Archive for the ‘Investment News’ Category
Monday, October 10th, 2011 |
If you’re still standing on the sidelines in cash at the moment, here are three good reasons that you should be invested in stocks right now.
- An investor’s choice of asset allocation is the single largest factor that will influence the probability of long-term success. Historical evidence suggests that cash investments return the least amount over the long run.
- There is significant upside potential in equities for long-term investors right now. Stock valuations are well below their highs and have a long way to go to be back in line with what we consider to be fair value.
- Sustained low interest rates and dramatic increases in money supply combined with increased deficits have many fearful of the inflationary impact once a true economic recovery takes hold.
Money market investments, non-market linked CD’s and high interest savings accounts offer little protection against the wealth eroding effect of inflation.
That is not to say that there is no downside. In fact, there is an inherent risk when investing in equities and there may, in fact, be another leg down.
However, I believe the risk vs. reward payoff favors the astute dividend growth stock investor at this time.
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Friday, May 27th, 2011 |
In a recently published report authored by the McKinsey Global Institute (MGI), a consulting firm that provides research and advisory services to large businesses, governments and institutions, we see the ever increasing urbanization of growth around the globe. The report focuses on identifying where the world’s growth opportunities currently lie and where they appear to be in the near future. The paper has an even more extensive focus on the identification of urban markets that are likely to contribute the most to global growth.
Increasing Importance of Global Diversification
The importance of global diversification and how most future growth is expected to come from U.S. and international markets, in particular Emerging Markets is not a new idea. MGI’s report however, outlines some additional new insights into the world’s major cities’ current contributions to global growth and where it’s likely to come from in the future.
Below are some key pieces of data form the report that are most relevant:
- Contrary to common perception, MGI found that the world’s largest cities have not been driving global growth for the past 15 years, and many have not grown faster than their host economies. Its estimated that today’s 23 largest urban areas will contribute just over 10% of global growth to 2025, below their current 14% share of global gross domestic product (GDP) today.
- Middleweight cities in emerging markets are poised to delivery nearly 40% of global growth by 2025, more than the entire developed world and emerging market megacities combined
(middleweight is defined as metropolitan areas with between 150 thousand to 10 million inhabitants and megacities have 10 million or more).
- Currently, 1.5 billion people live in the top 600 urban centers of the world and account for $30 trillion or more than half of the world’s GDP. It’s expected that by 2025 the population in these cities will reach 2 billion and will account for $64 trillion or more than 60% of the world’s GDP.
Again, the importance of global diversification of investments is not new. However, this report gives some merit to paying additional attention to the growth of centres outside of the major metropolitan areas in the emerging economies.
What does this mean for you as an investor?
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Friday, May 7th, 2010 |
It has been said that Shakespeare drew his inspiration for many plays from classic Greek dramas. If he were alive today, I don’t think there would be any shortage of inspiration for new projects!
Of course, the situation in Greece has been front page news this week and it has created some choppy waters for investors (it was another volatile day on the markets yesterday – but that was apparently caused by a trading error). Amid the headlines, and the increased market volatility, we thought it might be helpful to take a look at how the sovereign debt situation has evolved and why it is causing so much noise (and by extension, investor anxiety).
Each day, there seems to be a new take on the story and many of the headlines have been conflicting. For example, consider the following:
- Two EU Ministers: No Bailout for Greece – Wall Street Journal (Jan 18)
- Merkel Says Greece Doesn’t Need Financial Support – Dow Jones (Mar 22)
- Fears rise that Greece is days from defaulting – Associated Press (Apr 12)
- Greece begins talks on details of IMF aid deal – Reuters (Apr 22)
- EU: Greece loan package coming soon but worries persist – Globe (Apr 30)
- Greece swallows tough medicine in bailout – Globe (May 3)
- Analysts like Greek bank despite nation’s woes – Bloomberg (May 4)
However, as is often the case when it comes to complex issues, there’s usually more to the story than meets the eye. The situation in Europe is complicated and very volatile and many investment management teams are monitoring new developments closely.
Also, amid the noise, it should be noted that there have been other developments that, while not front page news, are noteworthy nonetheless from an investment standpoint.
For example, the U.S. dollar has strengthened which has benefited U.S. dollar denominated investments, and global bond spreads have widened, creating potential investment opportunities.
Another important note is that many of our favorite dividend growth stocks have returned to profitability. Regardless of the happenings in the world economy, when our dividend growth stocks are making money, we will be rewarded accordingly… But, it will take faith in our philosophy and time for the markets to catch up to us 
.
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Friday, September 11th, 2009 |
In spite of the many articles published here at Dividend Money and the powerful rally that took place over the summer across global equity markets, some investors are still not ready to plunge back into equities.
However, long-term Investors who choose to sit in perceived ‘safe’ investment like savings accounts, CDs and money market funds should realize that the historically low yields are likely going to leave their portfolio returns flat for some time.
In response to the low yield environment, it seems that some are taking innovative (albeit somewhat questionable) measures. That said, an interesting investmetn vehicle has popped up in France that gives a whole new meaning to ‘alternative investing’. It seems that investors over there are turning their attention to an age old option – cow lease contracts!
Cow Lease Contracts
The process goes something like this:
Buy a couple of cows and rent them out to professional farmers for milk production. From a cost perspective, this is a plus as it helps the farmers generate cash flow and frees up money for other necessary expenditures like buildings and machinery. This type of meat market may sound extreme but promoters of cow leasing suggest that the potential yields are 4 to 5 times that being paid on savings vehicles today.
As the herd grows, each new cow represents a new source of cash flow. New offspring cover deaths in the herd, some cows are sold off to cover maintenance costs and in particularly fertile years, the return on investment for each cow can be as high as 7%. Investors can sell the new cows for cash or continue to build up their herd to then draw a regular income at retirement.
Cow Lease Risks
Although it may sound like a nifty little investment strategy, as with all investments these cash cows are not without risk. Fluctuations on the price of meat, milk and animal feed as well as unexpected disease are just some of the considerations for cow contract investors.
While environments of change often motivate innovation (did you know that Disney, FedEx, Microsoft and Apple were founded during periods of economic recession?), discipline remains the key to long-term investment success.
As dividend growth investors, we must remain confident that we are on the right track to achieving our long-term goals. Whether those ultimate investing goals are growth or income. It also means that we won’t need to follow the herd on the latest investment fad or have to convert our houses into cattle ranches anytime soon!
Posted in Investment News | 1 Comment »
