The T Report: China & LIBOR: Spain, Messy & Messi

Wednesday, July 25th, 2012

by Peter Tchir, TF Market Advisors

PMI

Chinese PMI was better than feared, but if I had to bet on what number is less manipulated, Chinese data or LIBOR, I would have to bet on LIBOR. Since we don’t have much else to work with, I guess we are stuck looking at it, and it shows that the slowdown is slowing, but I can’t get very excited about that.

European manufacturing PMI came in at 44.1, worse than the already low expectations of 45.2. The situation in Europe is deteriorating and all the summits aren’t helping. The banks need to be recapitalized and “uncertainty” needs to be removed or else business will continue to grind to a halt.

Most interesting, I thought, was that German Manufacturing PMI came in at only 43.3 and even German service remained under 50. Germany is not immune to the woes in the rest of Europe or to the global economy. French manufacturing PMI was an equally dreadful 43.6. Maybe the growing weakness in the core will light a fire. It isn’t enough to have firewalls. They either have to spend that money and finally take serious default and currency risk off the table, or the economies will continue to slide deeper into recession or depression.

Pesetas and Real Madrid

Spain had a reasonable t-bill auction today. The yields were high compared to any of the core with 6 month t-bills coming in a 3.69%. In a normal world, that isn’t bad, but in a world where Germany and others get paid to issue money for 6 months, it doesn’t look great.

In any case, talk of redenomination continues. Many people argue that the only way out for Spain and others is to exit the Euro and create their own currency that they can devalue at will.

I continue to see several problems with that. Devaluation will be controlled by the markets and not the politicians making it uncertain where the exchange rate will settle in. If the bets are “too high”, “too low” or “just right”, I would certainly bet against “just right”.

The uncertainty created by a new currency will be immense. The confusion for banks and businesses will overwhelm any possible business. Who will want to do business in a country with a highly volatile currency where the end result remains highly uncertain? Who will do business in similar looking countries? Trade will grind to a halt and demand for non-essential goods will dry up as people wait to see the results.

Finally, in a country where much of the “daily essentials”, particularly energy have to be imported, it is far more difficult to see how the people or the country, prosper. In successful devaluations, the country has often been natural resource rich and been able to “harness” those resources for their domestic economy during the devaluation process.

But those arguments are confusing, so let’s look at Barcelona and Real Madrid. Will Barcelona be able to afford Messi? How much of the revenue of these clubs from domestic markets? The higher the percentage of domestic revenue, the more expensive players will be. And it wouldn’t just be foreign players. Spanish players would also be tempted to leave. The clubs would have to pay their players in Euros. That could become a huge burden for Spanish clubs. As the peseta plummets, how will they afford these top players? Will clubs in other countries be able to pay them?

What if the situation in Spain erodes where daily protests become a way of life? What if the devaluation causes domestic problems? If political tensions grow and civil unrest increases will players want to stay in Spain when they could demand the same money elsewhere, without the additional risk?

Maybe Germany is hoping to transform the Bundesliga into the best league through currency devaluation? Yes, this is largely tongue in cheek, but it may be worth thinking about what Liga BBVA would look like after devaluation. People may not be passionate or understanding of the economy, but they are passionate and informed about their football clubs. In a world where much of the talent is imported and the local talent is free to leave, the analysis may not be as fanciful as it sounds. M

any Canadians saw it happen to their teams when a combination of a weak Northern Peso (this was pre loonie) and high taxes made it hard for Canadian franchises to compete (the BlueJays have never recovered). It wasn’t just sports. There were big issues of “brain drain” as many top people and companies looked to move to the U.S.

A weak currency may not be as helpful as people think and in fact may cause far more problems than it fixes, especially since this wouldn’t merely be devaluing, it would be creating a new currency and leaving a union, adding to the confusion and complexity of the task. Any real “progress” towards a near term redenomination would cause me great concern for all risk.

Risk “Meh”

Markets really don’t seem to know what to do. The greed is saying sell-off because Europe is a mess, yet the fear is that enough government money and liquidity comes into the market that we ignite another rally.

