates. With growth slowing this earnings season as well, caution is still warranted.

 

To view the full video and indicators, click here.

Economy

WhiteBoard Finance: The Great Deflation Is Happening

Posted on by Andrew Packer

Some asset prices have come off their highs considerably. That includes tech stocks that are more than 50 percent off their peak. But it can also include the drop in oil prices in recent weeks.

Most investors are still focused on inflation. The pandemic era’s money-printing and government support, combined with a strong jobs market, has been a proven recipe for rising prices. However, with the focus now on lowering inflation, deflation could occur.

In a deflationary market, prices simply tend to drop over time. For those with a fixed salary or fixed income, deflation means more purchasing power.

Meanwhile, when there’s deflation, lower prices can also lead to a number of companies going bankrupt. That can result in higher unemployment.

Deflation tends to occur largely in recessions when demand declines. One hint that we may face deflation is coming from the commodity space. Prices there, particularly in copper, have dropped significantly in the past year.

Deflation could also occur with a drop in money supply or higher taxes, as consumers have less to spend overall.

It will take months, if not more than a year, to see how today’s fight against inflation goes. But if it overshoots, it may result in a strong recession as a price decline spiral occurs.

 

To view the full video on how deflation can play out and how it can impact your investments and life, click here.

Economy

The Big Picture: The Trouble with Sentiment

Posted on by Andrew Packer

While the economy seems to be shaking off a poor start to the year, there’s trouble on the horizon. Sentiment indicators show that investors are getting bullish again.

Yet a key indicator continues to strongly hint at a recession in the next year. It may simply be a further continuation of declining GDP numbers as we’ve seen so far this year. Or it may come from a more severe move.

The indicator? An inverted yield curve. Currently, investors can earn more on a 2-year US Treasury bond than on a 10-year Treasury bond. Typically, the curve rises. Investors willing to lock up money for a longer period of time should be paid more for the risk.

Historically, this curve inversion has been good at predicting recessions 12-18 months before the market realizes we’re in one. That makes it a strong indicator. And right now, this indicator is at its steepest inversion since 2008.

Ultimately, this comes down to how human beings tend to be off in their estimates. When things are going well, people tend to overestimate. When markets are down, people get pessimistic.

With the recent market rally, investors may be too optimistic going into some continued tough times in the next year. However, such a recession may be mild given current conditions.

 

To watch the full interview, click here.

Economy

Lead-Lag Live: The Bear Market Ain’t Over

Posted on by Andrew Packer

Markets never move in a straight line. Even the market’s decline in the first half of 2022 was marked by a number of days with strong rallies. Now, with markets trending higher in the past few weeks, it may seem like the worst is over.

However, bear markets take time to play out. And they will often recover a significant amount of their prior losses before making new lows along the way. What should investors look for?

Investors are currently looking at the strong rally in a number of stocks over the past few weeks, including a few risky assets like cryptocurrencies that may have more than doubled off their lows.

But some indicators show trouble ahead. Investment drawdowns indicate that there’s usually a big shift towards US Treasuries.

This year, thanks to rising interest rates, those assets have declined along with stocks. That could be an indication that we haven’t seen a full “risk off” market yet, so much as a cooldown from high valuations.

Ultimately, the current markets come down to the Fed’s actions. With interest rates significantly rising, markets should be showing more trouble. But failing to raise rates with today’s inflation also makes for some trouble.

Chances are there will be some policy error on the Fed’s part that could lead to another market decline.

 

To listen to the full interview and hear other key indicators to watch now, click here.

Passive Income

Bigger Pockets Money Podcast: Coast FI

Posted on by Andrew Packer

Many investors looking at the market today are considering how to reach their retirement goals. For those looking to retire early, big market swings may put a dent in the plan.

But there’s a strategy called “coast FI.” It involves balancing out focusing on keeping costs to a minimum. Rather, it involves finding balance between saving for as early a retirement as possible while also enjoying life.

Those who pursue financial independence (FI) remain focused on earning as high a salary as possible, saving as much as possible. The goal? To retire as soon as someone hits the right net worth.

That can mean extreme money-saving moves. But it’s possible for those who earn even a below-average salary to save significantly. And by investing those savings in a diversified portfolio, many have found it possible to hit their retirement goals. For some, that may be as young as in their 30s.

The challenge? Things like lifestyle creep. By avoiding the urge to spend more after a big salary bump, the FI process can accelerate.

However, running full stop on working and accumulating money can prove draining. That’s why coast FI may make more sense. It allows one to continue to aggressively save and invest, while also enjoying life along the way.

To listen to the full podcast on how this strategy works, click here.

Cryptocurrencies

Simply Bitcoin: Michael Saylor Steps Down as CEO, Bitcoin in Trouble?

