In an enviornment of rising rates, it's always nice to have a FLOOR
under your investments.
TRADITIONALLY, THAT FLOOR HAS BEEN THE YEILD.
During periods of market decline, a yeild can act as support for a
stocks price; at least that is how things USED TO be done in the
markets.
Back in the olden days, say the 1930's or 1970's it was common,
indeed often demanded, that stocks pay something back to
shareholders. It was the sine quo non to make a stock investible.
Somehow that all ended in the 1990's.
AND, NOW WE ARE PAYING THE PRICE FOR IT.
If there is no yield--HOW TO YOU KNOW WHEN TO BUY, HOLD OR SELL?
IT'S AN IMPOSSIBLE SITUATION REALLY.
For NO-YIELD INVESTORS the only logical thing to do is DUMP! AND TRY
TO BE THE FIRST TO DUMP AT THAT!
BECAUSE THERE IS SIMPLY NOTHING HOLDING THE STOCK UP WITHOUT YEILD.
TRUE, WE HAVE HAD VERY LOW INTEREST RATES, AND MULTIPLE EXPANSION,
AND "GROWTH," PROFORMA AND OTHERWISE, AND, OF COURSE, MOMENTUM TO
FALL BACK ON RECENTLY. BUT THESE ARE NOT REALLY "FLOORS" TO THE
STOCK PRICE.
ALL OF THAT IS NO SUBSITITUTE FOR A YEILD!
On the other hand;
For the income investor the decision is different.
Do you want your 8% yeild to go to 10%, with a comparable reduction
of capital?
STILL, FOR THE INCOME INVESTOR, THERE IS A PRICE FLOOR-SOMEWHERE.
AT SOME POINT THE YEILD WILL BECOME COMPELLING. ONLY DEFAULT IS THE
ENEMY OF INCOME.
Conclusion:
IN THE CURRENT ENVIRONMENT, INVESTORS DUMPING NO-YIELD, NO-FLOOR
EQUITIES MAY DECIDED TO BUY INTO NEWLY CHEAP INCOME.
ESPECIALLY, WITH INCOME INVESTMENTS MOSTLY ON THE NYSE "NEW LOWS LIST" NOW;
While bonds are falling, income assets are falling MUCH FASTER! And,
the spreads between treasuries and other income is widening.
AN INCOME BUYING OPPORTUNTIY COULD BE NEAR.
