At least they’re willing to present both sides of an argument.
I refer to Barron’s. The leading financial weekly ran two articles a couple of weeks ago, with each proclaiming the opposite of the other.
No opposing view here. Click here for the No. 1 income investing strategy on the market today.
The first article was titled, “There’s No Recession Coming. The Fed Will Make Sure of That.”
If you had scrolled down the table of contents, you would have found the rejoinder: “The Fed Can’t Prevent a Recession Alone.”
The articles conjured images of Harry Truman and his longing for a one-armed economist.
The former president was reportedly flummoxed by economists offering a plausible explanation of an event only to counter the explanation with an opposing explanation. The joke was that the economist once finished with the first explanation would begin the second with the phrase, “On the other hand . . . ”
Returning to the debate: Can the Federal Reserve prevent a recession and negate its frequent companion, a bear market?
I think not, and not for the reasons, and they were dubious, presented in the writer’s rejoinder.
The Fed today is like the jockey lashing his horse for more performance. It works for a while, and then it doesn’t. The horse becomes immune to the lashing. Additional lashing fails to elicit the desired results.
The same is true for the Fed and its monetary policy.
Subterranean interest rates and money pumping (the lashing) worked at the outset. But after 10 years, they no longer elicit the desired result (rising asset values).
If a recession and a bear market come, and they eventually will, the Fed might be able to mitigate the damage to portfolio and morale, but it can’t prevent the dreaded duo’s arrival.
Income Investing Strategy
Will the recession and its bear-market companion arrive sooner than later?
It doesn’t matter, if you practice the right investing strategy.
Investing for income is that strategy.
I’m keen to remind readers that as the income (dividends) go, so goes investment value. They won’t always go in sync, mind you, but they’ll trend in the same direction over time.
The divergences are most dramatic during recessions and bear markets. The dividend holds steady, but the investment value spirals toward the nether regions.
Consider a long-time recommendation of mine, Gladstone Commercial Corp. (NASDAQ: GOOD).
This commercial REIT has never lowered its monthly dividend. Gladstone has raised the dividend four times over the past 15 years. The most recent increase occurred before the start of the 2008-2009 recession.
Yes, a steep price decline occurred heading into 2009, but Gladstone’s dividend held firm. The price recovered in short order.
Gladstone Commercial: Price and Dividend Chart
I’m not saying a recession or bear market is imminent. If it is, don’t despair. You might even rejoice at the prospect of the income deals sure to arise.
Gladstone Commercial was one of the income deals a decade ago. Had you bought its shares any time between October 2008 through May 2009, you would have secured an annual double-digit dividend yield.
And had you bought Gladstone shares when despair was most inconsolable (in early 2009), you could have secured a 20% annual dividend yield, which you’d be enjoying to this day.
That fact that Gladstone’s share price doubled over the subsequent year would have served as self-congratulatory, cocktail-party fodder. (And that’s all it would serve as. You don’t sell an income stream that generates a 20% yield on investment).
If investing for income is your strategy, permit me to introduce you to Liberty Checks. They pay up to 10X more income than most dividend stocks.
Investors who know about Liberty Checks have been able to claim checks of $1,170 every 21 days on average.
Now, it’s your turn.