The macro rules the micro. Always has. Always will. So, that is how we can go from yesterday morning's huge selloff to this morning's bounce in the S&P futures. Because the outlook for the health of the global economy changed that much in 24 hours. Ha!
This is where you need to ignore the so-called experts and, as Depeche Mode said, enjoy the silence. I have never seen such a widespread confederacy of people than the ones trotted out these days on little-watched cable news networks to talk about "stocks" or "the economy." Ignore them. These are the same folks that are horrified to learn that a pandemic that has now killed over four million people worldwide might, just might, not have been caused by a single bat bite.
That's the problem. There are no experts anymore. In the past two weeks I have seen negative market commentaries from some of the old-heads I respect the most, Jeremy Grantham, Leon Cooperman, and even Dr. Doom himself, Nouriel Roubini, but the market just does not care. Not for more than 45 minutes, anyway.
So, that's the rub. The media is telling us that stocks are rising today because the bond market is recovering, but, actually, yields are rising today, which means that prices for government bonds are falling, not rising. God forbid, anyone buys anything that's not in the Nasdaq. It's heresy.
But instead of burning folks at stakes, I just choose to ignore them. The motto of my firm, Excelsior Capital Partners, is "cash flow never lies," and, as a retail investor, your cash flow is the stream of dividends you receive. But for a brief period at the height of the Dot-Com Bubble, the yield on the S&P 500 has never been lower than today's 1.33%, as measured by multpl.com.
Is that it? Have we completely discarded the idea of real returns in favor of a crypto-driven casino run by the two slowest learning people in America - Powell and Yellen? Nope. We don't give up that easily in income-investing land. Powell and Yellen are sipping caviar, planning their lucrative "post-retirement" corporate speaking gigs and not giving a damn that prices for food, housing, and especially gasoline are going through the roof.
The only way you can fight inflation in your portfolio is to play it directly - and I have given many names in my RM column that fit that description - and this list, my coverage list for OHM Research in Sao Paulo, certainly holds a few clues to what I like. Or you can just sort the S&P 500 by yield and buy the highest numbers. That is not always a good strategy, but in today's interest rate environment, it actually is. OK, Google (Alphabet (GOOGL) )...where is a list of the S&P 500 sorted by yield?
That is an entirely frustrating exercise. Google produces many hits that are commercial come-ons disguised as a simple ranking of S&P 500 stocks by yield. I don't care about growth in dividends or reliability of payments... what I am telling you is that in July 2021, that doesn't matter. The macro calls for a purely mechanical approach, so I kept with it and finally found a decent list here.
If you are smart enough to get your investing advice from Real Money, you are smart enough to know which of those dividends are sustainable and which are not. Most are, and remember that in this COVID-19 "Delta" variant world, energy = good, cruise lines/hospitality = bad.
Arm yourself with real returns to protect against valuation corrections. It works well.