Saturday, August 6, 2011

"I leave you guys on your own for a week, and you lose 1,400 points on the Dow Jones Industrial Average, what's up with that?" ...... Blog #100!

Dow Jones Industrial Average 11,445  (Way,Way down!) Week ending 08-05-2011

Federal Reserve Bank

 Aug. 5, 2011, 8:46 p.m. EDT -

 U.S. loses triple-A credit rating from S&P -
"The United States late Friday lost its triple-A debt rating from Standard & Poor’s for the first time in its history, with the credit-rating agency saying the political system of the world’s top economy has become less stable and that budget cutting announced earlier this week didn’t go far enough."
 I take one weekend off from writing my blog, with the DJIA at 12,800 heading towards 13,000, and I come back and the place is a wreck. I can't leave you guys on your own for a second. Now Standard and Poors has downgraded the credit rating of the US for the first time in history. I can't believe I am writing those words. That's going to be just a great help for the market this Monday morning.
Somehow, I don't think Ronald Reagan would have let this happen. He would have taken action ahead of time.  Our current president needs to get rid of his current Treasury Secretary Geithner, and get himself some advisers that would have had the insight to forewarn him of the percentages of something like this happening. Worry about the debt, not about the debt ceiling.
Because we are still the "best of the worst", worldwide investors will still flock to our treasury bills for safety in a rattled global economy. So what to do with stocks here? I'm reminded of the line from many Laurel and Hardy films, "Well, here's another nice mess you've gotten me into".   
Well of course every genius is going to be out there to buy dividend stocks that are yielding higher than the treasury bills and that have some growth to kick in along with that. I would first put aside a pile of cash, kind of boost up your own personal reserve requirements, like the banks do in times of financial crisis. You never know what can happen. Of course do not attempt to use leverage here to load up in a down market, because things could get worse causing you financial ruin, not a good thing. (I looked at those Clearwire 2013 Call options too!, sitting out there like chocolate ice cream on a hot summer day, very tempting!) 

So lets garner a list of a dozen of these stocks:

HON    Honeywell     2.77% dividend yield
VZ        Verizon Communications    5.56% dividend yield
NOK    Nokia Corp. ADS    10.88% dividend yield
FTR      Frontier Communications Corp.  11.09% dividend yield
SPH      Suburban Propane Partners L.P.  7.77 % dividend yield
BWP     Boardwalk Pipeline Partners L.P.   7.91 % dividend yield
MO       Altria Group Inc. 5.87 % dividend yield
EXC       Exelon Corp.   5.00% dividend yield
T            AT&T Inc.   5.95% dividend yield
PAY       Paychex Inc.  4.58% dividend yield
GIS        General Mills Inc.  3.34% dividend yield
DD         E.I. DuPont de Nemours & Co. 3.47% dividend yield

 So the watch-word is Margin of Safety and dividend yield, and of course enjoy your summer where the same safety rules should apply to your activities.





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