Domestic credit continues to do okay. Spreads have widened in the past few days, but very calmly and with relatively little enthusiasm for any move wider. You can pick up some high yield bonds marginally cheaper, but that’s probably only until you engage an offer and find out they aren’t really selling.

My concern that Europe will mess this up is growing. They seemed to have been implementing small steps that could work, but they seemed to have slowed down, and the level of dangerous (and poorly thought out) rhetoric is growing. I will continue to keep a close watch on the situation and am continuing to lighten up risk, though will add when drops seem overdone.

The price action in Spanish bonds is chilling, but volumes are incredibly low.

Tags: Bets, chinese data, Currency Risk, Devaluation, Exchange Rate, German Service, Global Economy, Libor, Low Expectations, Madrid Spain, Politicians, Real Madrid, Recession, Redenomination, Slowdown, Summits, T Bills, Tf, Uncertainty, Woes
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Global PMI: The Trend is Your Friend

Tuesday, July 10th, 2012

by Frank Holmes, CEO, CIO, U.S. Global Investors

Manufacturing around the world weakened in June, according to the JP Morgan Global Manufacturing Purchasing Managers’ Index (PMI). Its reading of 48.9 was the lowest in three years and the first dip below 50 since September 2011. The current reading is also below the three-month moving average for the second month in a row. As you can see on the chart, PMI crossed below the three-month in May.

While Europe, China and the U.S. were primarily responsible for the slowed activity, we believe the trend is your friend. In April, global PMI crossed above the three-month moving average, and historically, when a “cross-above” has happened, it’s signaled higher prices for many commodities. Take a look at the chart below which shows the following:

Ninety percent of the time, copper rose 10 percent over the following three months. Eighty-five percent of the time, West Texas Intermediate oil has also increased. Its median three-month change has been an increase of 11 percent.

Materials and energy were also positively affected, with modest results: When the PMI crosses above the three-month average, 70 percent of the time, the S&P 500 Materials Index rose, with a median return of about 3 percent. The S&P 500 Energy Index had a median three-month return of about 5 percent, with an 80 percent chance of the three-month change being positive.

Using history as a guide, this suggests that by the end of July, we could see strength in these commodities and energy and materials stocks. Although volatility and uncertainty rule the markets these days, we believe that the world’s central bankers are taking note of slowed activity and will act if deemed necessary.

The trend is your friend only if your portfolio is “resourceful” enough to benefit. Read the Financial Planning article, which showed how U.S. Global Investors’ Global Resources Fund strengthened a diversified portfolio over the past 10 years. Read the article.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

Diversification does not protect an investor from market risks and does not assure a profit.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500. The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.

Tags: Amp, Commodities, Copper, Diversified Portfolio, Energy Index, Financial Planning, Frank Holmes, Global Resources, Jp Morgan, Moving Average, Nbsp, Pmi, Purchasing Managers Index, Resources Fund, S Central, Three Months, U S Global Investors, Uncertainty, Volatility, West Texas Intermediate
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A Letter to My Son: Financial Advice for Life

Wednesday, June 13th, 2012

The following is a letter from Russ to his son.

Dear Son,

You’re seven, a great age for many reasons. You’re old enough that I no longer have to watch Thomas the Train. You’re still young enough that when we read together, you let me pick at least a few books that I like (one day I’ll need to apologize for making you sit through several hundred renditions of Yertle the Turtle), and you still get excited when I bring you back a stuffed kangaroo from Australia. In short, you’re at an age when I can still solve most of your problems.

I know that won’t last. Eventually you’re going to need to go out and find your place in the world. So this Father’s Day, I thought I should take the opportunity to offer some advice, or at least advice relating to your financial well- being.

My number one recommendation is to find a job you truly love doing because you’re going to be doing it for a very long time. This was always good advice, but it’s likely to be even more pertinent for your generation. Recently my generation and the previous one have gotten into somewhat of an odd habit: we live much longer but want to retire much younger. This probably has to change. If you can find something you think you can do for, say, fifty years or so that would be a good thing.

