Many believe that the old saying, "It's different this time," is never true. It is widely held that situations are never completely different; they're just another version of events with slightly divergent circumstances. "History may not repeat, but it sure rhymes," is another old saw still batted about on Wall Street.
It is believed that the reason market events repeat generation after generation is that human emotions of greed and fear always have been and always will be present when it comes to money and investing. Today's technological advances may create a contradiction to those old beliefs. They have simultaneously made life simpler and more complex, and brought an element of change that hasn't been present in the past.
Take Major League Baseball as an example. Baseball hit upon a new era with the development of steroids and human growth hormones. Old pitchers well past their prime became Cy Young Award winners. Not just one but two players broke a decades-old home-run record in the same season, only to be surpassed again within a few seasons.
It became known as the steroid era. It truly was different. Fans were enthralled by the newfound power in the game and they cheered. But baseball's commissioner had to know something was up. Those feats of athleticism had never been witnessed before, but the baseball brass stayed mum because ticket sales and TV revenues were great.
Many fans were shocked to find out that the game was tainted by the use of steroids. They must have figured that players were just eating better and working out more. But no, things were different.
has done the same thing. It has created a new era. It has put the money-printing press on steroids. Since August, the Fed has bought 70% of all the new government debt issued by the U.S. Treasury. The Fed is, in effect, monetizing U.S. debt and creating an artificial stimulus for the economy. Fed Chairman Ben Bernanke hopes that this crutch will create enough confidence among consumers to become a self-fulfilling recovery.
Some very well-known bond managers are not so sure that this new era will work.
Bill Gross calls the Fed's path a "Ponzi scheme." Gross believes that everything the Fed is currently doing will prove to be harmful in the long run.
Investors, like baseball fans during the steroid era, are currently very happy. We just had the best first-quarter returns since 1999. Since the market was actually negative for the year on March 16 -- if the media really called it correctly -- it's been a good couple of weeks! The commissioner (in this case, the Fed chairman) is participating in the juicing of the game so to speak.
At some point all this will come to a tragic end, but for now it's just "Play Ball!"
So what should investors do while waiting for the end of Quantitative Easing 2's steroid injections? The safe play is to combine dividends and growth together.
First Trust Morningstar Dividend Leaders Index Fund
is based on a modified market-capitalization-weighted index selected by Morningstar. It invests into the top 100 stocks that have shown dividend consistency and sustainability.
FDL pays a 3.5% dividend, and it recently broke out over resistance. It closed Thursday at $16.65. It has a near-term price target of $17.90 and could potentially run to $22. Place a stop at $15.55 for protection.
Markets continue their upward bias on low volume, aided by newly created cash from the Fed. Investing in leaders like
, FDL's top three holdings, and FDL's other dividend-paying holdings makes sense in this environment.
At the time of publication, Slusiewicz and Pacific Financial were long FDL, though positions can change at any time.
Jerry Slusiewicz has over two decades of professional investment experience. He has worked with individuals and institutions to manage monies for both short and long-term investment horizons. This extensive experience through various stock and bond market cycles enables him to offer a unique blend of professional investment counsel and personal service.