Tags: Treasurys | dividend | fixed | income

Look Overseas for Dividend Stocks and Fixed-Income Investments

By    |   Wednesday, 08 August 2012 08:12 AM

The race of stocks heading north for no reason continues.

Tuesday was the 3rd day in a row that stocks headed higher around the globe. With the exception of maybe a few exchanges, the stock markets have been cautiously headed northward.


There are growing expectations that central banks will open up the spigots of easy money soon. No fundamental improvements, no real reasons, no change in the business dynamics. Just an expectation of more free money and more easy profits.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

And soon the markets will collapse for no reason, as well.

I was shocked to see one of the talking heads on CNBC yesterday morning talk about the fact that investors have not made any real money in stocks for the past decade. While I am in complete agreement with him, I want to state that no one has made money in stocks using a buy-and-hold strategy for nearly 15 years now.

Volatility has been spiking and will continue to remain high. Flash Crash, Facebook, high-frequency trading (HFT) and various mechanized algorithmic trade patterns are being blamed for the higher volatility. I disagree as to them being the root cause of the volatility. I believe it is the result of lower to negligible profits in the stock markets since the financial crisis. Banks and financial companies are being pressured by the expectations of the investors to continually churn out profits.

As they fail to bring about real change, they start innovating with technology, pushing the limits of systems to eke out any profits they can through HFT and other techniques.

In essence, real profits and real business growth have stagnated, and thus companies are resorting to non-traditional ways to continue to show gains and profits.

Returns will remain flat to negative until real growth emerges globally, companies go back to traditional ways to earn income and there are improvements in so-called technology gains, which tend to crash and burn as we saw with Knight Capital Group’s HFT technology last week,

In an environment such as this, how does one make money?

The answer is fixed-income and dividend-paying stocks. The value of receiving a fixed income stream and dividends is immense when gains in stocks are a hit-and-miss strategy at best.

How does one perk up a fixed-income strategy when the interest rates are at a bottom and the next big bubble could be in U.S. Treasurys?

Answer: You look overseas and find the right type of fixed-income instruments that reward you for the risk your portfolio undertakes. Today the risk-reward ratio for U.S. Treasurys is heavily skewed in favor of risk and not enough reward.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Globally there are a few destinations that can provide you with really good returns for measured risk. You can also enhance your portfolio return by selecting choice stocks that have high dividend yields. Since you have these investments in overseas markets, you can enjoy some currency gains as well, as we continue to watch the hapless U.S. dollar decline against most currencies.

The solid fixed income, the dividends of companies with real and thriving business opportunities and the added kicker of some currency gains can land you some handsome rewards in your investment portfolio.

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Wednesday, 08 August 2012 08:12 AM
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