Wednesday, May 11, 2016

The 0% Faustian Bargain:Where Capital Goes To Die

There's no way out...buying overvalued and overowned high dividend stocks is like jumping out of a 10th story window and using a pillow to break the fall...

"To investors desperate for income, the argument for buying equities is, well, duh. Who wouldn’t want a higher income?"

"depressed bond yields send contradictory signals to investors. First, that the outlook for the world economy is grim, meaning they should expect lower returns on all assets in the future" .

"...the lack of growth and inflation will hurt dividends, too. Investors tend to extrapolate from the recent past, a period which has been great for dividends. In the U.S., S&P 500 dividends last year were 55% higher than in 2007, the peak of the last cycle, while earnings were up only 29%. Dividends over the past five years have grown at an annualized 13%" 

In other words, buyback inflated profits (and debt) are funding even more inflated dividends...

The Dividend Yield ETF

The top holding of the high dividend ETF
Lockheed Martin
I mean, "Keynesian bombing of foreigners". What else?

P/E ratio of consumer staples: