Saut: Not Your Father's Typical Recession; Baby Boomers Demand Yield

Excerpt from Raymond James strategist Jeffrey Saut's latest essay:

[O]ne theme we are certain of is “yield.” The retiring baby boomers want yield in their retirement years combined with an adequate rate of return. This is consistent with Benjamin Graham’s definition of an investment operation, which reads, “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

With interest rates near historic lows, bonds may satisfy the “safety of principal” requirement, but it is doubtful they will provide an “adequate return.” The burgeoning demand by the “boomers” for yield should provide support for select dividend-paying stocks. One such name for your consideration is 7.5% yielding EV Energy Partners (EVEP).

The call for this week: The question du jour is, “Will the rate cuts, combined with the economic stimulus package, be enough to prevent the normal ending to the business cycle even if this is not your father’s typical recession?” Evidentially, the D-J Transports think so given their 7% rally last week! Yet even if successful, the nation faces a painful deleveraging process that will take time. As John Stuart Mill wrote in 1867, “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed into hopelessly unproductive works.”

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Comments

[granger]

Good stuff as always, thank you!