Home Forums Hunting & Shooting Hunter's Campfire Don't look now but stock market is booming

Groan......and the beat goes on. Did you even listen to Powell or the Fed this morning?

I have to wonder how many of us made a fortune over the last 12 months by ignoring the constant naysayers and doom predictors. Everyone that 'put it all in cash' "I'm sitting this one out".....11-12 months ago lost the opportunity of a lifetime; many of us told them that, too!

Inflation looms, the dollar will weaken, tax rats will rise...... but for now and for the foreseeable future thru '21 this economy will be supercharged. New housing starts, 4.5% unemployment, service industry reopening, hospitality going to be booming, good lord, how do you not see it?!

And if you're in oil and gas stocks from the start of Covid (penny stocks six months ago!) you're especially set.

This. It's been a good year of adding.

Market Outlook: March 28, 2021

Mar. 28, 2021 10:08 AM ET



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What's Next?
The markets have been extremely volatile this week, with a bias to the upside. The pullbacks were immediately met with buyers. The good news is that the markets closed the week sharply higher at the end of the session. Nearly all indexes are flirting again with previous all-time highs. There is a good possibility that the S&P 500 index will try to reach towards the 4000 level this coming week, but I doubt that we will break above, as this level is likely to remain resistive for the time being. I expect a lot of market volatility to continue in the coming week at least. There are two main reasons for this:

Fluctuating long-term interest rates (mainly the 10-year Treasury rates)
March 31 (or end of 1st quarter) rebalancing, as many funds, ETFs, and CEFs have to re-balance their holdings to keep their percentage allocations in line with their fund's objective.

As stated last week, rising interest rates at this point should not be a worry for investors. In fact, we should embrace it as it signals that we are heading towards a strong economy, as confirmed by Fed Chair Jerome Powell.

The big news that was published recently is that GDP growth is expected to be at 6.6% in 2021 and 4% in 2022. In fact, I believe that most economists are underestimating how strong the economy will be in the 2nd half of 2021. These economists based their GDP growth figures on an assumption that American consumers have kept a much higher than usual excess savings which was interpreted as "precautionary measures" against an ongoing pandemic. The study was made back in January 2021. What they got wrong in my opinion is that most Americans did not have the chance yet, as of January 2021, to go out, shop, travel, take holidays, or gather at restaurants as the vaccines are still rolling in. Following the stimulus checks, the excess savings climbed from $3 trillion in January (when the projections were made) to about $4.5 trillion today, which is an enormous amount of cash in consumers' pockets. As we know, the U.S. economy is a consumer-driven one, and once a big part of this excess savings rolls through the economy, GDP growth estimates are going to keep rising. So we should expect a "supercharged" economic recovery that will surprise most economists.

Road with diminishing perspective and text "Reopening the economy"

Value Stocks Will Continue to Outperform Growth Stocks

If you are worried that you are seeing "too much green" in your HDO portfolio and thinking about taking some profits to "lock-in" some gains, I suggest that you don't. The current trend strongly favors "value" over "growth". The reality is that there’s a major stock market rotation happening behind the scenes.

Quite a few of our stock picks have returned 20% to 30% year-to-date and I see much more upside. As noted earlier, economic growth will be the biggest driver for stocks: "Value stocks" tend to be economically sensitive and usually see higher earnings growth at the beginning of an economic recovery. Note that these "value stocks" are usually the small and medium companies (the heart of the U.S. economy) that will be the prime beneficiary of the stimulus plans. Small and medium-sized businesses will thrive first.

Even following the rally, the valuation gap between growth and value is very wide due to years of underperformance for value stocks. Add to this that value stocks are seeing much higher growth than seen in many years, this makes them prime for outperformance.

Here at HDO, we target the cheapest stocks with the most solid outlook. Today, our main aim is for economically sensitive stocks and sectors that will benefit the most from the economic recovery. I am very excited about the gains we have achieved and the outlook of our holding for the rest of the year.

