Courtesy of Read the Ticker.
To buy or not to buy: The US 10 year versus high yielding utility stocks.
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The US 10 year yield is at 2.34%
And compared to utility dividend stocks …
American Water Works (Dow Jones Utility: AWK) dividend @ 1.87%
NI Source (Dow Jones Utility: NI) dividend @ 2.58%
American Electric Power (Dow Jones Utility: AEP) dividend @ 3.25%
The question is, which asset class do you trust to provide a return for 10 years? Of course your ability to judge future inflation expectations (see TIP for iShares TIPS Bond ETF) and how extended the price trend is over time for each class.
Recently the Dow Utility Index has shown 3 thrusts higher in to new ground, the Dow Jones Utility index is now struggling to get higher as each thrust suffers a loss of power. These thrusts are simply a push higher into new ground to allow the big accounts to sell into, as this move high creates the BIDs to meet the large accounts ASKs. The big boys need the uniformed to buy at highs so they can sell to them.
Higher interest rates will either demand the Dow Jones Utility (DJU or RTT:!UTIL) pay a higher dividend, or create a slump in trend the Dow Jones Utility. The massive bullish stock market trend from March 2009 is extreme, and a leading bearish signal will be the Dow Jones Utility as it reflects the crazy prices paid for yield. Do you get the feeling we are near the turn?
Longer term trend
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Investing Quote…
..”If we wish to avert failure in speculation we must deal with causes. Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because mathematical principles of the highest order lie at the foundation of all things. Faraday said: `There is nothing in the Universe but mathematical points of force.”…
William D Gann
..“The main purpose of the stock market is to make fools of as many men as possible”..
Bernard Baruch
..The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell”..
John Templeton
..”October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”..
Mark Twain
..”Until an hour before the Devil fell, God thought him beautiful in Heaven”..
Arthur Miller, “The Crucible”
[Contrarian Investing]
