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Financial Wisdom w/Gabriel WisdomA former surfer and syndicated FM rock DJ, Gabriel Wisdom learned a lot about catching waves and trends early. His grand obsession with stock market began in the early 80's just as the Dow was building velocity off it's multi-year lows below 1000. "When I first learned that the legendary Charles Dow, a man of the sea, was inspired to create the Dow Averages by watching waves and tides, I was hooked." www.gabrielwisdom.com |
THE BENEFITS OF BAD NEWS
Posted on 08/31/2006 01:26:04 | Link | Post Comment
If there is one great investing secret that has stood the test of time, it is that recessions, depressions, and market calamities can offer investors their greatest rewards. Professor Jeremy Siegel of the Wharton School shows how beneficial rough times can be in his book The Future For Investors. Motely Fool's Rex Moore also wrote extensively about this in his 10-28-05 commentary, concluding that "depressions are good for you." Take for example, the mother of all calamities, the 1929 stock market crash and the Great Depression that followed. The Dow did not reach it's 1929 September high of 381 again until 1954! According to Siegel's research, anyone who stayed in the market after suffering the big losses and reinvested their dividends in more stock would have quadrupled their money in that same period. This assumes you only owned dividend paying stocks and reinvested all dividends in additional shares while they were low.
THE MARKET WAS BAD, AND THAT WAS THE GOOD NEWS
Siegel's research points out that if the 1929 crash and Great Depression had never occurred, providing stable stock prices and rising dividend payouts, the results would have been far worse. Investors would have earned 60% less than what the dividend reinvesting bargain hunters actually accumulated over that 25 year time frame. More historic proof that when it comes to successful long-term investing, less is more.
NOW THE BAD NEWS
Get ready for the great recession of 2006. Rising interest rates, very high oil prices, and slumping home sales are almost certain to trigger our next economic contraction. If history is any guide, when oil prices rise 50% or more, recessions are almost certain to follow. Consensus estimates are that housing now accounts for almost half of all economic activity. Real estate corrections can often last several years. There will be many ways to play this sector after it bottoms out, but meanwhile a long downward trend only adds to the probability for recession. It's time now to begin shifting into the kinds of stocks that generally prosper during difficult economic times.
"I PLAN TO STAY IN SHOW BUSINESS UNTIL I'M THE ONLY ONE LEFT"
George Burns at 95
The Fallen Angels selections this time around are some of the great survivors. Companies that have stayed profitable thru difficult times in their respective industries. Consider them now while their shares have been marked way down.
1. Merck (symbol MRK) around $29.59. currently paying a 5.2% dividend. Over $13 billion in cash, no debt, and high likelihood of a turnaround. Way off it's old highs above $80.
2. Verizon (symbol VZ) around $30.85 with a dividend yield of 5.2%. $3 billion in cash, $11 billion of "free cash flow," and 50% below it's old highs. Play this for next years tele-comeback.
3. Nuveen Preferred & Convertable Income (symbol JQC) around 11.91 with a current dividend yield of 8.4% This closed-end fund came public last year at $15 and now trades at a huge discount to it's net asset value. Should provides current income with nice appreciation potential at these levels.
The next Bulletin will have more detail on next year's anticipated market movements, with some ideas for the new year. Do your research before buying, and remember that we will not be telling you when to sell these or any other investments, as that is something we can only do for our managed accounts.
Best Regards & Good Luck,
Gabriel Wisdom
The opinions expressed are Mr. Wisdom's and do not neccessarily reflect those of American Money Management LLC (AMM) www.amminvest.com an SEC Registered Investment Advisor. Prices quoted are closing numbers for 11-9-05. Clients, employees, and members of AMM may buy or sell securities mentioned without prior notice. The opinions expressed do not constitute an offer to buy or sell securities nor should they be viewed as investment advise. Investing involves risks, and you should consult your own investment advisor, attorney, or accountant before investing in anything.
THE MARKET WAS BAD, AND THAT WAS THE GOOD NEWS
Siegel's research points out that if the 1929 crash and Great Depression had never occurred, providing stable stock prices and rising dividend payouts, the results would have been far worse. Investors would have earned 60% less than what the dividend reinvesting bargain hunters actually accumulated over that 25 year time frame. More historic proof that when it comes to successful long-term investing, less is more.
NOW THE BAD NEWS
Get ready for the great recession of 2006. Rising interest rates, very high oil prices, and slumping home sales are almost certain to trigger our next economic contraction. If history is any guide, when oil prices rise 50% or more, recessions are almost certain to follow. Consensus estimates are that housing now accounts for almost half of all economic activity. Real estate corrections can often last several years. There will be many ways to play this sector after it bottoms out, but meanwhile a long downward trend only adds to the probability for recession. It's time now to begin shifting into the kinds of stocks that generally prosper during difficult economic times.
"I PLAN TO STAY IN SHOW BUSINESS UNTIL I'M THE ONLY ONE LEFT"
George Burns at 95
The Fallen Angels selections this time around are some of the great survivors. Companies that have stayed profitable thru difficult times in their respective industries. Consider them now while their shares have been marked way down.
1. Merck (symbol MRK) around $29.59. currently paying a 5.2% dividend. Over $13 billion in cash, no debt, and high likelihood of a turnaround. Way off it's old highs above $80.
2. Verizon (symbol VZ) around $30.85 with a dividend yield of 5.2%. $3 billion in cash, $11 billion of "free cash flow," and 50% below it's old highs. Play this for next years tele-comeback.
3. Nuveen Preferred & Convertable Income (symbol JQC) around 11.91 with a current dividend yield of 8.4% This closed-end fund came public last year at $15 and now trades at a huge discount to it's net asset value. Should provides current income with nice appreciation potential at these levels.
The next Bulletin will have more detail on next year's anticipated market movements, with some ideas for the new year. Do your research before buying, and remember that we will not be telling you when to sell these or any other investments, as that is something we can only do for our managed accounts.
Best Regards & Good Luck,
Gabriel Wisdom
The opinions expressed are Mr. Wisdom's and do not neccessarily reflect those of American Money Management LLC (AMM) www.amminvest.com an SEC Registered Investment Advisor. Prices quoted are closing numbers for 11-9-05. Clients, employees, and members of AMM may buy or sell securities mentioned without prior notice. The opinions expressed do not constitute an offer to buy or sell securities nor should they be viewed as investment advise. Investing involves risks, and you should consult your own investment advisor, attorney, or accountant before investing in anything.
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- Efficient Markets vs. Cheap Stocks?
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- FALLEN ANGELS READY TO "SPRING FORWARD"
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