Actions Speak Louder Than Words
The HDO portfolio is composed mostly of value high dividend stocks. We are seeing dividend hikes across many stocks in our portfolio and in some cases quite large ones: ATAX (50% dividend hike), NEWT (guided for 17% to 41% hike), CSWC (2% hike, although modest, but now yields 9.5% which many investors are overlooking because it still shows on most sites as yielding 7.6% because they don't include the $0.10 per quarter supplement). Even better news: We expect more hikes from the above-mentioned stocks. We expect significant hikes from most Property REITs and mREITs that we hold in our Portfolio. Annaly (NLY) and AGNC (AGNC) which are two notable mREITs that we are very bullish on, are set to have nice dividends increases.

Where are the Markets Heading and What Will Be Driving Them?

I remain very bullish on equities in general. Remember that the current interest rates at 1.6% for the 10-year are still very low, even if they climb to 2% by year-end. That will be no threat to equities. One thing to keep in mind: For every 1% growth in GDP, this translates into 2.5% growth in corporate revenues, and even more in "net revenues". When the economy is growing +6% rate, you can only imagine what kind of growth we will see in companies' earnings this year. This is why the markets are surging, and they are set to continue to do so as the markets are always forward-looking.

Also as noted in many of my previous market updates, there is too much liquidity in the system chasing too few opportunities, and one of the best opportunities to make money today is the equity market. Ultimately, it is liquidity that is the main driver for equities.

What are the Risks to be Aware Of?
There are two main risks that can derail this bull market:

Inflation and related rising of long-term interest rates.

Higher taxes
We have discussed the first issue last week. Inflation is likely to hit 2.5% according to the Fed, and I would expect it to be higher now with the additional supply disruptions from the Texas floods, and the blockage of the Suez Canal in Egypt. With pent-up consumer demand, there are going to be higher prices passed on to consumers. But this will be only temporary and will subside in 2022. There are many counter-inflationary pressures at play including increased productivity, global price competition, and new disruptive technologies. Inflation is not going to be a worry before the end of the year 2023, or most likely the year 2024.

About taxation, uncertainty could be a source of worry for investors. However, it would be hard to imagine that the new administration would hike corporate taxes to a level that would counter all the efforts it is doing to get the economy going strong and reaching its full employment goals. So my expectations are that the government will focus on higher taxes for the very wealthy and closing loopholes for more tax collections. If corporate taxes will go up, it is unlikely that this will happen anytime soon or before mid-2022. I also do not expect that they will go up significantly so that the U.S. tax rates will remain competitive compared to global tax rates. This is a goal that was set by Secretary of Treasury Janet Yellen.

However, these are two real risks that investors need to keep an eye on, and that I will be monitoring very carefully. They could very well materialize if inflation runs out of control sometime in 2023 or 2024. The risk of out-of-control would be caused by excess liquidity, excess government spending, or irrationally high asset valuations (or asset bubbles). In such a scenario, the main tools that the government would have to fight a "runaway inflation" are hiking short-term interest rates (which would also result in rising long-term interest rates), and further raising taxes. This would for sure result in a full-blown bear market.

Best Course of Action
We remain in a strong and secular bull market, and the next 24 months are set to be the best that the markets will have to offer. There are risks that are worth to keep watching but they are risks that are unlikely to materialize over the next two years. Investors are best served by taking advantage of the current situation and ride this big wave to maximize their profits to the fullest.

For value income investors like us, we have made significant profits (and total returns) in the past 6 months and I believe that we are barely mid-way there. There is at least as much upside left as we have already made during the past 6 months, in addition to the big yields that we are currently collecting.

Note that we are likely to see plenty of market volatility possibly over the next weeks. I would consider every pullback a buying opportunity if you are not fully invested. However, if you are invested, I would remind you again not to trade this market. We have seen this week how quickly the markets can pull back and recover, and if you attempt to trade it, you may very likely end up on the losing side of the trade. Be patient, do not worry about volatility, and keep collecting those dividends. We are set to see a spectacular year for our dividend picks!

Happy investing and have a great weekend.

Rida MORWA

I’m starting to think through what the implications of supply constraints will be. Nothing is available. Contractors can’t buy building materials as needed, farmers can’t buy inputs as needed. Sports venues, restaurants and theaters are closed, rental cars are unobtainium, there are no houses to buy, and we can’t get stuff from overseas because of the backups at the ports. And even if you can get it ashore, you can’t find a truck to haul it inland.

Hard to grow an economy, in real terms, if people can’t find stuff to buy?

