Tags: Belpointe | Tomasulo | Dividend | Stocks

Belpointe’s Tomasulo: Wait for Pullback to Buy Dividend Stocks

By    |   Friday, 24 August 2012 01:07 PM

Equities, especially big dividend stocks, aren't as risky an asset class as people think, while fixed-income isn't always the safe harbor that investors view it to be, said Jeffery L. Tomasulo, managing partner of Belpointe Alternative Investments.

Stocks have swung up and down lately as few investors are in the market because of fear of uncertainty.

The European debt crisis continues to rage on while the United States will hold elections in November, followed by a sharp fiscal adjustment that could strike early in 2013. At the end of the year, tax cuts are scheduled to expire at the same time preprogrammed cuts to public spending kick in, a combination known as a "fiscal cliff" that could send the country back into recession next year if left unaddressed by Congress.

With such clouds on the horizon, both professional and retail investors have jumped onto the sidelines and have stayed there.

"I think there is a lot of uncertainty," Tomasulo told Newsmax.TV in an exclusive interview. "If you look across the landscape, you have not only the Europe crisis, you also have an election, you have this fiscal cliff that we are dealing with and let me tell you, the retail investor hates uncertainty."

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Stock markets swing more with fewer investors trading, and there aren't too many investors making buy-and-sell orders these days.

Trading volume has reached its lowest levels since September 2007, with a daily average of fewer than 3.3 billion shares exchanging hands so far in August, according to CNNMoney. Trading volume is also down by more than 30 percent when compared with the average August during the past five years, CNNMoney reported.

Many investors have fled to the safety of bonds to ride out uncertainty on the notion that despite lower returns, the risk factor isn't there like it is with stocks.

Stocks may be volatile but they are higher for the year. And there are many healthy companies investors should consider, especially after a sell-off, which will reveal some nicely priced firms with sound fundamentals.

"Right now, if I had to go buy tomorrow, I would be looking into the dividend-producing stocks like Philip Morris, the Procter & Gambles, the stocks that people know — the Disneys," Tomasulo said.

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But view bonds with some skepticism.

Bond legend Bill Gross, founder of Pimco, which manages the world's largest bond fund, recently compared long-term gains on stocks to a Ponzi scheme. Gross also said the days of hefty returns on equities are over.

"I have all the respect for Bill Gross and Pimco and all they have done over there, but at the end of the day, they are bond salesmen. They are salesmen. They are going to sell bonds," Tomasulo said.

"What happened to the GM bondholders? They had to take a haircut. What about all the bondholders in Greece?"

Private investors in Greece recently agreed to restructure their debt with the government as well.

"There are quality companies, companies like IBM, Disney, Procter & Gamble, Caterpillar. These are stocks that have been around for generations."

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Friday, 24 August 2012 01:07 PM
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