So, I’ll take Bill Gross’ recommendation one step further. Forget now. Dividend-paying stocks ALWAYS deserve a place in your portfolio.

Yet, in this market, it’s increasingly difficult to find reliable dividend stocks.

“This is going to be the worst [dividend-cutting year] in 50 years,” Howard Silverblatt, Senior Index Analyst at Standard & Poor’s, predicted in January. So far he’s right with industry titans like General Electric and Dow Chemical announcing cuts.

Keep in mind, Dow Chemical maintained or increased its dividend every year since 1912. That means conditions this year are worse for the company – at least on a cash flow basis – than during the Great Depression.

Against this backdrop, it’s understandable why many investors consider no dividend safe. But that’s a mistake. Fact is, countless companies will weather this storm with their dividend intact.

To find such companies I focus on the following six criteria and I recommend you do the same:

1. Simple business. The fewer the moving parts the fewer things that can go wrong and sap cash intended for dividend payments. Focus on companies doing one or two things that you can understand, as opposed to massive corporations with dozens of operating segments.
2. Steady demand. Given the Great Recession, the first thing we need to verify is demand for a company’s products. After all, a company needs a steady stream of cash coming in to afford to pay it out to shareholders. Stick to industries or sectors with recession-proof or recession-resistant demand (food, alcohol, tobacco, health care, etc.).
3. High cash balance. Cash IS king, especially when it comes to maintaining a dividend. Consider it insurance against any unexpected slowdowns. At a minimum, insist on enough cash to cover one quarter’s worth of dividends.
4. Minimal need for credit. Securing credit in this market is extremely difficult. Accordingly, I focus on companies that do not need to raise significant amounts of capital. Remember, too, when interest rates rise, so do interest payments for companies that rely on a significant amount of debt. So it’s also important to focus on companies with reasonable or low debt balances. This insures interest payments won’t sap money intended for us.
5. Cash flow positive. If a company’s not generating cash each quarter, the only way to pay a dividend is by borrowing or tapping into cash reserves. Such practices are not sustainable over the long term. Eventually, the dividend will be cut.
6. Earnings buffer. Insist on a dividend payout ratio (annual dividends/annual net income) of 80% or less. A company paying out 100% of earnings has no wiggle room in the event of a slowdown. If business suffers, so will the dividend.

Obviously not every stable dividend-paying stock will meet all these criteria. But the more criteria a stock fits, the more stable you can consider its dividend.

I followed these six criteria to unearth all the dividend stocks I’ve previously mentioned here -TEPPCO Partners (NYSE: TPP), Lorillard (NYSE: LO) and Windstream Corp. (NYSE:WIN).

Lorillard and Windstream remain attractive at current prices.

Next week, I’ll reveal another dividend-paying stock worth your consideration. But please note, in the days ahead my dividend-sleuthing prowess will change venues.

You see, because these columns are garnering so much interest, we’ve just decided to revamp the entire mid-month issue of The Oxford Club Communiqué. Going forward, each mid-month issue will be exclusively dedicated to dividend-paying stocks and other safe ways to generate an income.

So if you want a steady stream of stable dividend-paying stocks, you’ll have to join us. Go here to sign up today.

Source: 6 Steps for High-Yield Dividends

Standard & Poor’s/Case Shiller 20-city home price index fell 0.6 percent in April, after a 2.2 percent decline the month before. Economists expected an April drop of 1.8 percent

“It’s a little better than expected, but not much. On a top to bottom basis, home prices are down 30 plus percent, which underscores the amount that home prices have to climb to get to normal territory,” said Dan Greenhaus, an analyst at Miller Tabak & Co in New York.

“While they’re better than expected in the short term, in the larger sense the housing market remains under great pressure.”

On this last day of the quarter, fund managers often enhance portfolios as part of “window dressing” by selling losing stocks and scooping up the winners. The process can add to volatility.

Analysts noted the shortened week could lead to thinner volumes and increased volatility. U.S. markets will be shut for the U.S. Independence Day holiday on Friday.