I worry about this too. Increasing demand and tons of cash being pumped into the economy with a decreased availability of goods. Chart those curves and there's a strong case fir more inflation.

I played a bit in the market this time last year and made some money but I was too cautious in retrospect. I kept waiting for a second dip of a W that never happened. I had another couple of hundred thousand that I did leave in mutual funds all year that did well but I parked it at the end of December not knowing what would happen as they installed the new regime. I've missed a bit of a rally the last few months and want to get back in I'm just not sure where or how. What do you guys think of TIPS?

Bb

High Dividend Opportunities
by Rida Morwa

Market Outlook April 11, 2021
Apr. 11, 2021 9:27 AM ET


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Market Outlook April 11, 2021
2021 Ahead
All major indexes all made surprise moves to the upside (again) this week, breaking all-time high levels. I keep reminding our members that during strong bull markets, surprises to the upsides should not be "unexpected".

The S&P 500 index has made a significant move and broke through the 4100 level (a resistance level) without any resistance, indicating that the markets are likely to be heading much higher.

As noted earlier, it is liquidity that is the main driver for equities. As long as there is all this liquidity sloshing around, equities are set to continue to move much higher. Keep in mind that April is the best performing month of the year (along with November) as you can see in the statistics below (taken from years 1980 to 2019):

I expect that this month will be no different. The summer/autumn season could be volatile, and the markets for sure do not go up in a straight line. Here again, my best advice is to never try to time the markets. Being a long-term investor is a much better strategy, and has been proven by several market studies. As income investors, time is always by our side. I always take a look at our "Dividend Tracker" to check out when I will be collecting my next dividend paycheck, or at our "preferred stock dividend tracker" to check out when my next preferred dividend will hit my account. I am happier to collect the income rather than to game the markets. Time is always by my side!

Long-Term Outlook: Goldilocks Moment For the U.S. Economy
My projections since late 2020 have been that this secular (post-covid) bull market will last until year-end 2022 at least and possibly into the year 2023.

Just last Wednesday, the leader of America’s biggest bank JP Morgan Chase (JPM) Jamie Dimond, in his annual letter to shareholders, said the U.S. economy is emerging from the coronavirus pandemic into a boom that could last until 2023. The reasons being strong consumer savings, expanded vaccine distribution, and the Biden administration’s proposed $2.3 trillion infrastructure plan could lead to an economic “Goldilocks moment”—fast, sustained growth alongside inflation and interest rates that drift slowly upward.

My personal views have always been to never bet against the American economy. This is more true during this period of grand re-opening. Our high yield "model portfolio" is actively managed, which means that our aim is to have it positioned in the right stocks and sectors to maximize both our income and returns, given the economic and political environment.

One of the main market risks that I highlighted two weeks ago for the equity markets was a significant tax hike on corporate taxes, but it seems that this risk will not be a significant one. Any changes to the corporate tax rate will be “reasonable and moderate” to keep the U.S. competitive with other countries. In fact, president Biden stated last Wednesday that he is willing to negotiate on corporate tax rates, which leads me to believe that he clearly understands the risks of hiking corporate taxes will derail the economic recovery.

The Case for Value Stocks
I have made the case for the outperformance of value stocks in many of my previous market updates. Value stocks, the market’s cheapest, tend to profit the most during the initial phases of the economic recovery. They tend to be economically sensitive and usually see higher earnings growth as the economy recovers. Note that these "value stocks" are usually the small and medium companies (the heart of the U.S. economy) that will be the prime beneficiary of the stimulus plans. Small and medium-sized businesses will thrive first.

Even following the rally, the valuation gap between growth and value is very wide due to years of underperformance for value stocks. Add to this that value stocks are seeing much higher growth than seen in many years, this makes them prime for outperformance.

Importantly, value stocks are much more resilient to higher interest rates than growth stocks. The reason? Growth stocks trade at high valuations (or high Price/Earnings ratios) which are based on assumptions that include "interest rate" projections. The higher interest rates go, the lower these growth projections become. In fact, higher interest rates are bearish for most growth stocks, should interest rates continue to climb higher.

Where We Are Likely Heading Next?
I expect that the month of April is likely to be a great one for equities. We should expect some volatility and choppiness, but I would not worry about it. As we have seen over the past few months, I expect every dip to find buyers and that the downside risk is likely to remain low. This should remain true throughout the year 2021.

