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Earnings Thus Far More Than Fine, Yield Mining In This Environment, Devine

Earnings season, in my opinion, really kicked off with Goldman Sachs absolutely hitting the ball out of the ballpark. Granted, they did it with all the money we lent them at extremely favorable terms. And yes, they use more leverage than would a traditional money center institution, but, Goldman is more a hedge fund, than bank. Bank of America, Citigroup and Wells Fargo, there we have more traditional banking institutions. Within, JP Morgan Chase we have the JP Morgan trading desk, that was more closely reflecting Goldman, but since its merger, now is wrapped inside Chase, which groups them more closely with the latter three I mentioned. Back on point, earnings as of this writing, we have seen better than 70% of companies reported thus far outperformed. Consider, that the Dow is comprised of what are considered Large Cap companies and widely covered by analysts on Wall Street. The percentage of the "beat" on earnings has been significant, 20,30 even 40%. How could so many analysts get it soo wrong. On one issue, they missed the impact of streamlined head count along with stripped down inventories. On another, exports are improving. Those 25 some years of global trade has worked in creating consumer nations overseas. Domestic consumption in China and India have picked up, and should continue. Larry Summers made point of this in a speech just the other day in pointing to the direction for the new economy.

The contrarians and bears will point to the weakness of earnings being, top line weakness. Meaning, you can only cut so much in expenses. They use this logic when setting short positions and every day the market rallies they are forced back in to cover their shorts. As I've stated in the past, this recovery should initially be a jobless one. We have excess capacity in the system of at least 12-14%, (the US economy historically runs at 80% in normal times give or take), so that slack in the system must be soaked up before new additions to headcount begin meaningfully. In the interim, a mere stabilizing of the economy should boost productivity and can drop right to the bottom line. Boosting earnings significantly, allowing for multiple expansions can command much higher market valuations. That's my story and I'm sticking to it, until data prove me wrong that is.

Now for the yield. Yields remain attractive in many sectors of the market. One must find investments with good coverage, reasonable debt levels, access to the capital market and a defensible position. Obviously the banks did not fall into that category once they levered up and chucked any and all underwriting criteria. But, back to the idea, Senior Housing Properties-SNH. This company fits the pre-stated criteria, has a history of increasing dividends. Demographics are in it's favor and it has a very attractive 8.6% yield. So, if you want to invest for your future income or your future retirement community Senior Housing just might be good for you.

On a note of full disclosure, I may own or may look to own in the future shares of Senior Housing Properties. Please do you own due diligence before investing.