S&P 500 futures rose 2.20 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futuresgained 29 points, and Nasdaq 100 futures added 2.75 of a point.

The S&P 500 is up 16.2 percent so far this quarter, putting it on track for its best period since the fourth quarter of 1998, when the index jumped nearly 21 percent. The S&P 500 has gained 37 percent since hitting a 12-year closing low in early March as early signs of an economic rebound surfaced.

NEW YORK, June 30 (Reuters)

The Great Depression Speaks

The most notable example of what happens to gold stocks in a prolonged deflationary environment is the Great Depression. However, the United States was on a gold standard at the time, so miners had a guaranteed selling price – which was a good thing for them, because their operating costs were plummeting. So the comparability isn’t perfect, but let’s see what we can learn.

When the stock market crashed in 1929, gold stocks were part of the general wreckage (sound familiar?). The market then rallied and recovered almost 50% of its losses by April 1930, with gold shares again tagging along. It’s what happened next that gives us our first clue about deflation’s effect.

When the bear market resumed in the summer of 1930, all securities sold off again – except gold stocks. Gold shares stayed basically flat until early 1931, when they boarded the elevator and headed for the penthouse.

Let’s look at how shares of Homestake Mining, the largest gold miner in the U.S. at the time, and Dome Mines, Canada’s senior producer, performed during the Great Depression.

And the chart doesn’t show that you could have bought both stocks at half their 1929 price five years earlier, which would have led to gains of around 1,000%. And get this: both companies paid healthy and rising dividends as the depression wore on; Homestake’s dividend went from $7 to $15 per share, and Dome’s from $1 to $1.80.

Yes, volatility was high in the gold stocks throughout the depression, with occasional wild price swings, but after the 1929 crash most of the volatility was to the upside.

The bottom line is that the two largest gold producers – during a time of soup lines and falling standards of living – handed investors five and six times their money in four years.

From Homestake’s chart, you get a clear picture of what the stock did compared to the market as a whole:

You’ll notice the large spike down in both Homestake and the Dow during the 1929 crash… but then look at Homestake’s recovery immediately afterward, returning close to its old high. This is eerily similar to our recent pattern: our stocks sold off violently last October but have since doubled or more from their bottoms.

You’ll then notice that Homestake took almost two years to exceed its old high, but once it broke out, it was off to the races. The stock doubled four times in five years during a seven-year run to its peak after the ’29 crash.

The conclusion? If history is any guide, gold stocks can hold their own against deflation. And they could profit tremendously if the demand for gold as a safe haven continues to grow.

Gold vs. Deflation

On April 5, 1933, President Roosevelt issued an executive order forcing delivery (confiscation) of gold owned by private citizens to the government in exchange for compensation at the fixed price of $20.67/oz. And less than nine months later, he raised the gold price to $35, effectively diluting the dollar in every wallet 41% overnight and swindling everyone who had turned in his gold.

We don’t know exactly what an untethered gold price would have done during the depression, but given its distinction in history as a store of value, it’s likely to retain its purchasing power in a deflationary setting regardless of its nominal price. In other words, while the price of gold might not rise, or could even fall, your best protection is still gold.

But with this said, the overriding concern is that in a fiat system, any deflation will be met with an inflationary overreaction (as we’re seeing). And the worse the deflation, the more extreme the overreaction will be.

It’s for this reason that the editors of BIG GOLD urge you to own physical gold, in your possession and under your control, given its reliability as a store of value in both inflationary and deflationary environments. If you have less than our recommended one-third of your investable assets in some form of gold, check around for places to buy gold coins and bars at good premiums.

The Silver Lining

For those with an inclination toward silver, our research points to clear signs that silver is increasingly being viewed as a store of value and not just as an industrial metal.