I am excited about the prospect of our portfolio for the year. We are invested in both economically sensitive stocks and sectors that are set to strongly outperform for the next two years. We have also started to adjust our portfolio well in advance for rising inflation and higher interest rates.

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Good investing from your HDO Research Team,

Rida Morwa, Philip Mause, Treading Softly, Beyond Saving, PendragonY, & Preferred Stock Trader

My last 8 years


You did the same if you were half in AMZN and half in GOOG

Market Outlook: April 18, 2021
Apr. 18, 2021 11:57 AM ET

High Dividend Opportunities

Summary
+ The equity markets continue their spectacular rally.
+ What is the "real reason" behind this "unstoppable rally"?
+ We will be heading soon into a lower trading volume season. What comes next?
+ I share my short-term and longer-term outlook.
+ I also explain the dangers of investing in passive index ETFs such as SPY and others, especially at this point in time.

This market update is exclusive to HDO subscribers.

The equity markets continued their spectacular non-stop rally, with both the S&P 500 and the DOW index closing at record highs on Friday. The indexes are just going through every resistance level without looking back. This is "unseen" in recent market history, and I will give my views on it later.

As noted in my earlier market outlooks, there are a lot of tailwinds driving this market, and one of them is the U.S. economy. Just this week, a batch of stronger-than-expected economic data and corporate earnings results helped fuel the markets higher.

What can be noted from the current market leaders is that they consist mostly of economically sensitive stocks, including those that are cyclically oriented. They have been strongly outperforming the rest of the market. These are the stocks and sectors that we have been targeting and that we are currently overweight in our "model portfolio". I expect that this trend will continue throughout the year.

Here I would like to touch again on questions that I keep getting from some of our members: Why are we buying stocks that "look expensive" such as NEWT (NEWT), ARCC (ARCC), ECC (ECC), OXLC (OXLC), or PTY (PTY)? This is because they are economically sensitive and their expected fast growth will more than compensate for their current valuations. If you buy them today, "at the current prices", they will look cheap in a few months as growth kicks in. You would be locking in a great yield at a good price. This is why their prices keep going higher week after week.

Going back to the Economic Outlook
This week, we got a slug of economic data from Jobless Claims, Retail Sales, Empire State Manufacturing, and the Philly Fed Manufacturing. They all came in much stronger than expected.

Unemployment claims declined to the lowest level since the coronavirus pandemic struck last spring, adding to signs the U.S. economic revival is picking up speed. Jobless claims, fell to 576,000 last week from 769,000 a week earlier. That is the lowest weekly figure since March 2020. While they remain higher than the pre-pandemic levels of around 220,000, economists expect they will continue to drop as the recovery accelerates.

GDP could reach 10% this year. Economic data will continue to get better and better and better as the economy opens up.

Goldilocks Moment For the U.S. Economy
As referred to in my update last week, we are heading into a "Goldilocks moment" secular bull cycle for equities this likely to last until year-end 2022 at least, and possibly into the year 2023. The tailwinds being strong consumer savings, extensive stimulus plans, the Biden administration’s $2.3 trillion infrastructure plan, a very accommodative Fed policy, and interest rates that remain near their all-time-lows (despite the recent spike in their long-end). The risks for the end of this bull markets are:

+ Significantly higher inflation, which is unlikely to happen before the end of 2023 or 2024.
+ An abrupt change in Fed policy.
+ Another "black swan" scenario such as COVID.

Non of the three scenarios are unlikely to happen.

The 4th risk is a significant hike to corporate taxes. Here I see it unlikely that the current administration would hike taxes that would undo all the stimulus and jeopardize the economic recovery that it is seeking. The current proposed plan is to have unified global taxation for multinational corporations at a rate of 28%. This is unlikely to happen. My personal views are that the administration will remove incentives (or even tax U.S companies) that move factories outside the United States, and opt for a smaller corporate tax hike. Furthermore, funding for the infrastructure plan could be done via special bonds, such as "Build America Infrastructure Bonds". President Biden clearly said that he is open to negotiations on corporate taxes. I do not see a significant risk here either.

Therefore my longer-term views for the equity markets are very bullish and we rarely see such an opportunity for the potential of big returns over the next two years.

