Dividend stocks and other retail products
The stock market is ever busy in the
eternal search for new “themes”, i.e. stories that can persuade investors to
buy and sell and thereby generate the commissions needed for the business. As interest rates have fallen, one
particularly hyped theme has been “dividend stocks”.
The story has been that if you could not
count on stocks to appreciate steadily each year, then at least you could
borrow money at low interest rates and invest in stocks that would give you a
better cash flow, i.e. dividends. I have never met any theoretical explanation that
could make me understand why “dividend stocks” should be more attractive than
any other stocks.
In Germany a group of researchers have now
worked for a bit on the “dividend stocks”. Their verdict is clear: dividend
stocks do not offer a better return on investments over any relevant time
horizon than any other group of stocks. But for sure the many new products
based on “dividend stocks” have generated a nice commission (plus loan margins)
for the finance sector.
Caveat Emptor. We’re just saying.
Another “new-new thing” is investment in
volatility. For private investors who do not even know what it is all about!
With the
predictable results.
Firewall
The EU summit in Copenhagen seems set to
decide that the total emergency facility to help troubled countries (and banks)
will end up at EUR 800bn as the Germans finally seem to understand that the
larger the facility, the smaller the probability that it will ever be used.
Spain
Yesterday, I referenced a study from the Swiss
National Bank. There you would find a chart indicating that the Spanish
residential property market is still significantly overvalued, and we are NOT
talking holiday property here. When that information is combined with PM
Rajoy’s new inititatives to cut the public sector deficit by a whopping 3.2 per
cent of GDP we have all but a guarantee that Spain will remain mired in
recession for a while. Personally i have a hard time believing that Spain will
meet the German-imposed deficit targets in 2013. When will they ever learn?
At the same time Spanish trade unions are
demonstrating against reforms that would actually make it easier to create new
jobs.
Not funny at all. We will hear more of
that story soon.
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