Here’s a comparison of silver’s performance vs. base metals over the past six months (10-1-08 through 3-31-09), which includes last fall’s meltdown:

Silver               +6.7%
Copper            -36%
Lead                -18%
Aluminum        -35%
Nickel              -25%
Zinc                 -13%
GFMS Index*  -54%

[*Based on the average equally weighted settlement price for aluminum, copper, lead, nickel, tin, and zinc.]

If silver were viewed solely as an industrial metal, the price would be off sharply.

This doesn’t mean we think silver or silver stocks can’t go temporarily lower from here, but rather that the demand for silver as a store of value metal will be growing.

Bottom line: Whether we’re served debilitating deflation or insidious inflation, holding gold (and silver), along with an appropriate allocation of precious metals stocks, offers us both a fort for protection and a canon for profit.

Buying physical gold and silver as safe-harbor assets is for many investors a no-brainer at this point. But only a few have heard of another prudent gold investment – one that has gone up more than 50% in 2008, at the exact same time when the overall stock market bombed. You don’t want to miss out on owning this “48 Karat Gold” stock… click here to learn more.

Source:  Gold Stocks in a Depression

Companies that have followed a policy of consistently increasing dividends have historically outperformed the market.  And the best part–they put a growing stream of cash in your pocket.  Plus, steady dividend growth helps counter inflation which could rear its ugly head due to rampant government spending.

We are still suffering from a financial crisis and global recession… these are still risky times for investors.  One great way to ride out the turmoil is with blue-chip stocks that keep raising dividends.

Another key factor to success is investing in companies that are dominating players in their business.  If you are the key player in your sector then you can raise prices to keep up with inflation.  The market leaders can easily raise capital and survive economic downturns.  These companies are mature cash cows that funnel their excess cash to investors in the form of dividends.

Invest in the 800 pound gorilla!  The one that can crush their competitors by lowering prices if need be.  Recessions and downturns actually make them stronger, because it flushes out the weak players in their space–and they gain market share.

Here are some of my favorite blue chip stocks with steady dividend growth and income.  In addition, they are the dominate player in their industry:

Procter & Gamble Co. (PG) provides branded products of superior quality and value to improve the lives of the world’s consumers.  They run a great business and own some of the world’s best brands like Tide, Duracell, Pampers, Gillette and many more.  P&G has increased its dividend for 53 consecutive years.  I believe they will continue to deliver dependable sales and earnings growth over the next several years, benefiting from growth prospects in new markets.

Wal-Mart Stores Inc. (WMT) is the biggest retailer in North America and has set its sights on other parts of the world.  They do great during times of economic downturns because people turn to discount retailers which offer more goods for less money.  Wall-Mart has vast economies of scale and can offer consumers cheap goods while turning a tidy profit.  WMT has increased its dividend for 26 consecutive years and is well positioned to gain market share in an adverse economic environment.

Exxon Mobil Corp. (XOM) is the largest publicly traded integrated oil company on earth, serving customers in over 200 countries.  XOM is well positioned to benefit from higher crude oil prices and is one of the best managed companies in the energy sector.  XOM has increased its dividend for 26 consecutive years and has excellent earnings and dividend growth and stability.  They have $32 billion in cash sitting in the bank which will allow them to gobble up competitors and gain market share.

The Coca-Cola Company (KO) is the world’s largest producer of soft drink concentrates and syrups, as well as the world’s biggest producer of juice and juice-related products.  Coke will benefit from higher retail prices as inflation kicks in.  Plus, global demand for Coke’s products has virtually unlimited potential.  Furthermore, people continue to drink Coke’s products during recessionary times like these.  They have increased their dividend for 39 consecutive years.  KO will continue to be a cash cow and pay you a hefty dividend for years to come.  Invest in and Drink Coke…

Please keep in mind that the current rally could run out of steam and we could experience a major market pullback in the near term.  Therefore, you may not want to take a full position in these stocks right now.  Take a position over time by buying in small lots.  Or, wait for a market pullback to get a better entry price.  These are some of the highest quality stocks around, but they are not immune to a market selloff.