Also, when you finally do decide to retire, the government may not be of much help. That will be all right, assuming you follow my second admonition: save. This is both the easiest and hardest one to follow. It’s easy because unlike picking a career or picking a stock, both of which involve a lot of uncertainty, saving requires no special foresight. It does, however, require discipline, and the earlier you start the better.

The third bit of advice concerns what to do with those savings. This is a big topic but, for now, concentrate on just two things: value and diversification. Always remember the price you pay matters, even when investing. This is something many in my generation forgot during the tech bubble when we told ourselves that Internet companies with no revenue should be worth several billion dollars. Second, no matter how good an investment looks, don’t own too much of it. There are very few free lunches in finance, or in life. If you want more return, you need to take more risk. Diversification is the one loophole to this rule.

That’s pretty much it. Find a job you love, save early and often, be a value investor and don’t put all your eggs in one basket. Nothing that original, but I’d like to believe that following this advice will save you from at least a few of life’s little hiccups. And know that if you stumble, I’ll always be there, stuffed kangaroo in hand.

Love,

Dad

Tags: Admonition, Australia, Books, Dear Son, Discipline, Diversification, Fifty Years, Financial Advice, Find A Job, Foresight, Good Advice, Habit, Kangaroo, Long Time, Picking A Career, Renditions, Russ, Thomas The Train, Turtle, Uncertainty
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Into the Great Unknown (PIMCO)

Tuesday, May 29th, 2012

by Andrew Balls, PIMCO
This article was originally published in thetimes.co.uk on May 28, 2012.​

Amid great uncertainty and huge challenges in Europe, it can be helpful to cut through all the detail and map out what we know and what we don’t know. This is at best depressing and, at worst, terrifying.

What are the known knowns?

First, Greece is spiralling out of control. No good outcomes appear possible for Greece or the eurozone. They face only bad outcomes that will be chosen or forced. Arguments over the economics of Greece’s programme and creditor country demand for adherence to what looks like an impossible task have run into political and social rejection in Greece. The country’s political system is fragmenting and social unrest is sure to persist. While there may be a way for Greece to remain in the eurozone, an exit looks far more likely.

Second, this is not merely a Greek or a eurozone challenge. Across the world, rich countries are trying to de-lever in a controlled way while maintaining growth and jobs. The eurozone’s institutional challenges make this difficult task far worse. Individual eurozone countries are like emerging markets, borrowing in foreign currency in their susceptibility to a run on the sovereign. During a crisis, investors will go to the safety of the strongest balance sheet, which in the eurozone’s case is Germany. Italy and Spain are not insolvent countries, but nor can they maintain stable debt dynamics with nominal yields well above their nominal growth rates owing to the absence of a predictable central bank lender of last resort.

Third, the eurozone’s monetary and fiscal interventions to date have not succeeded in stabilising its sovereign debt markets and crowding investors in, in part because they have been reactive and insufficient and also because of the public slanging matches between European leaders and with and between central bankers. Rather, these interventions have financed the exit of banks and other investors retreating back within their borders and the exit of foreign investors. Bank deposit withdrawals now threaten to accelerate the process.
Fourth, it is a known known that the eurozone’s most important challenges are political, rather than economic. Measured by debt and deficit levels, the eurozone is no worse off than the United States or Britain. The challenges are of co-ordination among countries and regional legitimacy, as governments try to overcome disagreements over how to mutualise the risks within the eurozone and on the proper role of the central bank.
Finally, it is clear that the eurozone status quo is not sustainable. A risk of a Greek exit and/or bank runs across the eurozone threatens to press fast forward on the crisis.

Turning to the known unknowns, it is unclear if the eurozone’s governments have the technical capacity to administer what will be a difficult process of managing the crisis in the short term and of integrating the eurozone over the medium term. It will require some combination of: policy and political coordination; measures to reduce the vulnerability of the banking system; the European Central Bank acting as a credible, committed lender of last resort for sovereigns to prevent self-fulfilling runs; closer fiscal union involving the mutualisation of debt in the form of guarantees or common eurobond issuance and a pooling of fiscal sovereignty; a more sustainable balance between the need for growth and the need for fiscal retrenchment; and, most likely, support to facilitate a managed Greek exit and limit the run on the eurozone as a whole. Indeed, the signal from a Greek exit that this is not an irrevocable currency union but a fixed but adjustable exchange rate could unleash a re-pricing of currency risk across the eurozone’s private markets, not only the government bond market, heightening the risk that the technical capacity to respond is overwhelmed.
This difficult prognosis is compounded by the huge known unknown over whether the eurozone’s leaders have the ability to overcome their co-ordination challenge and lay out an immediate plan to deal with a Greek exit, to defeat spiralling contagion risk in the short term and to build a more stable eurozone in the medium term.

