Chart Comparing Dividend Yield to Bond Interest


Here's why stocks are cheap

Compared to bond interest rates, dividend income from stocks makes stocks extremely cheap.  Plus you get a dividend tax credit that boosts your dividend income a lot higher.  Since 2007, the dividend yield on the TSE Composite has gone from 2.5% to 3% while 10 year bonds have gone from 4.5% to 1.5%. This chart really shouts the story at a glance. It is incredible!

Great news. We have started a new bull market. (according to Ken MacNeal)

From the 2014 peak in the TSX, Ken MacNeal’s managed portfolio clients were up 8% when the market was down a bear-market 20% on January 20th. They celebrated with a Champagne Brunch atop the Calgary Tower. Already for his first four months of 2016, Ken’s model portfolios are up a further 18% in $US or 9% $Canadian YTD. These amazing results are due to his studying individual industry sectors and countries, rather than just looking at the U.S. general stock market index.  Most portfolio managers and investors were mesmerized by watching the S&P levitating near its highs and seeing its bull market aging from six to seven years and ‘knowing’ that there was a come-uppance looming any time, just like old ‘normal” times. The area above the S&P 500 highs just seemed like it wouldn’t have enough oxygen to sustain life. Ken MacNeal says they are just plain wrong.  His results confirm it.

Ken MacNeal was looking at the reality that many sectors were nearing the end of obvious bear markets. The list of bear market sectors and countries is too long, so it’s easier to just say the S&P 500 and the DJIA are the ONLY indexes that didn’t have a defined bear-market-minus-20% plunge.  How could anyone think that the Canadian stock market, commodity sectors and so many others were in the seventh year of a bull market and ready to head down any moment when they had already been crushed?  Bear markets end with extreme pessimism and start new long-term bull markets. The bearish extremes happened on January 20th for value stocks and February 11th for growth in those sectors and countries that were in bear markets. Ken bought the commodity and value bear market casualties on January 21 and 22. The results speak for themselves. So we are in a new bull market. Simple, but true. Unbelievable to most, but true. 

Ken MacNeal has been around long enough to have seen the S&P 500 break above 1000 in 1982, the top of a 16-year trading range, and go to 5000 in seven years.  Yes, Virginia, stock markets can go up and up because earnings and dividends go up and up.  Other ‘Veterans’ might not have been around long enough to experience how stocks can go up and up and up and up. 

Ken Macneal's positive projections

Aren’t earnings locked in a perpetual funk, as some people say?  No, companies will reinvest profits and grow earnings and dividends forever. This bull market will see commodity producers go from basket cases at the beginning of the year to profitable in the not too distant future.That alone will take indexes higher. It will see dividends become the focus of investing over earnings and a higher revaluation of all dividend stocks. That will give the non-commodity stocks a big boost. Technology will bring amazing new advances and their stocks will go up. Countries with failed austerity programs will rediscover Keynes and rebuild boosting economies and corporate profits.  We will see peace and prosperity break out in the world, where now we see only destruction and chaos in the media. There will be a Marshall Plan to rebuild devastated homelands to let refugees return and live in dignity. The companies and workers that rebuild will earn well deserved monies, boosting economies and stock markets. Life will get better. Stocks will go higher.


The views and opinions in this report are that of the author and are not necessarily representative of those of Richardson Wealth Limited. The statements and statistics contained herein were obtained from sources believed to be reliable, but we cannot represent that they are accurate or complete.  This material is published for general information only.  The author and Richardson Wealth assume no liability for financial decisions based on this information.  Readers should obtain professional advice before applying any ideas mentioned to their own personal situation to ensure their individual circumstances have been properly considered. Please note that the comments contained throughout this report are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances. Past performance is not indicative of future results.