If you’re looking for more high quality income producing stocks I suggest you subscribe to my colleague Andrew Gordon’s Income letter.  He has an excellent portfolio of income producing stocks and the newsletter is only $99 per year.  Get more information on Andrew’s Income newsletter here.

Source: Buy Quality!

Either way (and even if you don’t plan on making either move anytime soon), having a sense of what got us here can keep you from repeating the same mistakes and even help you make smarter financial decisions – particularly when it comes to repairing your portfolio and even growing it in the years ahead.

When it comes to understanding exactly “what got us here,” I find it helpful to review some of the key bits of advice that Wall Street kept pitching to retail investors, a series of widely accepted investment adages that somehow became gospel and that I refer to as “Wall Street’s Biggest Whoppers.”

Let’s take a couple of minutes to look at the Big Five – the five worst offenders from a list that I assure you is actually quite a bit longer:

Wall Street Whopper No. 1: Buy and Hold – It was supposed be a simple proposition. Consistently put money to work in the markets, let it ride – and laugh all the way to the bank. The thinking was that you couldn’t go wrong because the markets would go up 10% to 12% a year – each and every year (It’s actually more like 4% to 6% – on average – but that’s another story for another time.

What’s important to understand is that “Buy and Hope” is the greatest myth foisted upon the American public in the last 200 years – the need for American International Group Inc.’s (AIG) retention bonuses, notwithstanding. As millions of investors have found out the hard way, the markets can – and do – frequently go through tremendous periods of readjustment.

This means that timing, as they say, really is everything. And “they” – the brokerage firms, hedge funds, ratings agencies and others that together make up “Wall Street” – don’t want you to know that. Wall Street wants you all the way into the game all the time. It doesn’t care whether you win or lose, just as long as you keep playing. So the collective “they” work together to pitch you whatever’s hot, and then move on when that investment has run its course.

And don’t even get me started about the conflicts of interest. The supposedly independent ratings agencies that rubber stamped everything from derivatives to high-grade debt have been in bed with the companies they’re supposed to be regulating for years. Consequently, millions of investors thought they had the “green light” to invest in supposedly safe institutions that have proven to be anything but during the past 24 months.

Where the rubber meets the road – especially during the down years like we’re living through now – is that the risks of outliving your money go up dramatically if you have to get out. In fact, if you achieve annualized returns of zero or less for the first five years after you retire, your odds of running out of money in the next 30 years more than double from 26% to 57%, a study from T. Rowe Price Group Inc. (TROW) reported recently.

And that’s proving to be a tough reality for millions of investors who thought they had this handled. Which is why I was not surprised to see data from the Employee Benefit Research Institute quoted in Money Magazine showing that more than 30% of near-retirees, or those in the early years of their retirement, had more than 80% of their money invested in stocks at the onset of this crisis.

Many of those investors have undoubtedly sold off assets to finance living expenses while waiting for the market to reverse. And that’s created a “double whammy” of sorts: Not only did they lose money on the way down; but those losses and the subsequent forced sales could well mean that their portfolios won’t be big enough to benefit from the next upturn when it does arrive.

What to Do Now: As I have long espoused, the notion of being able to take on more risk simply because you have more time isn’t what it’s cracked up to be. Instead, it is far more appropriate to make choices based on the certainty of returns, especially now.

And that should start with how you think about dividends and reinvestment. In short: Boring never looked so good. Data from Wharton’s Jeremy Siegel and Yale’s Robert J. Shiller – not to mention from my own research – shows that dividends and reinvestment can be far more stable contributors to overall wealth creation than capital appreciation.

Looking ahead in uncertain times, the best choices remain those businesses with solid management, plenty of free cash flow, and an increasing dividends that are backed up by unstoppable global trends. Not overpaid, arrogant Wall Street executives who engineer risk under the guise of safer returns.

There are still plenty of choices available if you do your homework. And it’s not too late to begin buying them selectively right now. In fact, as I wrote recently, history suggests we’re nearing a once in a lifetime buying opportunity so the odds of an upside move could arguably outweigh additional downside…even if you don’t quite get the bottom right.