Posted on by Andrew Packer

Bitcoin has attracted plenty of attention as a new asset class. While many companies have started to look at integrating Bitcoin payments, only a handful have held the asset on their books.

Outside of Bitcoin mining companies, tech intelligence firm MicroStrategy (MSTR) has embraced the cryptocurrency. The company now holds over 129,000 Bitcoin, and has used debt to build that stake.

This week, the company reported a nearly $1 impairment on its Bitcoin holdings, and that its CEO, Michael Saylor, is stepping down as CEO.

Markets haven’t minded the news. That’s because Bitcoin currently has to be marked to its market value every quarter. So while the company is sitting on a loss, in the future it could be market far higher. Given Bitcoin’s long-term prospects to trade in the six-figure range, investors easily overlooked the move.

And Saylor is leaving the CEO role to take on the role of Chairman. In that role, he’ll have less say in the company’s day to day operations, but expects to continue to share his rationale for holding Bitcoin. He expects to entice other executives to start holding Bitcoin on their balance sheets as well.

A mass move by corporations to diversify their assets into Bitcoin could help spur the next move higher for the cryptocurrency.

 

To view the full podcast, click here.

Economy

Meet Kevin: Legendary Stock “Suit” Flips

Posted on by Andrew Packer

Calling a market top or bottom remains a challenge. As the old saying goes, “They don’t ring a bell at the top.” However, investors can pick up on clues.

For instance, the stock market’s most recent peak occurred when the Fed came out and announced that they would soon raise interest rates. A bottom is more challenging. That’s because markets tend to bottom out while the news still looks dire.

And by the time people realize the market has already bottomed out, it’s likely already headed higher. That’s why it’s important to find clues, such as macro analysts who have been bearish flip to bullish.

That’s been the case recently as stocks have moved higher in the past few weeks.

In a world flooded with data, many points may not always fit an investor’s thesis. Knowing which data is important now, and how much it should be weighed, remains critical.

Much of the market’s recent behavior indicates a potential bottom. Investors now have a negative outlook overall. That’s usually a sign that the worst is over. Prior market bottoms have seen similar psychological behavior.

Not only that, but prior market bottoms have seen some sharp, initial reversals, much like July’s rally. That includes the market bottom of the Great Depression in 1933, among others.

Investors should take history with a grain of salt. But we may be in the early stages of a new bull market if prior macro data concerning market bottoms holds true.

To watch the full video, click here.

Economy

A Wealth of Common Sense: Animal Spirits: Invest in What You Know

Posted on by Andrew Packer

In 1947, GDP contracted for two quarters in a row. Yet that wasn’t declared a recession. Why? The economy was coming off of World War II, and shifting from wartime to a peacetime economy.

Despite the economy’s wild swings during the pandemic, seeing two quarters of declining GDP in a row likewise aren’t being treated as a recession. That may make sense, even if it feels like a recession.

The concept of measuring the entire economy in terms of GDP wasn’t around until World War II. That makes the concept relatively new, and therefore subject to potential changes.

While the concept may seem a bit semantic, it gives investors a chance to focus on what should really matter. If investors have priced in a recession that hasn’t happened, stocks may have gotten oversold.

So, for most investors, that means focusing on areas they know best right now. That allows them to take advantage of the recent market selloff.

Right now, investors are coming off a period of betting on tech. That’s largely due to the fact that tech stocks tend to be more volatile. When markets soar, tech tends to perform even better. When markets are fearful, tech stocks get hit the hardest.

So it makes sense for investors to focus on areas where they’re spending in their everyday life to get more consistent returns.

To listen to the full podcast, click here.

 

Stock market

Let’s Talk Money: Is the 2022 Stock Market Crash Over?

Posted on by Andrew Packer

July marked the best month for the stock market since November 2020. Overall, the S&P 500 rallied by 9 percent in July. That may mean that the bear market that started last year ended back in June.

This rally even came as news came in that the economy declined for a second quarter in a row, and as the Federal Reserve raised interest rates by another 0.75 percent. But are traders getting ahead of themselves?

The market seems to be pricing in the idea that we’re past the worst of the Federal Reserve’s interest rate hikes. However, more data is needed. The July jobs report and inflation data could point to how close things are to an end.

Ironically, a strong jobs market will still mean we’re in a strong economy. And that inflation will likely remain higher for longer. So if jobs numbers come in worse than expected, the market will react positively.

If the job market remains strong, we may find out that we’re in a bear market rally. Potentially, that could mean that stocks head lower, even breaking through to new lows later in the year.

Investors will want cash to protect themselves. They’ll also want potential defensive investments like I-Bonds, a government bond whose payout is tied to interest payments. And investors can potentially start investing in blue-chip, dividend-paying stocks now.

To watch the full analysis on where the market is at now, click here.