cancel
Showing results for 
Search instead for 
Did you mean: 
     
Highlighted
Frequent Contributor

Inflation, Deflation, or Both? Protecting Our Dividends

M2-Money-Chart.jpg

https://contrarianoutlook.com/inflation-deflation-or-both-protecting-our-dividends/

"It’s hard to picture any sustained level of inflation, or reflation, until at least 2021. (When I say reflation I’m talking about what we saw in 2009: an asset boom that eventually resulted in a slow recovery and a Bitcoin and pot stock bubble, but not the type of runaway inflation we saw in the 1970s).

Bear markets tend to last 12 to 18 months. Our 2008 experience was roughly 18 months gate-to-gate. I realize it feels like 2020 has been dragging on forever but this is only the fourth month of the downturn (yikes).

Another 14 months from here puts us in reflation territory towards the end of 2021. Unless our Fed boy JP gets really reckless between now and then, we can probably set our alarms for the back half of 2021."

 

"Value investor Shelby Davis famously said: “You make most of your money in a bear market; you just don’t realize it at the time.”

In April, we bought some great dividend stocks that were way down. It felt nauseating at the time (most contrarian plays do!). That is usually a good sign, and sure enough, that was the time to step in.

Now, with investor sentiment (amazingly, astoundingly, I don’t understand why but it is) bullish of all things, it’s a prudent time to be cautious. We can use the moment to trim any positions that we wished we’d sold in February. And we should be glad that we kept some dry powder because we can deploy it in the weeks and months ahead when perfectly good dividend stocks get dumped once again.

What dividend-paying stocks should I have on my shopping list?

Dividend growers! This is the time to cherry-pick dividend stocks that are going to double. As Davis would say, we can make most of our money in the months ahead because we’re still in a bear market."

My dividend growth ETF of choice is SDY, and I uses the 2X leveraged ETN version, to double, and then some, the distribution yield I receive.  The S&P500 SPDR, SPY, yields 1.9%.  SDY yields 3.06% while SDYL yields 7.93%

ElLobo, de la casa de la toro caca grande
0 Kudos
8 Replies
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends


@ElLobo wrote:

M2-Money-Chart.jpg

https://contrarianoutlook.com/inflation-deflation-or-both-protecting-our-dividends/

"It’s hard to picture any sustained level of inflation, or reflation, until at least 2021. (When I say reflation I’m talking about what we saw in 2009: an asset boom that eventually resulted in a slow recovery and a Bitcoin and pot stock bubble, but not the type of runaway inflation we saw in the 1970s).

Bear markets tend to last 12 to 18 months. Our 2008 experience was roughly 18 months gate-to-gate. I realize it feels like 2020 has been dragging on forever but this is only the fourth month of the downturn (yikes).

Another 14 months from here puts us in reflation territory towards the end of 2021. Unless our Fed boy JP gets really reckless between now and then, we can probably set our alarms for the back half of 2021."

FD: the bear market is over by now, we may have another one but right now it's over. The SP500 (VFIAX) is just -2.4% for YTD. The Fed support is why the US markets are back so quickly.

"Value investor Shelby Davis famously said: “You make most of your money in a bear market; you just don’t realize it at the time.”

FD: Is he timing the market which is not recommneded for most? BTW, growth did better than value

In April, we bought some great dividend stocks that were way down. It felt nauseating at the time (most contrarian plays do!). That is usually a good sign, and sure enough, that was the time to step in.

Now, with investor sentiment (amazingly, astoundingly, I don’t understand why but it is) bullish of all things, it’s a prudent time to be cautious. We can use the moment to trim any positions that we wished we’d sold in February. And we should be glad that we kept some dry powder because we can deploy it in the weeks and months ahead when perfectly good dividend stocks get dumped once again.

FD: that's timimg again.  If you always have money on the side then you also missed a great return in the previous 10 years. BTW, I do believe in timing and I sold almost everything at the end of Feb and above 99% in the beginning of March.

What dividend-paying stocks should I have on my shopping list?

FD: the biggest high tech companies because they were the leaders for the last several decades and will continue to do so in the future...or just buy QQQ.