Wall Street Whopper No. 2:  Some Debt is Good (aka: The Careful use of Debt is an Appropriate Wealth-Building Tool) – This is one of Wall Street’s biggest and most dangerous whoppers, and yet I almost hesitate to include it because of the e-mail I know it’s going to generate. But at the risk of sounding like a broken record, if you owe somebody money, you’ve still got to pay it off one day. That means any growth you attribute to debt until it’s paid off in full exists only in fantasyland. Ask General Motors Corp. (GM), Lehman Brothers Holdings Inc. (OTC: LEHMQ), or any one of the dozens of world banks that are now coping with the aftereffects of growth through the supposedly “intelligent” use of debt.

And this is just as true on a personal level as it is on a professional and governmental level. I wish our leaders understood this, although – in their defense – they finally seem to be getting the picture in recent weeks. Better late than never, although I would just as soon not have seen millions of investors taken on a white-knuckle ride to begin with.

Perhaps the saddest thing of all – and one of the most important lessons we can learn – is that the lessons we grew up with no longer seem to apply. We were taught that if we worked hard and acted responsibly, we would flourish. But now, even if we were responsible, we’re finding out that we’re now liable for the “other” guys’ debts, too.

What To Do Now: From an investing standpoint, confine your choices to those companies with little or no debt. Steer clear of the ones that are on the U.S. Federal Reserve’s IV drip. Yes, those companies probably have upside, but the real test will be what happens when they are forced to wean themselves off their Fed-administered drugs and operate without the crutch of government financing. History suggests that many will fail – despite the government’s unprecedented efforts to save them.

On a personal note, borrow conservatively and only if you have to. Pay off your credit cards each month or shift to a cash-only, “pay-as-you-go” spending plan if you can’t keep that spending under control. Refinance your house before interest rates begin rising dramatically to cope with the almost-certain after-effects of current stimulus spending. And by all means make sure that whatever debt you take on is debt you can afford to pay off.

Wall Street Whopper No. 3: It Pays to Diversify – The conventional wisdom used to be that if you spread your money around, you’d somehow be safer. This is no more effective than rearranging the deck chairs on the Titanic. It’s better to get off the boat.

In uncertain times, it’s how you concentrate your money that matters. This is an important adjunct to “investing with certainty in uncertain times,” and I’ve long advocated the benefits of stability and consistency as a means of getting ahead of the game – and staying there.

The proprietary 50/40/10 (Base Builders/Global Growth & Income/Rocket Riders) portfolio structure we utilize in our monthly newsletter, The Money Map Report, is a terrific example of what I mean. Not only does this portfolio strategy instill a discipline that forces investors to adhere to a “safety-first” philosophy, it has also proved itself to be far more stable than the broader markets since the credit crisis began. It kicks off higher-than-average income, demonstrates lower-than-average volatility – and still generates all the upside you can handle.

This safety-first discipline, with its dual emphasis on high current income and long-term appreciation, has generated some truly impressive returns.

And t his brings me to a key point: Far too many investors don’t understand how the game must be played right now. They think that investing in rocky times is an all-or-nothing equation.

It’s not.

Instead, it’s about the continual adjustment of positions to reflect changing assumptions related to risk – especially now that the risks of stock ownership have changed.

What To Do Now: In an era of simultaneous collapse, when then stock, bond, housing and credit markets have cratered at the same time, there’s simply no excuse for not hedging your portfolio at all times, not just when it’s popular to do so. Nor is there any reason why you shouldn’t be thinking safety first. That way you have the freedom to screw up on speculative bets instead of being dependent upon them to regain what you lost on foolish moves made during the downturn.

And by all means, learn how to use any of half a dozen specialized tools – like inverse funds, or options – to make low-risk, but-often-spectacularly-profitable choices, even under current market conditions. That way you can plan for the worst , yet still obtain the best of what’s out there.

