This is just my opinion, but I think we are turning Japanese. Rates have bumped lately due to Fed talk, but my reality is that there is no real growth in the economy and without growth rates are going to stay low for a long time. (20 years?) There is historical precedent for this last time rates were this low they stayed low for 25 years. And of course Japan. Look at the recent past predictions: 2009 - 2011 4%+ growth, nope, 2010 - 2013 4%+ growth nope, now - 2014-5 4%+ growth?. Inflation is caused by growth which comes from jobs, I don't see it. Sorry. I think we are treading water and will for a long time to come. I believe the Fed and other CB's will not let us crash, but in doing so this is the result. So, until growth is up, and unemployment falls, the market will see gains, but small ones, bonds rates will be low, and if you want to see gains, solid dividends (and tax-free munis) will be the only long term game in town, JUST MY HUMBLE OPINION, not advice. I welcome any other opinions.
Relative Strength Index.......RSI, a market indicator reached +65 a few days back. Historically once it reaches +55 we see corrections. +65 was a near record, a correction was almost certain. On the reverse end is -60 for a low. Few people realize that all this QE spending is put out to major banking, including investment banking to spread into the economy. Not one dime is actually printed currency. Since QE stimulus started, basically 12 of the major banking entities were making over 60% of the trades in the market to build bank assets for a solid balance sheet again after they nearly fell apart from over value housing assets. It was all about building back the bank foundation for our economy. Now QE is pulling back, and actual real money has to support the market, and the banks when it ends. How much real money is out there to support the market ebb and flow, and real money capital to invest for growth. A house of cards still exist, and the government can't take and keep tax money that would be real working capital. Don't expect to get it from Euro investment, they did the same thing on a bigger scale to remain solvent in their banks. I like MAIN, they deal in actual dollars, actual investments, into an actual economy, in company's that produce real product and services. The same can be said for the surge in oil & energy in the USA, clearly on a growth curve up, using real capital, the government just needs to step aside from their massive regulation demands, EPA regs and the like.
And so...under this economic scenario as you describe it, (i tend to agree with you by the way) how does an investor proceed forward? Your last sentence mentions "solid dividends and munis" as one possible strategy. Munis are better for tax advantages but still do not provide much income unless you go the route of less quality or longer term positions. if the investor is in a low tax bracket then Munis are really not the best strategy. Back to "solid dividends". For a retired person wishing to live off dividends for daily expenses I find three outstanding industries that pay out by law, 90% of their earnings to share holders; Business Development Companies, Master Limited Partnerhships, and REITS. Very nice yields I might add but comes with plenty of risk to principle. So be it. As long as the companies have solid fundamentals, investors can ride out the bull/bear swings as long as the dividends are stable. That is the key, solid dividends. Also, other companies and industries that give high priority to payouts should be considered such as the stables and some selected utilities. . The only issue here is to stay as diversified as possible regarding correlations. For example, high yield investments, whether stocks or bonds tend to move together with regards to interest rates. So, I suggest have some exposure to those sectors that have less interest rate risk if you have a lot of exposure to interest sensitive sectors.
i agree with you. Just watch those income- dividend stocks I see many with the exact same dividend every time a little fishy(accounting tricks), mostly watch for some mlps and reits who will lie to your face and tell you no way they will cut div. and then will the next day. if their earnings/ cash flow drops head for the door!
I appreciate you are retired and looking for div income, but dude get prepared, looks like a low income world, for a while to come. I hate it all risk for litte reward.