Perhaps hardest of all, there is the known unknown of whether European populations will support or at least acquiesce in the face of miserable economic conditions, the pooling of sovereignty and greater transfers across borders.

Taking together the known knowns and the known unknowns, it seems likely that the eurozone’s big four — Germany, France, Italy and Spain — as well as other German satellite countries will find a way to hang together in a smaller currency union backed by stronger regional co-ordination and financing mechanisms.

But it will be difficult and costly and the tail risk of failure is very fat, indeed.

For investors, the balance of risks suggests preparing for the worst, even if, as citizens, we hope for the best. This would include limiting exposure to real confiscation risk in the eurozone and focusing instead on better global alternatives available in countries with stronger balance sheets, exposure to better growth prospects and less intractable governance challenges.

Copyright © PIMCO

Tags: Adherence, Balance Sheet, Balls, Bank Lender, Creditor, Debt Markets, Emerging Markets, European Leaders, Eurozone Countries, Foreign Currency, Impossible Task, Institutional Challenges, Interventions, Lender Of Last Resort, PIMCO, Rich Countries, Social Rejection, Social Unrest, Sovereign Debt, Susceptibility, Uncertainty
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U.S. Stock Market – Long-Term Indicators Could Go Either Way

Monday, May 7th, 2012

During times of great uncertainty regarding the outlook for stocks, I often focus on long-term indicators to provide some guidance.

Let’s by means of example consider the U.S. benchmark S&P 500 Index (SPX 1369.58 �‘0.04%). A simple 12-month rate of change, or ROC, indicator seem to pick up the major turning points quite well. Let me say straightaway that monthly indicators are of little help when it comes to market timing, but they do come in handy for defining the primary trend. The ROC line below zero depicted bear trends quite clearly, as in 1990 (not shown), 1994, 2000 to 2003, and from 2007 to March 2009. Right now, the ROC line is on a knife’s edge and is perched only 1.9% above the zero line.

I will, needless to say, be watching this space quite closely.

Source: StockCharts.com

Tags: Amp, Benchmark, Focus, Guidance, Market Timing, Nbsp, Roc, Spx, Stocks, Term Indicators, U S Stock Market, Uncertainty, Zero Line
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Cliff Asness: Uncertainty is Not the Problem Holding Back the Economy

Monday, April 2nd, 2012

Nick Schulz, editor-in-chief of American.com, recently interviewed Cliff Asness, the managing and founding principal of the hedge fund AQR Capital Management. Last year, Asness wrote a provocative piece in the Wall Street Journal about what’s holding the economy back, arguing that “Uncertainty is Not the Problem.” He said: “Many commentators blame our continuing economic woes on ‘uncertainty.’ They allege that recent and anticipated dramatic policy changes make business planning difficult, and that this is retarding growth and employment. This view is not wrong—but our main problem is not the uncertainty surrounding new policies. It is the policies.” Schulz asked Asness to expand on this idea as shown below.

Source: The American, March 27, 2012.

Tags: Capital Management, Cliff Asness, Commentators, Economic Woes, Economy, Employment, Hedge Fund, Nick Schulz, Principal, Provocative Piece, Uncertainty, Wall Street, Wall Street Journal
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Stock Market – Long Term Indicators Could Go Either Way

Thursday, January 19th, 2012

During times of great uncertainty I also often focus on long-term indicators to provide some guidance.