Wall Street Whopper No. 4: Your Home is an Investment – No, it’s not. At best, it’s a roof over your head that keeps you from being priced out of the local rental markets. At worst, it’s a money pit that provides you with the illusion that you’re doing something sensible with your hard-earned money – despite the fact that an entire industry would have you believe otherwise.

Research from Shiller, the Yale economist, shows that, since 1900, home prices have run sideways or even declined for long periods of time. That means that – except for two steep run-ups – one after WWII and the other as part of the late 1990s lending binge – real estate hasn’t been the winning investment everyone claims it to be. And millions of people are learning the hard way that real estate can, and does, lose value. Seems they’ve conveniently forgotten the lessons Texans in the oil patch learned in the early 1980s or that Japan experienced in the 1990s.

Wall Street Whopper No. 5: Shop ’till You Drop and Save the Economy – The U.S. government wants you to spend money. And Wall Street, together with the credit card companies, want you to save their sorry hides by helping you do just that. That’s why so much of the stimulus planning – if you can call it that – revolves around tax cuts and handouts. It’s all window dressing.

Nothing – and I mean nothing – will matter until the banks start lending again.

Period.

What To Do Now: Keep your powder dry. History shows that the ebb and flow of money has never been smooth. Ever.

So to talk as if what’s happening now is an enigma is to ignore the past. We’ve been here before. There was the Panic of 1873 (sometimes called the “real” Great Depression), the Great Financial Crisis of 1914, and the Banking C risis of 1931, for example. The reason what we’re living through now feels different now is that those events are simply beyond the living memory all but a precious few people.

But take heart, for there are some bright spots to look to.

America’s safe-haven mantra – misguided though our policies may be – is an important indicator that savvy investors should plan for an eventual rebound – even if we’re destined to test new lows in the months ahead, and even if we have to look outside our own borders as a part of that process.

Source: Five Wall Street Whoppers And Why You Need To Know Them

Banks got us into this mess, so it’s banks that will have to get us out.

From the President on down, nobody is disputing such a self-evident premise.

And that includes Wall Street. Here’s a typical statement – from RDQ Economics LLC in NY, “They [the Obama administration] should be focused on stabilization” of financial firms “and stimulus — and that should not only be ‘Job 1,’ that should be the only job right now.”

Of course, the financial crisis has killed Wall Street. So the statement might seem a little self-serving, except for the fact – once again – that everybody agrees with it. I don’t buy it.

Maybe banks were the problem a lifetime ago – when Bear Stearns was taken over and Lehman went under.  When nobody knew which were the good banks and which were the bad banks and interest rates shot up as a result.

But it just takes one stupid question to realize we’re so past that now…

Who will the banks lend to?

To you and me? Wait a minute. We’re saving more. From a negative savings rate, we’re now saving about five percent of what we earn.

It’s about time. We couldn’t go on forever spending more than we make. It was bankrupting us.

Do you really want to buy a new car? Richard Wagoner, CEO of GM, wants you to. So does Ben Bernanke. And, let me go out on a limb and submit that President Obama also wants you to.

But what’s good for the economy isn’t necessarily good for you and me.

But surely companies need more loans from banks? If companies weren’t running so low on cash, why are so many of them cutting their dividends (37 so far this year)?

Aren’t the auto companies strapped for cash? Aren’t many banks scraping the bottom of the cash barrel? Couldn’t they use loans from other banks?

Yes, yes, and yes, BUT…

Fewer sales mean a smaller cash flow. When you’re earning less cash, the last thing you want to do is get a loan and go deeper into debt. Ask any responsible CEO: Higher interest payments and lower earnings aren’t a good combination.

Then there are the irresponsible CEOs, who have made a ton of bad decisions and are now forced to take out loans. Just ask Vikram Pandit of Citigroup (NYSE:C) and Bob Nardelli of Chrysler how it feels to put their companies into deeper debt?

No self-respecting bank would give these companies a loan. They’re getting them from the government.

Responsible companies – especially those in cyclical industries – are paring down debt right now, not increasing it.

