Fickle Investors, More Pickups, And Why Yield Matters So Much

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Includes: F, HOGS, SPY
by: Lou Basenese

As usual, I've selected a handful of graphics to put important economic and investing news into perspective for you.

Another Pick-Up for Pickups

Last week, I did my best Jeff Foxworthy impression and mentioned that you might be a redneck if you drive a pickup. But you'd be a pretty darn smart redneck if you also owned a few hundred shares of Ford (NYSE:F). Well, that's even truer today. Since then, Ford F-150 sales data for May came out. And it looks as if the boom times are back for dealerships.

Ford sold a total of 72,000 trucks in May, which brings the year-to-date total up to almost 300,000. That's a 21.5% increase over last year, and the highest total since the recession hit. As Americans keep buying pickups, is your portfolio built Ford tough? It should be.

Get a Grip, Would You?

The summer months promise to bring volatility to the stock market. But investors really need to get a grip on their emotions.

The latest bullish sentiment reading from the American Association of Individual Investors (AAII) dropped to 29.5%. Keep in mind that two weeks ago it stood at a jubilant 49%. So we're talking about the largest two-week decline in bullish sentiment since the bull market began, according to Bespoke Investment Group. And all it took was about a 5% sell-off for the S&P 500?

Again, investors need to get a grip. I get that their risk appetite remains "almost paralyzed," as UBS Group's CEO Sergio Ermotti said. But there's no such thing as investing without volatility. Unless you're Bernie Madoff.

I must confess. The contrarian in me rejoices when I see this data. As average investors get more and more cautious about the rally, it's a strong indicator that stock prices are going to head higher still. Bring it!

Wherefore Art Thou, Yield?

Yesterday, I chastised Bloomberg for preying on everyday investors' insatiable hunger for income. Today, I want to flip the script and share why we're such easy targets: We’ve watched yields literally collapse ever since the Great Recession hit.

"In the past six years, central banks around the world have cut interest rates 515 times, increased global liquidity by $12 trillion and crushed bond yields to the point that almost 50% of all global government bond market cap currently trades below 1%," said Michael Hartnett at Bank of America. That has left investors of every stripe wondering if they can get any income at all these days.

Sure you can. Just not a lot. Not from the old tried and true investments, at least.

Now you know why I'm such a fan of merger arbitrage opportunities in this zero-yield world. It's a proven (but largely overlooked) way to earn short-term yields of 5% to 10% (or more). Speaking of which, it appears that one of my recent merger arbitrage recommendations, Zhongpin (NASDAQ:HOGS), will close in the next 30 days or so. But fear not, I'm researching several new opportunities and will let you know immediately once I find a suitable one.