Below is a paragraph from a good read pointing out that the investment markets(valuations) have decoupled from the fundamentals. Does this point to another bubble, me thinks possible.
Given the data hasn’t improved much, neither has my cautious view. The world really is not that much more of a better place, as an economy, than it was in April (2009). But events since April have proven it is possible to have asset prices rise, whilst economic activity declines. This is the real ‘decoupling’. The core question is why, which gets us to whether this is healthy, and whether this is sustainable. Such a divergence from underlying fundamentals usually signals price bubbles, particularly when the fundamentals are so weak, and the range of assets so uncorrelated.
The full article can be here: Decoupling of Markets and Economies
Friday, January 22, 2010
Thursday, January 21, 2010
New DOL Employee Deferral Deposit Rules
DOL finalizes safe harbor rule on employee contributions for small retirement plans. Late last week, the U.S. Department of Labor announced the finalization of a rule to protect employee contributions deposited to retirement plans with fewer than 100 participants by providing a safe harbor period of seven business days following the receipt or withholding by employers.
This replaces the current rule stating that employers of all sizes must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer.
The department did not expand the safe harbor to cover plans with 100 or more participants due to a lack of information and data sufficient to evaluate current practices of these larger employers. The final rule is effective Jan. 14, 2010, and can be found in the Federal Register. Further detail about the announcement can be found at: http://www.dol.gov/opa/media/press/ebsa/EBSA20100056.htm.
This replaces the current rule stating that employers of all sizes must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer.
The department did not expand the safe harbor to cover plans with 100 or more participants due to a lack of information and data sufficient to evaluate current practices of these larger employers. The final rule is effective Jan. 14, 2010, and can be found in the Federal Register. Further detail about the announcement can be found at: http://www.dol.gov/opa/media/press/ebsa/EBSA20100056.htm.
Wednesday, January 20, 2010
Joblessness - An American Trap
Analysis: U.S. is increasingly locked into long-term unemployment. There seems to be little hope of escape from a truly jobless recovery, given the dismal rate of job creation in the U.S., according to The Economist. The population grew by almost 30 million between December 1999 and December 2009, but at the end of that period, only 400,000 more Americans had jobs. "Without job growth, household indebtedness will linger as a problem, depressing spending and hiring," according to The Economist. "Joblessness is a trap the American labour force may not soon escape." The Economist (14 Jan.)
Friday, January 15, 2010
Highest Yielding, Dividend Paying, S&P 500 Stocks Best in the Long Run
Prieur du Plessis,SeekingAlpha.com, January 15, 2010
A recent article in Kiplinger magazine by Jeremy Siegel, Scoop Up Dividends, notes the highest yielding dividend payers in the S&P 500 Index have
outperformed the lowest yielding dividend payers going back to 1957. In Siegel's research he points to the fact:
If an investor had put $1,000 in a portfolio of the 100 highest-yielding stocks on January 1, 1957, by December 1, 2009, he would have
accumulated more than $450,000 (assuming all dividends were reinvested). That’s a hefty annualized return of 12.5%, an average of almost 2.5
percentage points per year greater than the return on the S&P index. That same $1,000 invested in the 100 lowest-yielding stocks returned only
8.8% per year.
As I have noted in past posts, the absolute dollar amount of dividends in 2009 has declined significantly. Most of the decline has occurred in the financial sector.
The article notes:
• For 2007, at the height of the bull market, the dividend stream -- total dividends paid on all U.S. stocks -- was $288 billion.
• For 2009 through November, the dividend stream had dropped to $216 billion -- the greatest decline in that measure since the end of World War II
• The entire decline in dividends can be attributed to the financial sector, which cut its total payouts by $79 billion over the past two years. (Siegel includes General Electric because GE’s dividend reduction was caused solely by the losses at GE Capital.)
• In other sectors of the economy -- energy, health care, technology, consumer discretionary, consumer staples, telecom -- dividends have actually risen over the past two years, even with the recession.
Although Jeremy Siegel cites the higher return of the highest yielders, investors should perform their own due diligence and not chase yield blindly. The
dividend paying stocks in the S&P 500 Index (http://www.indexarb.com/dividendYieldSortedsp.html)can be found at indexArb's website.
Source: Scoop Up Dividends (http://www.kiplinger.com/columns/goinglong/archives/scoop-up-dividends.html)
A recent article in Kiplinger magazine by Jeremy Siegel, Scoop Up Dividends, notes the highest yielding dividend payers in the S&P 500 Index have
outperformed the lowest yielding dividend payers going back to 1957. In Siegel's research he points to the fact:
If an investor had put $1,000 in a portfolio of the 100 highest-yielding stocks on January 1, 1957, by December 1, 2009, he would have
accumulated more than $450,000 (assuming all dividends were reinvested). That’s a hefty annualized return of 12.5%, an average of almost 2.5
percentage points per year greater than the return on the S&P index. That same $1,000 invested in the 100 lowest-yielding stocks returned only
8.8% per year.
As I have noted in past posts, the absolute dollar amount of dividends in 2009 has declined significantly. Most of the decline has occurred in the financial sector.
The article notes:
• For 2007, at the height of the bull market, the dividend stream -- total dividends paid on all U.S. stocks -- was $288 billion.
• For 2009 through November, the dividend stream had dropped to $216 billion -- the greatest decline in that measure since the end of World War II
• The entire decline in dividends can be attributed to the financial sector, which cut its total payouts by $79 billion over the past two years. (Siegel includes General Electric because GE’s dividend reduction was caused solely by the losses at GE Capital.)
• In other sectors of the economy -- energy, health care, technology, consumer discretionary, consumer staples, telecom -- dividends have actually risen over the past two years, even with the recession.
Although Jeremy Siegel cites the higher return of the highest yielders, investors should perform their own due diligence and not chase yield blindly. The
dividend paying stocks in the S&P 500 Index (http://www.indexarb.com/dividendYieldSortedsp.html)can be found at indexArb's website.
Source: Scoop Up Dividends (http://www.kiplinger.com/columns/goinglong/archives/scoop-up-dividends.html)
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