In other words, we’re way past the point where banks are holding back the economy. In fact, there are very good reasons why the government shouldn’t spend hundreds of billions of dollars to a trillion dollars more to save banks…

• Throwing good money after bad. The so-called stress test isn’t nearly tough enough. Many of the banks getting government money won’t survive.
• The adrenaline shot is diluted. When banks were leveraged 30 and 40 to one, these banks might have been able to kick start a lagging economy. Not anymore.
• Inflated pay scale. A reality check is long overdue. Without the lucrative derivative market and with lower leverage, banks can’t afford to pay their 20-something employees millions of dollars anymore.
• Where’s the accountability? On a scale of 1 to 10, remorse gets 0 and a sense of entitlement gets 11. Dozens of banks were engaged in reckless behavior. They bullied Freddie and Fannie. They gave out billions of dumb loans. They infected other banks all over the world. Has any banker said, “I’m sorry?” Not that I know of.

We shouldn’t be asking our banks to go back to the bad ol’ days of dumb lending and dumber borrowing. It’s not fair to lenders or borrowers.

But even if banks wanted to return to their loosy-goosy lending ways (which they don’t), they wouldn’t find enough pent-up demand for credit to lift the economy out of its current doldrums.

Banks are a problem. But they aren’t the answer. Their festering issues are hurting the market because Wall Street thinks that banks are more important than they are.

It’s the ultimate lose-lose situation…

Save the banks and the economy still drops like a rock.

Don’t save the banks and the markets drop like a rock.

I’m bearish. And you should be too. There’s no easy way out of this dilemma.

Source: Saving Banks Accomplishes Nothing

all of which probably explains why the Wall Street Journal reports that railroads “have seen shipping volumes drop by double-digit percentages in recent months”, and that “the nation’s five largest railroads have put more than 30% of their boxcars – 206,000 in all – into storage.” Yikes! A third less volume!

In a similar vein, Giovannie Bisignani, director general of the International Air Transport Association, says that volumes of air cargo traffic are in “free fall”, dropping 29.5% from a year earlier, and 17% of it in December alone!

One of his associates quipped, “It’s gone from terrible to unprecedented” which is clever and humorous, and thus the only bright spot in the whole mess, as far as I can tell.

Then Bloomberg.com notes that it’s not just earnings that are falling, but dividends, too! They report “The fastest reduction in U.S. dividends since 1955 is depriving investors of the only thing that gave stocks an advantage over government bonds in the last century.”

The explanation for this cryptic remark is provided by James Swanson, chief investment strategist at MFS Investment Management. He says that dividends are what matters, and “It’s a greater fool theory if we always buy stocks based on earnings and we never get a penny out of it, hoping for someone to buy that stock at a higher price.”

In fact, he says, “Dividends have been a cushion in bad times” and the Really Bad News (RBN) about this drop in dividends is that “If they go to zero, it’s a disaster”.

Now, as a bad husband, a worse father, a terrible neighbor and an incompetent employee, I obviously know a lot about “disasters”, and trust me when I tell you that it’s going to Cost You Plenty (CYP).

Bloomberg, taking no interest in my insightful observations gleaned from a lifetime of paying for my screw-ups, is still talking about dividends, and reports that “Twenty-six companies in the S&P 500 saved more than $21 billion by cutting or suspending outlays this year, more than all the reductions from 2003 to 2007. On a per-share basis, S&P 500 companies may trim payouts 13 percent this year, the biggest drop since 1942.”

This big drop in dividends is plenty bad by itself, but the news is doubly bad because “saving more than $21 billion” means that a lot of companies got $21 billion less in revenue! Which doesn’t even talk about the multiplier effect as that money cascades through the economy!

Econometrically, applying a mysterious “constant growth version of the so-called dividend discount model”, which “values a stock as the sum of all its future dividends,” the Really Bad News (RBN) is that it “shows equities are still overpriced. With S&P 500 companies projected to pay a combined $25.57 in dividends this year, the index would need to fall to 526.46 before investors are compensated for owning shares.”

