- “What were you doing in 2010?” Zach Scheidt asks
- Cash to burn: Companies spend more on dividends and buybacks
- How (and why) to get ahead of investors “riding the bench”
- The SEC bides its time on crypto ETF
- “To infinity and beyond!” — nuptials get launched
- A reader gives The 5 a “standing ovation”
“What were you doing in the fall of 2010?” asks our income expert Zach Scheidt.
“Investors had a lot on their plates in 2010,” Zach says, “thanks to a surge in profits from companies that were rebounding from the Great Recession.”
The end of 2010, in fact, set the stage for the bull market that continues today, with some companies reporting Q4 earnings up by as much as 30%.
“I bring up this strong season of earnings growth,” says Zach, “because today we’re actually in the same environment!
“According to the latest data, this earnings season is turning out to be the strongest one since 2010, giving investors a great environment for building their wealth.
“So what does that mean for us and our income investments?”
As more companies report solid Q2 earnings, the U.S. economy continues to steam ahead, translating in expanding sales and — combined with tax cuts — exponential revenue growth.
Normally, in this environment, Zach would expect companies to reinvest capital in new growth opportunities.
“But we’re in a bit of a unique period right now,” he notes, “where growth is pretty much a given and companies can look at other options for cash they’re pulling in.
“This year, our income plays are doing two important things with extra cash: They’re paying larger dividends… and they’re buying back shares.”
And they’re making income investors very happy in the process…
“As an income investor, you know exactly what higher dividends mean for your cash flow. It means you personally have more to spend on your day-to-day expenses.
“Or if you’re reinvesting your dividends, you are now able to buy more new shares with the cash that comes into your account.
“But what about the share buybacks?” Zach says.
“In fact, executives have… authorized a record $1 trillion in share buybacks for this year,” he says.
Why’s that good news?
When a company buys back its stock, they’re basically “retiring” those shares; as a result, there are fewer remaining shares for investors to purchase. “Each remaining share,” therefore, “represents a larger portion of the total company.”
And Zach says: “There will be fewer shares for… companies to divide income between.” So companies will have even more cash to distribute to investors in the form of dividends.
Speaking of positives: Zach’s been surveying the markets’ recovery ever since pullbacks in February and March.
“I’ve talked about the strong job market, about rising wages and about higher home prices and growing corporate earnings,” he says. “Not to mention the S&P 500 holding steady above the 2,800 mark…
“I’ve been telling you how the economy is strong,” Zach says… But he’s starting to wonder if anyone’s listening.
“One chart I came across,” he says, “shows that not many are listening. And I’m worried that you might be one of the many people who will be left behind.
“You can see the red line (which is the U.S. stock market) inching closer to hitting new highs.
“At the same time, the [blue] line shows the level of confidence that individual investors have in the market,” Zach says.
It doesn’t take a genius to figure you don’t want to leave money on the table when the market’s surging. But the chart shows that’s exactly what many retail investors are doing right now.
“But if you’ve been listening to my advice,” Zach says, “and you have your money invested in the strongest companies that are growing earnings, this chart is actually very exciting!
“Because it tells you there is a lot of money on the sidelines just waiting to help you grow your investment profits.”
“If you think the current market rebound is good,” Zach says, “wait till you see what happens when investor sentiment starts to shift.”
The same investors who sat on the sidelines when the markets got, well, a little interesting amid trade-war drama and the like will be the same one’s giving into FOMO… and bad instincts. All at once.
“After all,” Zach says, “they have to make up for lost time after getting out of the market at the wrong time.
“All of these buy orders will send stocks sharply higher.
“And that’s the time when you should start thinking about taking some profits off the table,” Zach says.
“In other words, you want to sell at least some of your shares when everyone else is excited about owning stocks.
“This is how professional traders make money. It’s how savvy investors grow their wealth. And it’s how successful speculators take advantage of the opportunities the market is giving them.”
Zach’s advice?
“Act ahead of the herd’s instinct,” he says, and “you can accumulate some serious profits along the way.”
To that end, if you’re looking for a way into instant-profit plays that’ll keep you ahead of the herd, Zach has a one-of-a-kind tool that’s got the potential to beef up your bank account by as much as five figures in only a week.
That’s just with ordinary stocks — no options or anything exotic. Click here to learn more about this compelling tool… before Zach’s next recommendation on Wednesday.
To the markets, where Turkey’s economic free fall continues… as does the fear of market “contagion” we reported on Friday.
“The [Turkish] lira tanked as much as 10% against the U.S. dollar this morning despite the Turkish central bank’s efforts to boost liquidity,” say our analyst Greg Guenthner.
The Wall Street Journal notes, “The measures won’t have any direct impact on the lira because it doesn’t ease a core concern — the hefty debt exposure of Turkish banks and corporations — and warned the central bank has limited reserves of its own to weather the storm.”
“Emerging markets continue to tumble as the drama plays out,” Greg says. “European and Asian markets remain stuck in the red this morning.”
As for U.S. markets, the S&P 500’s down by about nine points but still floating above the 2,800 mark, while the Dow’s down 95 points, to 25,217.
Similarly, the Nasdaq’s down by roughly nine points, to 7,829.
Checking in with commodities, a barrel of West Texas crude’s selling for $65.83, down almost $2, and gold’s getting creamed — losing about $16 so far today — priced at $1,202.70.
What’s all this “down” news in conventional markets mean for bitcoin? Well, it’s down too, priced at $6,285.70.
While we’re on the subject…
“The SEC announced on Tuesday that it would be postponing a decision on the VanEck/SolidX Bitcoin ETF until Sept. 30,” says our crypto maven James Altucher.
