smurphny

Can the Dow and S&P Last 15 Rounds?

Those high dividend rates look tempting but there is also considerable danger. I have traded these things for years. First of all, the stock value WILL float up and down with the tide which is most certainly going out. There is little evidence that the dividend rate will positively affect the stock price.

Second, in this extremely volatile and fickle commodities market, it is impossible to count on the dividend rate staying high. The dividends will fluctuate along with the price of crude. When dividend cuts occur, as they must, investors will run like lemmings off the cliff and drastically cut the share price.

Third, no one knows what will happen as we get closer to the Can. tax gouge that is scheduled for 2011. It is impossible to tell when investors will start pulling out (if this is not already happening).

There are many uncertainties and it makes no sense to get a hefty dividend if it is all lost in share prices. Maybe when this very erratic and confused market stabilizes it will be possible to trust the trusts will provide a decent overall return. There is an old and mostly forgotten investing principle which still holds true for high yields like these: RISK=REWARD.