Earn Baby Earn

Posted: January 26, 2012 in Uncategorized

Another day another bang up earnings report. So far this week we have seen AAPL, CAT, NFLX, SBUX all outperform analyst estimates. Regardless of these great earnings reports stocks are still underowned across the board. With the large outflows from equity mutual funds over the last few years many investors are sitting in fixed income at the moment. Obviously the last few years has driven a generation of investors out of the market. The fear has been palpable, but as we talked about yesterday fear can crush your portfolio. In the current environment the risk is to the upside. Though the Fed is planning on keeping rates low through 2014, essentially begging investors to jump back into risk based assets, many are keeping it safe and staying in fixed income. Unfortunately for these investors current yields on fixed income are very low, many are eating into their principal just to get the necessary income to live their lifestyle. Generating yield in this environment is tough. On one hand the events of the last few years have had investors running scared for a safe place to put their money, which strictly from a psychological point of view makes sense. On the other hand however,yields in these “safe” assets are so low that you almost have no chance to outpace inflation. Whats an investor to do? Current trends suggest that at current levels the market is a bit over bought. Ok, so if you are a trader now may be a good time to take profits from your long positions. If you are investor however now may be the time to over come your fear and rebalance your portfolio. Look for companies/funds that pay a solid dividend and have solid earnings to give you stability and income. If the earnings reports of the last week are any indication companies are becoming lean, mean, earning machines.

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