This means another drop of 25% in the S&P 500 index, assuming that there are no more dividend cuts, and I would have to be an idiot to think that! Okay, I really AM an idiot, but I am still freaking out here!

This is not, as you could expect, a dire economic forecast based on the “velocity” multiplier-effect of a third less volume in transportation traffic, meaning a huge drop in transactions, which implies that less money is coursing through the economy, or about dividends being cut and stocks falling precipitously in price as a result, but about gold – glorious, wonderful gold – and how if you aren’t buying it, then there is something Very, Very Wrong (VVW) with you if you can look at this stuff, and look at economic history, and look at the Austrian school of economics which you can get free at Mises.org, look at the dismal economic situation of the world and then not buy gold. It amazes me!

And then I remember that “the majority of investors must lose money”, which means that the only reason I can make so much money with gold is that I am in the minority, who are the guys who make the money that the majority loses!

Whee! This investing stuff is easy!

Source: Dividend Drop-Off: When Cushions Turn to Rocks

Our team, the Indians, was the underdog against the Rockies. In the bottom of the final inning, we were tied 13-13. We had two outs and a runner on third base. One of my youngest and smallest players, Will, was due up at bat. Will is also one of the fastest kids on the team. So I told him, “Any ball you hit on the ground to shortstop or third base is going to score a run if you can beat the throw to first. Are you ready to do that?”

Will said, “Coach, I’m ready to hit a home run.”

“All we need, Will,” I replied, “is a single. A single wins the game.”

“I know, Coach,” Will said. “But I haven’t hit a home run all year, and I know I can do it.”

What could I do? “Then swing away, Will. Go get your home run.”

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Sure enough, on the very first pitch, Will hit the ball harder than he had all year. It sailed out of the infield and was headed over the left fielder’s head. Any other time, and against any other team, that ball would have dropped and run all the way to the other field, and Will would have gotten his home run.

But on this day, the left fielder jumped, stretched way above his head, and somehow, miraculously, caught the ball in the webbing of the glove.

Will was out, and the game ended in a 13-13 tie.

No one seemed to care much. The parents enjoyed the game. Will hit the ball harder than he had all year. And both teams moved on to the next round.

But I was in a funk all weekend because we missed an opportunity for a win. “If only I insisted he hit the ball on the ground,” I told my wife when she asked why I was so quiet after the game.

She looked at me with those eyes that every husband has seen when he’s said something stupid and said, “So what do you do when you miss an opportunity for a good trade? Do you sulk? Or do you find a way to come up with another winning trade?”

And that’s where this becomes a lesson about trading. You see, I missed a trade yesterday. After looking at hundreds of charts, I was bearish on the market. So I told S&A Short Report subscribers to buy puts on the Nasdaq 100 Index.

But just like the Indians missed a chance to beat the Rockies, we missed the trade.

The stock market gapped lower on Monday morning. And the trade I had my eye on ran away from us. We couldn’t get into it at a favorable price. My first thought was, “If only I’d made the recommendation on Friday instead.” But I almost never trade on Fridays. Too many unknowns can happen over a weekend. So, the opportunity slipped away from us.

No big deal, really. Traders miss out on thousands of opportunities during a career. So now, the real question is, what looks good to trade today?

We missed the opportunity to buy Nasdaq puts on Monday, but I’m still bearish on the market. I’m looking for a chance to short the Nasdaq at a good price.

Good investing,

Jeff

P.S. I’m constantly looking out for the market’s best trades and sending e-mail alerts to Short Report subscribers. They’ll be the first to know of my favorite trading opportunities.

In fact, I think we’ll have another shot at the Nasdaq puts some time this week. If you’d like to get in on it, then click here.

P.P.S. As it turns out, we can’t have a tie in Little League playoffs. So the Indians and the Rockies are going at it again tonight. We’ll play however many innings are necessary to determine a winner. And I’ll share the results with you on Thursday.

Source: What to Do When You Miss Out on a Trade