Let’s by means of example consider the S&P 500 Index (SPX 1308.04 �‘1.11%). A simple 12-month rate of change, or ROC, indicator seem to pick up the major turning points quite well. Let me say straightaway that monthly indicators are of little help when it comes to market timing, but they do come in handy for defining the primary trend. However, the ROC line below zero depicted bear trends quite clearly, as in 1990, 1994, 2000 to 2003, and from 2007 to March 2009. Right now, the ROC line is on a knife’s edge and is perched right on the zero line. I will, needless to say, be watching this space quite closely.

Source: StockCharts.com

Tags: Amp, Focus, Guidance, Market Timing, Roc, Spx, Stock Market, Term Indicators, Uncertainty, Zero Line
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Bob Doll’s 10 Predictions for 2012

Wednesday, January 4th, 2012

by Bob Doll, Chief Equity Strategist, Fundamental Equities, Blackrock

The Frustrations of 2011

2011 was a volatile and disappointing year for most investors. Expectations entering 2011 featured a continuation of economic recovery around the world from the Great Recession, despite ongoing deleveraging and residual debt and credit concerns. Debt and credit issues, however, obviously exploded over the past year, particularly in Europe. The investment landscape was one driven by fear and anxiety and while earnings were up in most places, multiples were down, causing equity markets to struggle.

10 Predictions for 2012

Making predictions for a new year is always a difficult task, but this year the uncertainty associated with emerging markets growth, upcoming elections, and the European debt situation in particular, make the forecasting exercise especially precarious. Nevertheless, it is with this backdrop that we move forward with our predictions for 2012:

1. The European debt crisis begins to ease, even as Europe experiences a recession
2. The US economy continues to muddle through yet again
3. Despite slowing growth, China and India contribute more than half of the world’s economic growth
4. US earnings grow modestly, but fail to exceed estimates for the first time since the Great Recession
5. Treasury rates rise and quality spreads fall
6. US equities experience a double-digit percentage return as multiples rise modestly for the first time since the Great Recession
7. US stocks outperform non-US stocks for the third year in a row
8. Dividends and buybacks hit a record high
9. Healthcare and energy outperform utilities and financials
10. Republicans capture the Senate, retain the House, and defeat President Obama

A “Muddle-Through” World Should Allow Stocks to Outperform

We continue to operate in a post-credit bust world, a chief consequence of which is ongoing deleveraging. As a result, economic growth will likely be slow in 2012. Slow growth should be partially offset by the forces of accommodative monetary policy in much of the world, designed to provide the liquidity necessary for solvency and debt repayment. This combination of slow growth and debt repayment/deleveraging is likely to be a difficult one, fraught with occasional accidents and subject to low tolerance for policy errors.

A backdrop of slow, but positive, economic growth should allow for acceptable, but lackluster, earnings growth. Both “risk” and “safe” assets seem priced for such an environment, but not for a “left-tail” event whereby financial contagion could do significant damage. Our mainline scenario assumes a continued “muddle-through” global environment, especially regarding the European debt problem. Whenever deflation is a risk factor for the global economy, equity valuations remain under pressure. Importantly, the US household sector has been steadily restructuring its balance sheet and lowering its debt service ratio. This positive step, combined with some increase in the pace of job creation, provides hope for a better year for equities.

On the “what can go right” front, we would list Europe moving toward resolution of its debt crisis, the United States heading toward fiscal responsibility, the emergence of a US manufacturing renaissance, a housing recovery, and/or an increase in confidence. The “what can go wrong” list would include a systemic banking crisis in Europe, a true double dip recession in the United States, a hard landing in China, a breakout of class warfare in the United States, and a Middle East flare-up that drives the price of oil to $150. Our “muddle through” base case avoids both extremes, but leaves much unresolved.

In summary, 2012 is likely to feature a slow-growth world that includes a recession in Europe. The United States faces headwinds, but manages to achieve growth of between 2% and 2.5%. China and India slow somewhat, but, along with the United States, make up two-thirds of global GDP growth. The big risk remains that of a financial breakdown in Europe, which would tip the developed world, if not the emerging world, into recession. Inflation should also continue to move lower. Should the muddle-through environment come to pass, we believe earnings and some improvement in confidence would allow equity markets to move higher, with US stocks leading the way.

