by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club
Tuesday, November 20, 2012: Issue #1909
Tomorrow, most of us in the United States will be with friends and family, sitting around festive tables filled with way more food than we need, sharing all of the things that we’re thankful for.
Yes, I’m thankful for my family, the abundant meal, puppies, rainbows and all of the heartwarming stuff like everyone else. But this is an investment e-letter, so here’s what I’m thankful for when it comes to the financial markets…
I’m thankful for this bull market that has been in effect since the lows of March 2009. Since then, the S&P 500 is up 108%.
Even better – as Alexander Green says, this is the most disrespected bull market in history. Despite the fact that the market has doubled in just three and a half years, there’s still a very high degree of skepticism.
According to the Spectrem Group, 48.6% of affluent investors (those with $500,000 or more of investable assets) are sitting on the sidelines. That’s a lot of firepower that can return to the market and push stocks higher once these investors decide they’re missing the party.
Low Interest, Low Inflation and Housing Recovering
I’m thankful for low interest and low inflation. While low interest rates make it tough for savers, it’s a great environment for investors. The low rates have driven stocks upward, and if you can get a loan, the banks are giving away money. Thirty-year fixed mortgages are available in the low threes. I recently obtained a loan at 3.25%. For someone who wants to pick up some investment real estate, you can’t ask for much better than that.
I’m thankful that housing is recovering. The National Association of Home Builders Index, a measure of sentiment, is at its highest level in six years. The eight-point jump in present sales was the largest since 2002.
When housing prices rise, people feel more confident. Even if they have no plans to sell, they feel wealthier and will be more comfortable spending more money, which sparks the economy.
Harnessing the Power of Dividends
The low rates also have awakened many investors to the power of dividend investing, particularly investing in dividend growth stocks. By investing in stocks with growing dividends, investors not only tend to own higher-quality companies, but the investment outpaces the ravages of inflation. That last statement is a critical point in my book, Get Rich with Dividends, which shows investors how to earn double-digit yields and/or returns over the long term.
By the way, that’s something else I’m thankful for – the fact that Get Rich with Dividends was so well received it became an Amazon.com bestseller, hitting No. 1 in “Investing.” So if you already read it – thank you very much.
If not, or you know someone who could benefit from learning how to conservatively create wealth and income for the long term, there are only 33 shopping days left before Christmas. Thank you in advance for filling loved ones’ stockings with copies of the book.
Cheers to All the Fearful Investors…
I’m also thankful for panicky investors. I love when people dump stocks because the market is falling, or because of an election, or because taxes may rise. Yes, those things can be scary, but in the long run, stocks go up. They always have and this time is not different.
There have always been troubles – the Depression, World War II, the Cuban Missile Crisis, double-digit inflation, terrorism, etc. But through it all, the market has continued to climb higher. When scared investors sell stocks, I go in and scoop them up. That’s how you make real money in the stock market.
I’m especially thankful for all of you who read this column. Without you, I wouldn’t be able to jump out of bed every morning, excited to go to work. It is truly a blessing to love what I do and to be able to write about whatever market topics I find interesting, It’s a dream job that, quite frankly, I never would have even imagined having 16 years ago, when I was first breaking into the industry as an assistant on a trading desk, having chairs flung over my head into a bank of monitors when the computer regularly locked up.
I’m thankful that, today, no one throws chairs over my head. I’m very thankful for that.
Lastly, as rancorous and difficult as the past few years have been, I’m thankful I live somewhere that has free elections and markets. Much of the world does not have that luxury. While the government, the economy and our markets have problems – serious problems – that need to be addressed, I would still rather contend with these issues than live in a place where my life and prosperity are determined by autocrats and dictators.
As has been said about both capitalism and democracy – they’re the worst systems, except for all of the others.
I hope you have a wonderful Thanksgiving holiday filled with good times, laughter and some good stocks in your portfolio.
MarcWhat I’m Thankful For...,