Market Thoughts

We are well into the greatest, at least longest, bull markets ever. Many have become complacent that this could last forever. And it could.

The best performing group during this period have been the Dividend Aristocrats. The average successful industrial company pays out about 40% of its earnings in dividends. The yield depends upon the share price and dividend payout, of course. Those companies which grow their dividends fastest (by growing their earnings) are Aristocrats. Note: corporate earnings grow, on average, 7%. See why folks look for companies with earnings growth of say, 10%, 20% or 50%? But it’s the Aristocrats that deliver the best performance over time. Unfortunately I don’t have an excess amount of time so I pretty much ignore the Aristocrats. I tend to gravitate towards the faster earnings growers.

Sell in May and go away has been trumpeted for decades as a truism. It certainly worked this year. Few could compete with Trump’s May 6th tweets on trade. I got shaken out after 2% daily and 5% weekly declines. Trouble with that approach is you have to be right twice; selling then buying back in. An almost impossible task, as I proved yet again.

We may get another chance if the Iran situation gets out of control. Today’s tougher sanctions may be harsh enough to bring Iran to the table. If not, and bullets start flying, what will the market do? Of course, oil will rise. And companies depending upon oil will fall: railroads, chemicals, plastics and industrials in general. You can protect yourself by buying or selling market puts or, easier to understand, reverse ETFs. These go up when the markets go down. I’ve bought SDS, for example, many times but with only modest success. I’ve had better luck by using TLT, which represents the US 20-year Treasury bond price and pays an okay monthly dividend. Folks flock to US bonds during fearful times. There are probably another 100 speculative vehicles you could consider to protect your portfolio. And, of course, you could use a significant decline to snap up some bargains. That’s probably the best idea…..if you’re young enough.