Streetwise for Sunday, July 16, 2017

Whenever I mention that I write about investing in stocks, the response of many naysayers can be divided into one of three categories. The first is a comment such as, “Wonderful, do you have any hot tips?” However, there is often a degree of sarcasm dripping from those words.

Responding that hot tips are more appropriate to horse racing, I would try to offer up what I thought was an enlightening and instructional answer. However, to exploit an equine metaphor I am well acquainted with, you can lead a horse to water but you cannot make it drink. Therefore, I have shortened my response to a single word…no.

The second category of individuals look at me askance, their faces blanching as they put forth a diatribe on how nobody makes money on Wall Street and how whenever they have taken somebody’s investment advice they lost money; and am I aware of the volatility on Wall Street recently?

No sir, they say, their money is staying in a government guaranteed certificate of deposit. Tactfully, I do not point out that after taxes and inflation, it is probably also generating a negative return.

Finally, there are the well intentioned who insist on blindly investing in a myriad of mutual funds, or worse yet annuities, and cannot wait to tell you about their investment perspicacity. What little they know was gained from a glossy marketing brochure or a persuasive sales presentation. The hype is high, as are the commissions and fees, but not the performance.

It is amazing how many people will research an automobile down to the tire size, or can quote the number ice cubes per hour a new refrigerator puts out. Yet, when it comes to investing their hard-earned dollars they pass up readily discernible and potentially rewarding blue chip investment opportunities where the total commission can be less than the price of lunch at McDonalds.

Yes, you will occasionally have to deal with a volatile investment climate, often the result of a global politics, as we have just seen with the G20 meeting and Russia, or our not participating in the Paris climate accord. The answer is to ignore the perturbations that are so much a part of Wall Street, while recognizing that there are a copious number of high quality investment opportunities readily available.

At the same time, the major equity indexes have swung wildly of late as Wall Street tries to come to grips with both global crises and the underlying indecisiveness of the Federal Reserve.

The increased volatility is in many ways a result of just how edgy the Street has become since the Dow Jones industrial average initially hit the 21,000 level, backed off and then returned to it. Now the guessing game is whether 22,000 is in the cards. The Street becomes confused anytime stocks or stock indexes appear unable to hold onto their gains. The reason is it challenges the comforting outlook of low inflation and low interest rates. It also cannot shake off the unrelenting fear that we are overdue for a “correction.”

So how do you navigate your portfolio in this sea of uncertainty? History has shown repeatedly that a fully invested, low turnover dividend paying portfolio will outperform one that is constantly churning between cash, stocks and bonds to take advantage of “market conditions.”

As we enter the upcoming earnings season there are indications that corporate earnings, while maybe not knocking the cover off the ball, are quite strong.

Keep in mind that 70 percent of what is produced in the United States is consumed in the United States. Furthermore, the latest estimate from the Atlanta Fed’s GDPNow model is for real GDP growth (seasonally adjusted annual rate) of 2.6 percent.

Moreover, I would totally disagree that stock prices are being pushed aloft in what many refer to as a bubble. Yes, some companies, maybe even a lot, unduly flatter their results with miserly cost-cutting, cheap debt and stock buybacks to boost their share prices.

Your research should see through such antics. Meanwhile, my vote remains the same – the glass is half-full not half-empty.

Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.

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