Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Published: October 17, 2005
Stocks fell sharply during
the first two weeks of October on fears of inflation and rising interest
rates, even as fuel prices retreated.
After posting unexpected gains in September, which has historically been
the worst month for stocks, the S&P 500 (GSPC, 1186.60) posted its
best third-quarter performance since 1997. But the benchmark index has
since lost over -3% in the first two weeks of October and is now down
more than -2% so far this year.
Stocks sold off despite the fact that oil prices slid to two-month lows
and gasoline and heating oil prices also fell. Strong economic data and
inflationary warnings from Fed Chairman Alan Greenspan reawakened fears
of higher interest rates, which could slow corporate earnings and hurt
stock prices.
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Stocks nose-dived when Fed
member Richard Fisher, who just a few months ago had suggested the Fed
was nearing the end of its rate tightening campaign, now decided that
"the inflation rate is near the upper end of the Fed's tolerance
zone, and shows little inclination to go in the other direction."
And indeed, the signs of inflation are getting hard to deny. The
Institute for Supply Management said its index of input prices for
factories, a key inflation gauge, leaped in September to the highest
level in the 8-year history of the index, putting in the biggest monthly
gain on record. The price of imported goods, including oil but also
industrial supplies and building products, also jumped in September, the
largest monthly rise in 15 years. Higher prices could spark fears of
runaway inflation, triggering a series of further interest rate hikes
from the Fed.
Inflationary fears sent the 10-year Treasury yield to levels not seen
since March. When Treasury yields move higher, investors have the
potential to earn a higher risk-free rate of return on their money. In
this type of environment, investors often take their money out of
dividend-paying stocks (which involve more risk) and place their funds
into Treasuries. As a result of this shift, dividend-paying stocks have
now fallen into negative territory for the year.
The Dow Jones Select Dividend Index (DJDVY, 720.3) fell -4% during the
first two weeks of October and is now down nearly -1% for the year.
Meanwhile, the Morgan Stanley U.S. REIT Index (RMZ, 787.1) has fared
somewhat better. Although the index has lost nearly -6% so far in
October, for the year the REIT sector is still ahead over +2%.
OUTLOOK
The third-quarter earnings parade has begun and Wall Street expects
S&P 500 companies to post an +18% jump in quarterly earnings (versus
the year-earlier period).
That's the good news. However, the truth is that the energy and
financial sectors account for the lion's share of these gains, according
to Thomson Financial. If you strip out resource stocks, then earnings
expectations dip to +11%. Fourth-quarter earnings are also expected to
rise a robust +16%, but just +12% sans energy.
Although these are healthy numbers, the reality is that the market's
best performance may be behind us. As pricey fuel and higher interest
rates tax consumers and businesses alike, corporate profits may have a
hard time maintaining their momentum. If earnings slow, then share
prices could also dip.
Action to Take: In a scenario of decelerating profits, rising
interest rates and falling stock prices, high-quality companies with
attractive and secure dividends will be the most likely to outperform.
With this in mind, in my November issue of High-Yield Investing,
I will sift through the high-yielding shipping sector and will spotlight
several stocks with the best prospects and safest dividends.
Important
Note: The above article
was merely a small excerpt from a recent issue of our premium,
income-oriented investing newsletter -- High-Yield Investing.
In each issue of that newsletter, editor Carla Pasternak delivers a host
of other investing ideas and tips designed to help you earn strong gains
and above-average income from your portfolio. To receive your copy of
our most recent High-Yield Investing newsletter, as well
as other guidance similar to this every month, you'll need to register
for this separate publication. If you're not already a High-Yield
Investing subscriber and you'd like to learn more about this
publication, then please visit the following link:
https://web.streetauthority.com/subscribe-hy.asp
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