Diamonds and Dogs
Stocks Slide into CloseThe stock market continues to falter as we head into summer. The markets have been down for 5 consecutive weeks and the first two days of this week. The bearish drop has not been dramatic, as the drop from the highs is still about 5%. It feels more like the drip, drip, drip of a Chinese water torture.
Interesting, and telling, fact of the day is that for the past 80 years, 55% of the total return of the stock market has come from dividends. Pure growth plays can add zest to a portfolio and make for great cocktail talk, but over the long hall, reinvesting dividends is where the investment game is won or lost. Finally, the banks and financials cannot get out of their own way. Partly, as Jamie Dimon of JPMorgan alluded to in a call to Fed Chairman Bernanke today, the costs and regulations (in the 1000's) are keeping bank profitability down. Also overlooked is the competitive effect of hedge funds, private equity, and international money players are having on the profits of the large multi-national banks. The big banks are in a squeeze and until the Fed's back off or long-term interest rates shoot up, the pressure for profits will continue