Author Archive: Michael Foster

These days, we’re hearing a lot of pundits pontificating about which way the markets will go. But let me suggest something none of them are talking about:

What if stocks trade more or less flat for the next while?

It’s a contrarian call, to be sure, but there’s reason to think markets may be, well, kind of quiet in the coming days or weeks. And there’s a way we can squeeze a big 9.2% income stream out of just that kind of market.

The Flat-Market Theory

I know what you’re thinking: how on earth could stocks just hold their breath while America is on lockdown, possibly for a long time to come?… Read more

There’s no doubt portfolios everywhere are whipsawing due to the selloff.

But I’ve got good news for you: going by the historical record, this pullback will likely be shorter than most people think, and if you buy now—particularly if you target a select group of high-yield stocks and closed-end funds (CEFs)—you’ll outperform your fearful friends when the bounce-back comes.

Meantime, you’ll open up a nice new income stream to meet your cash-flow needs today. It literally is the best of both worlds!

Let’s dive into what the facts say about this bear market’s duration. Then I’ll name two funds worthy of your attention now.… Read more

There’s one investment you simply must not hold in this market crash—a highly speculative, high-yielding instrument called an exchange traded note (ETN).

Does the name sound familiar? That’s probably because it sounds like “exchange-traded fund,” or ETF. But an ETN isn’t like an ETF at all—and that’s a distinction many people fail to make.

So what’s an ETN, then?

It’s a highly leveraged, speculative instrument that lets investors access particular asset classes. In good times, ETNs can skyrocket. These, however are, er, more interesting times.

ETNs: Guaranteed Losses in the Coronavirus Crisis

As a result of the coronavirus selloff, ETNs aren’t just going to rack up big losses—they’re going to go to zero.… Read more

Markets have freaked out over the coronavirus—but there’s good reason to believe they have overreacted—I gave you a few of these reasons in my March 19 article.

There’s another reason we need to talk about today: corporate earnings.

While it’s true that earnings expectations have fallen since the outbreak began, they haven’t fallen as much as you’d think. At the start of the quarter, analysts expected 4.4% earnings growth from S&P 500 companies. Now they’re expecting a 0.1% earnings decline.

That’s basically flat, and it’s better than the earnings declines we saw at the start of 2019, when stocks were rallying, so this news shouldn’t scare investors away.… Read more

To be sure, no one expected stocks to notch big double-digit losses in just two weeks, and while I don’t know when a rebound will happen (anyone who claims they do is lying), the economic numbers do carry a ray of light.

So let’s dive into them, and talk a little bit about the 18 funds in our CEF Insider portfolio, too.

Of Lizards and Dividends

First, there’s one thing we must not do at a time like this: follow our “lizard brain”: the primeval part of our thought process that tells us to flee when danger rears up, to keep our precious capital safe.… Read more

Let’s set aside the noise and talk about the one thing that matters most in a volatile market like this: earnings.

According to recent FactSet data, analysts expect negative earnings growth in the first quarter of 2020. That’s no surprise, given the battering the coronavirus is laying on some sectors of the economy.

But even so, the projected decline as I write was still reasonable: just 0.1%. Things can still change, of course, but it’s important to note that this modest decline comes after a fourth quarter in which earnings grew following three straight quarters of declines—and despite analyst expectations of a 1.7% drop.… Read more

Last Thursday, we took a close look at how closed-end funds (CEFs) holding municipal bonds—issued by states and cities to fund infrastructure projects—can help stabilize your portfolio in times like these.

Today we’re going to dig deeper and put some numbers behind how these CEFs can do even more, including handing you a dividend that’s double what you’d get on stocks—and these payouts are tax-free, to boot!

First, here’s what “munis” did during the selloff in the last week of February:

Muni Bonds Hold the Line—Literally

When stocks plummeted, munis were fine. And why wouldn’t they be? As senior government debts, municipal bonds have strict regulations and restrictions that make them less risky than stocks.… Read more

When the market is selling off, it’s easy to panic as big losses rack up in your account.

Here’s the thing, though: going to cash, and fully exposing yourself to inflation, is a guaranteed way to lose. It’s doubly sad to see first-level investors doing this when there’s a time-tested way to survive meltdowns, keep your income stream intact and cut your portfolio’s volatility.

It doesn’t involve panic selling. Instead, it revolves around three simple rules: diversify, be patient and keep a big income stream. Let’s walk through each of these.

1. Diversify

The first key to surviving a meltdown is to be in several markets at once.… Read more

Let’s be honest: it’s hard not to be rattled by last week’s double-digit drop in the S&P 500.

And it’s true that if the coronavirus continues to spread, we could see more people holed up in their homes, meaning less spending and less economic activity. Some analysts are already calling for a coronavirus-driven recession.

But let’s not forget that American economic data looks very good right now. The Federal Reserve sees GDP rising a healthy 2.6% in the first quarter of 2020, even accounting for the coronavirus’s impacts. Personal incomes and spending are also rising at healthy levels, so there’s no reason to panic.… Read more

What are we income-seekers to do after this latest pullback? Buy more? Sit on the sidelines?

It’s the question everyone’s asking. And while no one can predict the future, the past gives us some solid hints at what might be ahead, and the moves that make the most sense for our income portfolios (including a certain 7%-paying fund that’s more than worth your attention now).

To see what I’m getting at, let’s rewind to 2002. Then, like now, we were facing the potential of a pandemic: SARS in that case. There was other dreadful news, too: the dot-com bubble had just burst.… Read more