About Bob Doll

Bob Doll is Chief Equity Strategist for Fundamental Equities at BlackRock^® a premier provider of global investment management, risk management and advisory services. Mr. Doll is also Lead Portfolio Manager of BlackRock’s Large Cap Series Funds. Prior to joining the firm, Mr. Doll was President and Chief Investment Officer at Merrill Lynch Investment Managers.

Sources: BlackRock, Bank Credit Analyst. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of December 30, 2011, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. International investing involves additional risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

BlackRock is a registered trademark of BlackRock, Inc. All other trademarks are the property of their respective owners.

Tags: Backdrop, Blackrock, Bob Doll, Buybacks, Continuation, Credit Concerns, Debt Crisis, Debt Situation, Disappointing Year, Dividends, Earnings, Economic Growth, Economic Recovery, Emerging Markets, Estimates, Frustrations, Half Of The World, Investment Commentary, Investment Landscape, Percentage Return, Recession, Republicans, Senate, Stocks, Strategist, Treasury Rates, Uncertainty, Upcoming Elections
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Canadian Investors Unclear on How to Use ETFs

Thursday, December 8th, 2011

A recent survey commissioned by BMO Investments Inc. reveals that only 18% of Canadian investors are aware of ETFs (Exchange Traded Funds), which are investment funds that provide investors with exposure to actively or passively tracked indices, and or participation in packaged investment strategies.

The study further revealed that once investors were made aware of the benefits of these securities, 74% of participants said they would consider ETFs in their investment decision making.

“Although ETFs have been around for only 20 years, they’re gaining in popularity and we believe they are poised to take off in Canada,” said Serge Pépin, Head of Investments, BMO Investments Inc. “Investors value the various benefits that ETFs have to offer, including lower costs, transparency, tax efficiencies, investment flexibility and diversity.”

The study, by Leger Marketing, also revealed the key barriers preventing Canadians from holding ETFs in their portfolios. These include:

• Not knowing how to get started / lack of knowledge (34 per cent)
• Uncertainty on how to integrate ETFs into current investments (23 per cent)
• Not having the time or expertise to pick and choose individual ETFs (21 per cent)

“Being a relatively new investment option, it’s only natural that many investors remain unsure how to effectively integrate ETFs into their investment portfolios,” continued Mr. Pépin. “Many are attracted to ETFs, but a lack of knowledge may make them hesitate when adding them to their investments.”

Finally, the survey also revealed that some two-thirds would invest in ETFs if they were structured (or packaged).

 
 
 
 
Source: BMO Investments Inc.

Tags: Canadian Investors, Canadians, Cen, Diversity, Efficiencies, Exchange Traded Funds, Investment Decision, Investment Flexibility, Investment Funds, Investment Option, Investment Portfolios, Investment Strategies, Investments Inc, Lack Of Knowledge, Leger Marketing, Mutual Fund, Participants, Popularity, Serge, Transparency, Two Thirds, Uncertainty
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High Dividend Payers the Place to Be

Monday, November 21st, 2011

Bespoke Investment Group highlights that the average stock in the S&P 500 Index is down 6.4% since October 28 high. “We broke the Index into deciles (10 groups of 50 stocks each) based on dividend yield and then calculated the average performance of stocks in each decile since October 28 to see how income-paying stocks have performed during the current market pullback.

“As shown below, the two deciles with the highest yielding stocks have averaged declines of 4.7% and 4.3% respectively, while the three bottom deciles based on dividend yields are significantly underperforming,” said the report.

High dividend payers typically outperform in times of uncertainty, and this has certainly been the case during the current pullback. I feel very comfortable recommending the purchase of dividend aristocrats, especially international companies tapping into high growth countries, during market corrections.

Source: Bespoke Investment Group, November 18, 2011.

Tags: Amp, Countries, Current Market, Decile, Deciles, Declines, Dividend Aristocrats, Dividend Payers, Dividend Yield, Dividend Yields, High Dividend, Highest Yielding Stocks, Investment Group, Paying Stocks, Pullback, Stock, Stocks, Uncertainty
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