Unstoppable Market Rally Has Got Analysts Scratching Their Heads
I have been reading several reports from prominent market analysts, and many seem to be puzzled about this unrelenting market rally. Why the markets are not seeing any meaningful volatility, and blowing through "technical resistance" levels, and never looking back? Other analysts have been warning for several months of market pullbacks and/or market dips that never happened...

Yet the explanation is quite simple: It is liquidity that is the ultimate driver of equities, and we have been swimming in liquidity for several months now.

I have been referring to the "bubble of cash" sitting on the sidelines over the past six months. Since early January 2021, it was estimated that there were $6 trillion dollars in investments sitting in either cash, CDs, or Money Markets, earning next to nothing. You can add to this that excess savings by U.S. consumers, following stimulus checks, climbed from $3 trillion in January to about $4.5 trillion. I was expecting that a big part of this money to move to equities as investors feel more confident about the prospects of an economic recovery, and this is exactly what is happening today. This "cash on the sidelines" is pouring into U.S. investments.

In fact, it was quoted on Barron's:

A continued strong rollout of Covid-19 vaccines in the U.S. and President Joe Biden‘s $1.9 trillion infrastructure package may be encouraging those usually more cautious investors into stocks, even if markets have been struggling to reach new records lately.....The analysts expected to see that followed by a period of hibernation for those investors. Instead, average daily purchases of U.S. securities reached $1.2 billion on Apr. 6, then $1.5 billion on Apr. 7, more than doubling a low of $772 million on Mar. 26.

So clearly, money is pouring into equity, and this perfectly explains why the markets are going up non-stop. These investors have a lot of cash that they want to put to work, and they are doing it at the same time, driving the markets up in a straight line. When this happens, the technical analysis does not apply anymore, nor do the algorithms (and related day-traders) that work around these technical levels have any significant impact.

Where is the 'Cash on the Sideline' Being Invested?
While we do not have detailed data on this front, we know one thing for sure. A lot of this money is being funneled to large passive ETFs such as:

The S&P 500 index (SPY), or the Nasdaq ETF (QQQ)
The corporate bond ETFs such as the Investment Grade Corporate Bond ETF (LQD) with a yield of 2.7%

Dangers of Buying into Passive ETFs
On the danger of buying large ETFs, I will address equity ETFs and Bond ETFs separately.

Equity ETFs such as SPY and QQQ: All these cash inflows into these ETFs end up building a bubble for just a few stocks. Furthermore, buying into a passive index does not mean you are buying into the best-positioned companies to profit from this specific economic or market situation. You are taking the risk of buying expensive stocks that may or may not be performing well. Finally, in the case of a market bubble, the most expensive stocks tend to take the biggest hit.

Corporate bond ETFs: It is mind-blowing that some investors are buying into the investment-grade corporate bond ETF (LQD). In fact, according to Barron's, LQD saw the largest cash inflow among all ETFs. The reason why I find this intriguing is that LQD has a duration of 10 years, similar to the 10-year Treasury, and therefore carries exactly the same duration risk. The 10-year Treasury took a huge hit over the past month due to mounting concerns about inflation and rising interest rates. We are in a bear market for longer-term bonds, and this is probably just the beginning. For 2.6% yield, LQD is likely to be a big money loser as inflation picks up.

What Comes Next?
The current bull market is supported by tons of liquidity. However, this liquidity is not constant and can fluctuate depending on the seasons. I expect that starting end of May, stock market activity will slow down. Also during the summer season, many institutional investors, and much of the older generation wealthy investors will be on holidays, and this will likely create some turbulence in the markets. I would not rule out a pullback in the magnitude of around 5% over the next 5 to 6 months. However, if it happens, I fully expect that this pullback would be short-lived and that this bull market will continue to see newer highs. Any pullback should be considered a buying opportunity.

Best Course of Action
The markets remain very bullish over the next two years, with outsized returns. My best recommendations are:

If you are already invested, it is best not to lighten up or take profits. Do not try to time this market, do not worry about any short-term pullback if we see one over the next few months. Keep a long-term view while you collect these high dividends. This is what we are here for! The capital gains should continue to accumulate, and we should have total returns that will beat all major indexes over the next 24 months.

