Daily Updates

In this issue of Breakfast with Dave

• While you were sleeping: the risk-on trade looks to be a little off today; the USD hits resistance at the 50-day moving average; Bernanke points to China as a source of global imbalance; secular bull market in bonds is not over; CAD hanging in very well

• U.S. index of leading economic indicators a mixed report: it rose 0.5% MoM in October (as expected) but once again, this was boosted by the yield curve and the stock market. Removing these two components, the ‘real economic LEI’ was only up 0.1%

• Whoa Philly! The Philly Fed manufacturing index jumped in November, to 22.5 … and the components were very positive as well

• No holiday cheer: The U.S. House of Representatives failed to pass a bill that would have extended unemployment benefits to millions of Americans

….read it all HERE

Marc Faber, Swiss money manager and editor of the Gloom Boom Doom report, said on Bloomberg television a “correction is overdue.” After yesterday’s dismal performance in stocks, the awaited Faber correction, with all major averages off more than 1.5%, may be upon us.

There have been some major trend changes recently and it looks as though more investments are about to follow. The real question though is… Are You Ready To Take Advantage Of It?

It has been an exciting ride to say the least with the equities and metals bull market and the plummeting dollar. But it looks as though their time is up, or at least for a few weeks. Traders and investors will slowly pull money off the table to lock in gains or cut losses and re-evaluate the overall market condition before stepping back up to the plate and taking another swing.

Stunning Call: “The Game Is Over”

Posted by Knight Research via ZeroHedge

on Thursday, 18 November 2010 8:00

From Knight Research. Presented without commentary.

The Game Is Over

The simple story is this: We believe the structural and cyclical terms of global trade have finally reached their tipping point. This will catalyze a wholesale change in sentiment and a historic repositioning of risk assets. The emerging market global growth story is over.

  • In meetings with clients throughout October, we began emphasizing our growing concerns about the nearly ubiquitous confidence the financial markets—and for that matter, global leaders and their body politic—have in China; and by extension, the rest of the emerging market story, commodities, and the direction of foreign exchange cross-rates.
  • Not surprisingly, our concerns were met with varying degrees of resistance; but the overall consensus clearly favored a very bullish, asymmetric outcome over both the near and intermediate terms. When pressed as to our own sense of timing and specific catalysts  for broad-based trend reversal, candidly we were unclear. Our sense then, was that the higher and faster the commodity markets pushed, the sooner the reversal would occur. But we have now clarified our view.
  • In just the past several weeks, we believe the data and government actions out of China, the back-up in US interest rates, the Fed’s emphatic commitment to QE2, intensifying pressures across the EU, broadly rising commodity prices, government efforts to control hot money flows, have finally pushed the global terms of trade to their tipping point.
  • And now, as is evident by the flight to safety, and growing evidence that China will soon try and effect price controls in addition to raising interest rates and significantly changing the rules for their vast network of Local Government Funding Vehicles (LGFVs); the writing is on the wall. The game is over.

And in our assessment given:

  1. The structural breakdown of the credit and labor markets in the developed world and the anemic outlook for nominal GDP growth
  2. The immaturity of the developing world and their vulnerability to credit shocks and uncontrollable inflation
  3. China’s dependence upon non-economic, and unsustainable credit expansion to maintain growth far beyond natural export and domestic demand, and
  4. Asia’s dependence upon imported energy and agriculture

the game is over. Presently, we believe that the broad-based resurgence of investor confidence in the emerging market and secular bull market in commodities will end badly; proving that the rally which commenced in Q2 2009, was in fact an “echo bubble” facilitated by massive—and unsustainable—stimuli from the Chinese Government

  • And although such cataclysmic shocks rarely result in rhythmic, straight line fractures, the chain of price adjustments should be  relatively clear. Accordingly, we expect a shockingly powerful rally in the dollar, broadbased weakness across the commodity sector, a dramatic widening of emerging market credit spreads, and what could prove to be a stampede of hot fund flows out of the emerging markets.
  • We appreciate both the gravity and the brevity of this note; but then again, the story is simple.

We believe that the end of the Great Consumer Credit Cycle and the vast structural differences in the terms of trade between the United States, the EU, and China, have finally caught up with the secular bull thesis on Emerging Market and Commodities. Quite ironically, the Fed’s aggressive policies will likely prove to be the catalyst which breaks China’s unbridled expansion of credit and non-economic growth, ushering in a wholesale rebalancing of risk assets.

Knight_0

The Safest Dividend in the S&P

If you’re a longtime Dividend Opportunities subscriber, you might remember an issue way back in March where I hunted down the safest dividend in the S&P 500.

The response to my article was overwhelming. So I’ve decided to provide an update to my newest readers — taking the same rigorous metrics I applied before to discover where the safest dividend in the S&P is today.

Thankfully, the draconian cuts that we saw in 2008-2009 seem to be history. Believe it or not, these cuts added up to $52 billion in lost income during 2009 — and that’s for just the cuts from stocks in the S&P 500. To put that figure in perspective, losing $52 billion would put Warren Buffett into bankruptcy.

Today the news looks much brighter. Standard & Poor’s reports that in the first three quarters of 2010, 1,033 companies increased payments (compared to 707 at this time in 2009). Even so, dividend safety still has its place. During the first three quarters of the year, 117 companies cut their payments.

To make sure you don’t have to worry about dividend cuts, I’ve taken a look at every dividend-payer in the S&P 500 to find the safest yields available right now. Let’s see who took home the title…

Safety Criteria #1: Yield
When it comes to yield, it usually takes something above 6% to garner even a second look from me. So I started my search with all the stocks within the S&P 500 that yield above that magic 6% number.

As I suspected, it turns out the common stocks in the S&P 500 don’t offer much in the way of yields overall, but you can still find a few individual companies offering attractive payments. (For the record, I typically broaden my income search to include closed-end funds, exchange-traded bonds, master limited partnerships — and a bevy of other asset types — to bring readers of Dividend Opportunities and my premium High-Yield Investing newsletter the most attractive yields.)

In total, eight stocks in the S&P (only 1.6% of the total) yielded 6% or more. Of those, the highest-yielding stock was Frontier Communications (NYSE: FTR), which pays investors 8.4% a year.

With this handful of stocks in focus, I turned to my next metric to uncover the safest dividend: earnings power.

….read more on the following topics HERE

  • Safety Criteria #2: Earnings Power
  • Safety Criteria #3: Dividend Coverage
  • Safety Criteria #4: Proven Track Record

 

test-php-789