The Income Effect

Your investment returns come from just two sources.

The first is capital gains. As the AI bubble blows higher, that’s the big focus for investors.

That means the second source of returns is being overlooked.

What’s the second source? Income.

The dividend yield on the S&P 500 is a paltry 1.18% today, almost touching its 1999 low:

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Investors ignore income stocks at their own peril (Source: Multpl)

Dividend-paying stocks have a lot to offer investors. A company can restate its earnings – but they can’t restate a cash dividend.

Plus, dividend growth companies tend to offer lower beta, or volatility relative to the market itself.

Finally, as Jeremy Siegel has documented in Stocks for the Long Run, over an investor’s lifetime, reinvesting dividends can account for over half of an investor’s total returns.

With the growing likelihood of a terrifying bull market in stocks kicking off, investors can get a relative safe-haven with dividend-paying stocks.

With the Fed about to slash interest rates, dividends may soon be the best game in town for income investors.

Even with overall yields looking low, there are plenty of companies that still offer decent yields and the potential to grow their dividend over time. We have plenty of such holdings in our Model Portfolio.

~ Addison

P.S.: Grey Swan Live! this afternoon at 2 pm ET: Mark Jeftovic joins us for “Shadow Fed & the American Dream” — how a September rate cut could hit the dollar’s purchasing power, where the money-market flood might go next, and why “control of money” is migrating from central banks to code, corporates, and courts.

No doubt, we’ll touch on the claims made by Anton Kobyakov, senior adviser to Russian President Vladimir Putin, that the U.S. is using stablecoins to devalue its debt. Paid members, join us at 2 p.m. ET today.

If you’re not a paid member of the Grey Swan Investment Fraternity, you can review the benefits of becoming one here.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

Your investment returns come from just two sources.

The first is capital gains. As the AI bubble blows higher, that’s the big focus for investors.

That means the second source of returns is being overlooked.

What’s the second source? Income.

The dividend yield on the S&P 500 is a paltry 1.18% today, almost touching its 1999 low:

Turn Your Images On

Investors ignore income stocks at their own peril (Source: Multpl)

Dividend-paying stocks have a lot to offer investors. A company can restate its earnings – but they can’t restate a cash dividend.

Plus, dividend growth companies tend to offer lower beta, or volatility relative to the market itself.

Finally, as Jeremy Siegel has documented in Stocks for the Long Run, over an investor’s lifetime, reinvesting dividends can account for over half of an investor’s total returns.

With the growing likelihood of a terrifying bull market in stocks kicking off, investors can get a relative safe-haven with dividend-paying stocks.

With the Fed about to slash interest rates, dividends may soon be the best game in town for income investors.

~ Addison

If you’re not a paid member of the Grey Swan Investment Fraternity, you can review the benefits of becoming one here.

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

The NYSE Arca Gold Miners Index is up 123% this year, the best this century.

The last time gold ran this hot — 1979 — savers stood in lines that wrapped around city blocks, waiting hours for Krugerrands and Maple Leafs. Fathers pulled kids out of school to get in line before the shop sold out. Dealers locked their doors mid-afternoon, unable to meet the demand.

It was less of an investment than survival. Inflation made cash a wasting asset, and gold was the last refuge.

We don’t want to see that again.

Gold is best as ballast — steady, weighty, tethering a portfolio to something real. When it turns into the object of a mania, it means we’ve entered the debt crisis of which we’ve long been wary.

The cost to ship cars, refrigerators, and Christmas toys has fallen back to numbers we last saw when the economy was on lockdown.

For these rates to rise, demand for goods needs to rise…. unlikely as President Trump’s tariff strategy is intended to reshore domestic production of these goods in the U.S.

Until factories come online, there will be fewer goods on the shelves. Combined with declining jobs and stubborn inflation, however, that fact may go unnoticed this holiday season.

We’ve been saying for a long time that when it came time to rev up the money printer again, the Fed would do it under some other rubric than “Quantitative Easing” (QE), because by now, everybody knows what that is. YCC? Not so much.

What it means is that the Fed will buy unlimited bonds out at the long end of the yield curve in order to keep yields under some arbitrary line in the sand.

Let’s see, now that the government is shut down, where are we?

Pretty much where we left off: Markets surging higher, backed by the weight of AI capex and gorging on debt; A Congress unable to pay for promises forged in the 20th century’s welfare bureaucracy; A currency bleeding purchasing power with each deficit skirmish; A nation where even butter, coffee, and bandwidth become weapons of policy.