On the heels of that news, the price of bitcoin dropped 13%.
As James has mentioned previously — something The 5’s covered, too — the SEC’s already denied the Winklevii’s request for a crypto ETF, citing regulatory concerns.
“But the VanEck/SolidX Bitcoin ETF attempted to resolve those issues by setting a price that would be prohibitively expensive for average investors ($200,000 per share),” says James.
“Market participants were wagering on the ETF being passed, given its emphasis on institutional investors.”
But by James’ estimation, “the SEC’s latest decision is not objectively bad news.
“First, the SEC didn’t outright deny the application, as it did with the Winklevoss Bitcoin Trust application last month.
“Secondly, the SEC postponing a final decision should not come as a surprise to anyone who has been keeping an eye on the agency. For example, the SEC only decided on the outcome of the Winklevoss Bitcoin Trust last month after several years of deliberations,” James says.
“In fact,” he says, “it wouldn’t surprise me if the government continued to postpone the decision and ultimately didn’t make a final ruling until early 2019.
“Meanwhile, with the market obsessively focused on a bitcoin ETF, other positive catalysts have gone largely unrecognized,” says James.
Last week, Bloomberg reported Goldman Sachs is looking into providing crypto custody services for institutional investors.
“Separately, and perhaps more importantly… the Intercontinental Exchange (ICE) — the parent company of the New York Stock Exchange — announced that it’s formed a new company.
“The new organization, Bakkt, has the stated purpose of enabling ‘consumers and institutions to buy, sell, store and spend digital assets,’” James says.
“The announcement, made in collaboration with Microsoft and Starbucks, indicated the exchange giant’s intention to work with best-in-class partners to bring digital currency to consumer transactions.
“As I’ve always said,” James says, “the biggest opportunity for digital currency is as a replacement for the imperfect currencies we use today.
“The latest news from ICE indicates the continued push toward the future of digital assets, despite regulator skepticism.”
“The sky is no longer the limit for lovers looking for unusual ways to commemorate their nuptials,” says Phys.org, “with a Japanese company now offering to blast commemorative wedding plaques into space.
“Warpspace, a startup based in Tsukuba City outside Tokyo, is introducing the new service in partnership with a local hotel popular for wedding banquets.
“For about 30,000 yen ($270),” the article continues, “newlyweds marrying at the hotel will be able to emboss their names and design elements on 16-by-8-millimeter (one-fifth of a square inch) titanium plates that will be loaded onto a tiny satellite.
“Customers will receive photos of the craft carrying their plaques as it swirls among the stars…”
“Space trips are not common yet but couples can send up plaques that carry their affections,” says Warpspace CEO Toshihiro Kameda. “I want them to spread their happiness across the sky.”
Heh… a real romantic, that one.
What if, say, the marriage ends in divorce? Do they have a plaque for that?
Just askin’…
“A standing ovation to The 5 for the exposé on the most recent attacks on free speech,” says a reader in response to Wednesday’s issue of The 5.
“I am in agreement with Byron King that these (telecommunications, software and digital device-makers) are anything but ‘private’ entities and free of oversight and regulation, yet the government is using them as a battering ram to control free speech, thereby controlling free thought and freedom itself.
“I don’t know if you’ve been reading the new agreements required by ISPs, Google, device-makers and phone companies, but they all include a censorship paragraph that implies not only can they limit what you say and how you say it, but they can monitor your account to determine your compliance. If you use the service, you agree.
“No censorship has ever been anything but sinister and nefarious in its intent, including wartime censorship.
“Yet censorship in the form of political correctness has been growing each year, giving yet another corollary to Gresham’s law — bad behavior drives out good behavior in increasing amounts in every venue.
“I don’t know if you intended the linking of the Chinese ‘social score’ to all this, but it is a perfect example of what we can expect the process to devolve into in the end.
“It seems to me that what our financial elite have identified in China and the Middle East is that it is actually possible to have economic growth that outpaces inflation without a free society (overlooking the actual mechanism of the growth).
“No sooner was Tiananmen cleared of bodies than the postmodernists took note of this fact and headed straight for China.
“In fact, no one had any interest in investing in the former Soviet Empire as it went through a concurrent quarter century of political, social and economic reform, but heavy investment went directly to China instead.
“I was part of a mission to China to create a joint auto industry in 1994. It failed then, not because of human rights, but because the Chinese government refused to honor our intellectual property.
“The lure of China was the guarantee from communists to protect capitalist investment, something Eastern Europe couldn’t do after the fall of communism.
“I have become more and more cynical about our country ever since.
“Free enterprise depends on free thought and free action, and those are never possible without free speech.
“The U.S. has never had a true free press or even true free speech, but at least we used to aspire to it (of course, monopoly capitalism is not free enterprise).
“Now, from Hillary Clinton to the ACLU, political entities are suggesting that free speech has gradations and is perhaps not such a sacred right after all. Those gradations are about the equal to undermining the monetary system and thinking just one more adjustment should do it.
“What we need, I believe, is an amendment to our Constitution guaranteeing that NO ENTITY — individual, collective or governmental — can abridge our fundamental freedoms spelled out in the Bill of Rights.
“Putting companies, religions, government agencies, employers or anyone else in a position that allows them to do so should be outlawed.”
Best regards,
Emily Clancy
The 5 Min. Forecast
P.S. Don’t forget: Zach Scheidt’s poised to reveal his latest stock recommendation Wednesday.
To get access and learn more about a tool so powerful it was once investigated by the SEC — click here now.