If you still have some cash to put to work, I would suggest buying slowly, by adding equal amounts every month. This also applies to new "buy alerts".
Here, I would like to point out that I am not giving individualized advice because I do not know your specific financial situation or your risk tolerance.
However, I am highlighting what I would personally be doing facing such a situation today.

I am very excited about being an investor in this particular period of the economic boom, and particularly about the prospects of our high dividend stocks. Wishing you all a happy weekend.

Good investing,

Rida MORWA

Disclosure: I am/we are long our "Core Portfolio" + our “Preferred Stock Portfolio” + SCCB + ECCX + GEO bonds.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Yeah the middleclass and lower class is getting wiped out.... but hey party on wallstreet..... when your common sense talks to you listen

The middleclass is counting on pensions, 401Ks and other retirement investment instruments, all supported by the market.

and jobs...... company profits are at record levels, which supports investments, which supports jobs. BP (Before Pandemic), the rate of wage inflation was pickup up steam very quickly, and I suspect we will resume seeing that as soon as next month. Talk to anyone trying to hire, and it's impossible to find hires .... at current wage levels.

Do you really believe pensions , 401k's etc.... have a pool of money to pay the pensioners? if you do you are a fool. They are depending upon people paying in today. It's a fuggin Ponzi scheme...

401 (K) accounts are, by definition, asset accounts held and directed by the owner (and beneficiary). If your 401 (k) isn't adequately funded or doesn't provide adequate returns, look in the mirror to find the problem.

Pensions are regulated to the point of suffocation to ensure they don't make investments that risk being unable to pay future obligations. And even then, they are backed up by the federal pension insurance scheme. I would not recommend anyone keep a job with a defined benefit pension without also investing in an IRA on the side. One little inflation blip in your lifetime and you pension is worth shyt.

Now, social security, that is a CLASSIC ponzi scheme.

When the feds print trillions of dollars and huge sums end up in equities.... well that's a ponzi in my book. Did you read about the tiny Brooklyn deli that had 17k in sales a year went public for millions? yep ponzi
The USD is also taking on Ponzi status.
The federal insurance you mention is a joke as is FDIC

a 401K is not a Ponzi scheme because they actually buy assets (securities) with the money the people pay in. 401Ks actually have the assets, though some crooked union pension funds don't. 401K participants can sell their assets if they want (though the .gov makes you take a penalty if you sell them before age 59.5).

The way a Ponzi scheme works is the fund manager takes the money paid in for himself, lies about the value of the assets in the fund, and then sells other suckers on paying in. The scheme collapses when it has to pay out more than new suckers pay in, because the fund simply doesn't actually have any assets.

An example of a real Ponzi scheme is Social Security. If you're collecting now, don't knock it. Social Security won't go bankrupt until 2035.

Union and government pension funds are slightly better. They have SOME real assets. They calculate when and how much they will have to pay out and then assume they can invest so as to earn a sufficient return to pay the future obligations. A lot of their assumptions about how much they can earn are flawed. the recent Biden "CovId 19 Relief Bill" had billions in it to bail out big cidy pension funds. There is also a ground swell building to bail out private pension funds.

Bottom line the money is not there.... they require people to pay today in order to remain solvent. Ponzi.... whatever you want to call it.... smoke and mirrors

Calling something a Ponzi scheme, is word think. It does not get you anywhere. You left out the qualifiers; is it a sustainable Ponzi scheme.
"Pool of money" is mind reading and a straw horse.

Well done for 24HCF:)

You can believe wall street all you want. The truth is America produces little anymore. We are a consumer driven economy and that is fake. When the money changers make more than anyone else you have a huge friken problem

I get it, your bread is buttered by wall street, but main st. is sinking. When the usd loses world reserve currency status even wall street will tank

I know you are speaking from ignorance and not personal experience, which is OK. I can say, from personal experience, that my 401K investments (while I was working) were sold and the money rolled over into a Rollover Individual Retirement Account (IRA) which I totally control. I also had a ROTH IRA and a Joint Broker Account in which I had added extra money during my working years, and bought equities, bonds, and other investment securities over my working years. I personally own all of these accounts and personally manage them. Together, they produce 1/3 of my annual income, in retirement. That is a big chunk, and blessed and content with my decision to invest in the market over the past 19 years. To each his own.