Your Survival Guy

Preparing your investments and family for when disaster strikes.

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You’ve Read the Last Issue of Intelligence Report: Back to Investors Yield

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“Well I remember the mood of euphoria that gripped the stock market back in the holiday season of year-end 1965,” writes Dick Young in his September 1987 issue of Richard C. Young’s Intelligence Report.

“I had just entered the investment business and was a broker at a Boston based member firm of the New Your Stock Exchange. It was an exciting period. The market had climbed by nearly 50% in a three-year period end 1965, and investors were spending their profits literally before they were booked. It was a period of casino mentality—no one could lose. The party ended with a thud, and the hangover was to last 16 years.”

“Why do I point to 1965 as a hallmark year? Because, as noted earlier, 1965 was the first time since 1929 that the yield on the Dow fell below 3%,” Dick writes, and later concludes, “It is not wise to be overloaded with stocks when yields are low and values are scarce.”

Why do I bring this up to you in 2017? Because we have just passed the 30-year anniversary of the stock market crash of October 1987.

In his September 1987 issue Dick was writing about dividends and investors yield. Why? Because dividends from stocks are an investors yield—much like interest from bonds, and rents from income property. They are an investor’s friend and are a stranger to the speculator—always looking for a sucker to sell to at a higher price.

Post WWII up to about 1995, dividend yields ranged between 3% and 6.5%. The average was about 4.5%. Those were the days!

When Becky and I graduated from Babson College in 1994, the Dow yielded less than 3% and has been closer to 2% for most of my career since then.

“Investors yield?” Ask any investor today what investors yield is and you’ll see eyes glaze over.

Think about the S&P 500 and imagine the trillions of dollars in perhaps the largest managed pile of stocks in the world as I explain here, here, and here.

Now, look at three of the top five companies in the S&P 500—they do not pay a dividend—a Blutarsky-like zero-point-zero. And then, take all five of the big guys, and the market-cap weighted investors yield is a whopping 0.8%.

You don’t have to go that far back in time to see the perils of this market’s dismal investors yield. It’s as important as Dick Young’s North Star. and it’s as important today as it was back in the holiday season of year-end 1965.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com