Dividend growers! This is the time to cherry-pick dividend stocks that are going to double. As Davis would say, we can make most of our money in the months ahead because we’re still in a bear market."

My dividend growth ETF of choice is SDY, and I uses the 2X leveraged ETN version, to double, and then some, the distribution yield I receive.  The S&P500 SPDR, SPY, yields 1.9%.  SDY yields 3.06% while SDYL yields 7.93%


SDY lags VFIAX(SP500) and way behind QQQ(less than 50%), see 10 year performance

sdy.PNG

 

0 Kudos
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends

"BTW, I do believe in timing and I sold almost everything at the end of Feb and above 99% in the beginning of March."

So, are you back in, or still out, FD?  Asking for a friend!  8-))

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Participant ○○○

Re: Inflation, Deflation, or Both? Protecting Our Dividends

When we invested in a concentrated equity portfolio of individual stocks (12-16) We never had a problem with the buy side. The sell side was always FAR more difficult.

Using market timing with funds / ETFs presents the opposite problem. It's fairly easy to "know" when to sell. It's far more difficult to "know" when to buy back in.

 

0 Kudos
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends


@ElLobo wrote:

M2-Money-Chart.jpg

https://contrarianoutlook.com/inflation-deflation-or-both-protecting-our-dividends

 

       It is a good time to make prudent purchases that fit your requirements but not to be cautious. It’a a sale man not a permanent world condition. If your old, sickly or have shriveled body parts with no stomach for this stuff, tune it out. They have a promising vaccine, we have new cases (we opened the economy, duh), but we have a promising vaccine. Back and forth.               

        Well I just bought more CEF income as insurance for yield cuts or if the gods smiled on me I would be buying cheap high income. I needed the insurance of course because of rate cuts etc. knowing the odds were against me but I’am an optimist that always works with a net. Lol. 

         Anyway I received my initial investment back in CEF’s when first purchased in 2008-2010 in excess to needs and banked the excess in PONAX compounding it to present at about 5% solidifying future income needs. So I would handle dividend protection by over doing any income investing to some degree, build in some slop for the unknowns, inflation, sudden permanent income needs etc. A correction I made after managing two retirement portfolios up to 35 years. The more risk you are willing to take climbing out on the income limb the less money you need for that protection. I stopped at the first crack, a prudent decision.

0 Kudos
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends


@ElLobo wrote:

"BTW, I do believe in timing and I sold almost everything at the end of Feb and above 99% in the beginning of March."

So, are you back in, or still out, FD?  Asking for a friend!  8-))


I already posted about it, you need to read my bond thread....

2020 - bond funds analysis

0 Kudos
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends


@FD1001 wrote:

@ElLobo wrote:

"BTW, I do believe in timing and I sold almost everything at the end of Feb and above 99% in the beginning of March."

So, are you back in, or still out, FD?  Asking for a friend!  8-))


I already posted about it, you need to read my bond thread....

2020 - bond funds analysis


A simple answer, FD.  I'm not going to pour through a 530 non-sensical response thread looking for a single piece of information!  You sold most everything (above 99%) at the beginning of March AND you stated that, in your opinion, the bear market is over by now.  So, you either got back into the stock market sometime over the last 3 months OR you missed your chance.

And ifn you got back in, taking advantage of the bear market bottom, exactly when did you buy back in?

"FD: the bear market is over by now, we may have another one but right now it's over. The SP500 (VFIAX) is just -2.4% for YTD. The Fed support is why the US markets are back so quickly."

 

ElLobo, de la casa de la toro caca grande
0 Kudos
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends

Won't we eventually have to deal with stagflation?

0 Kudos
Highlighted
Frequent Contributor

Re: Inflation, Deflation, or Both? Protecting Our Dividends


@PaulR888 wrote:

Won't we eventually have to deal with stagflation?


I dunno.  I just don't see it coming down the pike.  Stagflation is slow economic growth coupled with inflation.  I don't see inflation anytime in the future.  With all of this stimulus money sloushing through the economy right now, one would think that inflation is just around the corner (too much cash chasing too few goods and services).  However, I see deflation more likely (too much cash chasing too MANY goods and services.)

Strange times indeed!

ElLobo, de la casa de la toro caca grande
0 Kudos
Announcements