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Wednesday, January 20, 2016

Louis Navellier - S&P 500 "Triple Bottom" Last Friday

Excerpts from a Louis Navellier email titled "The S&P 500 Reached a "Triple Bottom" Last Friday"

-------- Forwarded Message --------
Subject: The S&P 500 Reached a "Triple Bottom" Last Friday
Date: Wed, 20 Jan 2016 08:05:08 -0500 (EST)
From: Navellier and Associates <>

All content in this Introduction to Marketmail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

The S&P 500 Reached a "Triple Bottom" Last Friday

Last Friday, the S&P 500 essentially tested its August 24th low on high trading volume; so we finally got the panic "capitulation" day that typically marks decisive stock market bottoms. I for one can tell you that I was putting new money into the stock market by funding my 2016 SEP and adding money to a family partnership Friday, because the stock market appears to be grossly oversold, as signaled by a "triple bottom," which was created by market lows set in mid-October 2014, August 24, 2015, and January 15, 2016.

The way High Frequency Trading (HFT) systems work, what is down today is likely to be up tomorrow; so the herky-jerky market action we've been seeing on a daily basis will likely persist. The fact that Friday was a capitulation day on high trading volume, aided by an option expiration day, gives me hope that we'll see a big bounce early in this holiday-shortened week; so be prepared for more daily gyrations, thanks to HFT. In addition, the S&P 500 dividend yield of 2.3% is now well above the 10-year Treasury bond (below 2%, intraday).

However, before we get too excited, theaverage energy stock now trades at 28.7 times trailing earnings, and their forecasted earnings are truly horrific. A while ago, my company published a white paper, warning investors to stay away from these stocks. The ETF industry is basically causing this excess valuation for energy companies with negative sales and earnings. Specifically, I've seen a wave of ETF "pop up" buttons lately, advertising ETFs with yields over 4%. The only problem is that to get that 4% dividend yield, the ETF industry has to buy a lot of multinational and commodity-related stocks that are characterized by negative sales and earnings. As a result, the tail (i.e., dividend yield) is wagging the dog.

Not surprisingly, energy stocks now dominate the "F"-rated stocks in our Navellier DividendGrader and PortfolioGrader services. In my opinion, it is futile to chase high-dividend stocks via ETFs since you are setting yourself up for persistent principal erosion, regardless of the dividend yield. In other words, while the S&P 500's generous dividend yield is putting a good foundation under the overall stock market, some of the highest dividend offerings are becoming dangerous, due to the ongoing woes in the energy sector.


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Wednesday, January 13, 2016

Low Oil Prices Are Here For Awhile - How Safe Are Your Dividends?

On Sunday January 9, 2016, Bob Brinker took a holiday and KTVU reporter Tom Vacar was the guest host.

More about Tom Vacar

I posted links where you can listen to the show at
In the first hour, Tom had a fascinating interview with Severin Borenstein, professor or economimics from UC Berkeley - The Energy Institute at Haas (Haas is the Haas School of Business where people get their MBA at UC).

Severin Borenstein explained why the Saudi's probably have not cut production and why there is good reason to believe low oil prices will be around for some time to come.

  • More supply coming online from Iran and Iraq that could make up for any cuts in production by the Saudi Arabia.
  • Fracking technology increased supply in the US so it should spread to the rest of the world, especially China where using natural gas will allow them to reduce green house gasses and polution by switching from coal.
  • "We are not on the verge of running out of oil in the US or the rest of the world."

If you own mutual funds and stocks for dividends, especially any related to energy, then I suggest listening to this discussion while asking yourself "how safe are my dividends?"

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