Posted At : February 16, 2009 11:17 AM
- Economic and market update
- Attractive CD and bank cash alternatives
- Tax Law change for mandatory IRA distributions
- AP Story
Welcome to the year of “HOPE”, with Obama waving the pompoms as hard as possible. Although the market is down the last two days, it does seem to want to rally, anticipating that the Obama Stimulus plan will rescue the economy. This is evidenced by the fact that bad news is now being taken in stride instead of crushing the market on a daily basis to bad news. Even though yesterday’s job data is sent stocks lower, we have shrugged off a lot of bad news over the last few weeks and have many more up days than down. There comes a point when all the sellers have sold and selling pressure dries up, and that’s where we seem to be. What we now need is buying interest to come in to bring the markets higher. Buying interest can come in either hope or actual data of economic improvement. I expect it to be the former, as the news remains bad. It is important to keep in mind that stocks tend to rise well in advance of any good news, often leaving investors scratching their heads as to why…and leaving them in the dust either sitting is cash waiting some sort of bell to ring or having sold out in an emotional panic.
Although the market should rally, and we are sure to look back at these prices as tremendous opportunities, I’m not going to sit back and wait. As you know, I’ve been very defensive and I will continue to look for the best opportunities, especially for good dividends. There are some tremendous opportunities out there right now. Municipal and corporate bond and preferred stock yields are extraordinarily high right now, with some good quality yields of 8, 9 and even 10%! For those that aren’t (too) greedy, that’s hard to beat. In addition, the oil bust has created some great opportunities, with many stocks of producers, who are hedged at higher oil prices, paying extraordinarily high dividends (some 12-15%) due to their corporate structure. Oil is also a good hedge against a falling dollar.
If you have any CD’s coming due or bank cash, there are some great alternatives, so let me know. Just for example, this is what I saw this morning:
2/10/10 CIT – 9.62% YTM
11/3/10 CIT – 10.23% YTM
6/1/11 Alcoa – 7.25% YTM
Bank of America – 10.15%
BSBC – 8%
Goldman Sachs – 7 ½%
Regards – Keith Springer