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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Stock of the Week

McDonald's

January 16th 2009 McDonald's
NYSE symbol: MCD
Industry: restaurant
Stock Price as of 1/16: $59.67

There is one constant in this market. The bad news keeps coming and it's only getting worse. Like I've said, there's no sugar coating the economic news, it's bad. Last week we learned that unemployment jumped to 7.2% and nonfarm payrolls lost over 500,000 jobs. For the full year, the U.S. lost 2.6 million jobs and many economists believe we'll lose just as many if not more over the next several years. The one bright spot recently is mortgage rates are coming down. Rates have dropped to 5% for a 30 year fixed. Some banks are below 5% for less than 30 years and of course a good FICO score. Unless you refinanced at the lows in June of 2003, you seriously need to call your bank and look at refinancing. Even if you have a bad FICO number, it doesn't hurt to call. This is the best advice I can give anyone. If the whole country could refinance their mortgages lower, this could be the best stimulus package THE GOVERNMENT WOULDN'T HAVE TO PAY FOR.
For the income investor, it's getting tougher and tougher. Interest rates are at or near zero. The financial sector used to be a great source for dividends, but not anymore. Citigroup's dividend is down to a penny. Just this week, Bank of America's dividend dropped to a penny as they accepted more TARP money. Investors have been looking more and more toward preferred and corporate bonds. The largest bond firm, Pimco has been buying agency mortgages along with the Treasury and the Fed. Pimco is also buying bank preferred shares along with the Treasury. Two Pimco funds that are performing very well of late are the Pimco Corporate Opportunity Fund yielding 12% and the Pimco Corp Income Fund yielding 11%. Barrons recommended the corporate and muni markets two weeks ago. Another bond fund firm I like includes Blackrock. A big asterisk with these closed-end bond funds is they do use leverage. The dividends can be postponed if the funds asset value drops too much thanks to leverage. So far it hasn't been a problem. But in this market, the unthinkable is now thinkable.
With the number of companies cutting their dividends, Barrons Online recommended several S&P 500 companies with consistent dividends. Barrons recommended McDonalds, P&G, and Walmart. Their respect yields are 3.5%, 2.8%, and 1.8%.
For investors looking for growth, it's best to wait and see what earnings look like over the next several weeks. The news will not be good. Hopefully, most of the bad news is priced into the markets.