3 Reasons Why You Should Still Avoid MJ, The Marijuana ETF

2018 was a tough year for long-term buy and hold marijuana investors. As a whole, the industry went on quite a wild roller-coaster ride. Marijuana stocks popped in December 2017 as anticipation for the ‘legalization’ of the drug occurred in the state of California on January 1st, 2018. We saw stock prices and the ETFMG Alternative Harvest ETF (MJ) jump as investors anticipated a ‘boom’ for the industry.

But, within a month or so of the legalization date, most of the marijuana-related stocks have fallen in price and MJ was trading below its December 2017 price. A few months went by, and most of the industries stocks just meandered along. Then the next big ‘legalization’ date grew near, October 17th, 2018, the day marijuana became legal in Canada.

The price of most of the well known and many of the lesser-known marijuana stocks, and MJ of course, once again began to ski-rocket. MJ, for example, went from $24 per share in August 2018, to as high as $45 per share, with its peak occurring just days before October 17.

Each time a new State or large country legalizes the drug, the companies in the industry experience an unfound increase in their valuation as investors buy shares at an insanely high rate. This type irrational buying leading up to a hyped up, essentially arbitrary date has put a lot of investors in a really bad place in 2018. MJ for one is down more than 24% in 2018, while other individual marijuana companies have seen their stock prices fall even further. Continue reading "3 Reasons Why You Should Still Avoid MJ, The Marijuana ETF"

GE's Recent Dividend Cut Highlights The Problem With Dividend Investing

General Electric (GE) has been paying a dividend to shareholders for 119 consecutive years. But if you look at the history of GE’s dividend, it regularly has been cut. Most recently, just at the end of October, the company lowered its $0.12 per share quarterly dividend down to $0.01 per share quarterly dividend. It should also be noted that its dividend was only at $0.12 per share after the company cut it from $0.24 per share per quarter in November of 2017.

GE’s move to slash its dividend down to the mere bone is just another reminder of the massive downside risks associated with investing in dividend-paying stocks. You see because when GE cut its dividend from $0.24 per share per quarter down to $0.12 per share per quarter, the stock dropped more than 7% from where it was the previous day. The same decline occurred this past October when the dividend was cut from $0.12 down to $0.01; the stock fell 8.7%. Furthermore, since the day prior to the announcement of the first dividend cut, GE stock is down an astonishing 63%.

But just because GE cut its dividend and its stock price has fallen off a cliff doesn’t necessarily mean all dividend-paying stocks are extremely risky. Or more so, that there is no way to lessen the risk associated with dividend-paying stocks. Continue reading "GE's Recent Dividend Cut Highlights The Problem With Dividend Investing"

REIT ETFs May Be Better Than Equity ETFs

A report issued last year called the “Historical Returns of the Market Portfolio,” looked at the performance of worldwide financial assets for the modern era, from 1960 to 2015. The researchers Laurens Swinkels of Erasmus University, Rotterdam, Trevin Lam of Rabobank, and Ronald Doeswijk, found that during the observed time frame global stocks returned 5.45% a year, non-government bonds returned 3.5% a year, and government bonds returned 3.06% a year. But, shockingly the best assets class from 1960 until 2015 was actually real-estate investment companies and trusts, which produced a yearly return of 6.43%.

The difference of a Real-Estate Investment Trust portfolio and a global equity portfolio for a period of 20 years would mean the REIT portfolio would have beaten the global stock portfolio by nearly 30%. Furthermore, the REITs performed very well when looked at on a per decade basis. The 1990s was the only decade in which REITs didn’t perform, as returns were just above zero. But that decade following the 1980s when things were booming. This all while stocks performed poorly in the 1970s, which just barely producing positive returns, and from 2000 until 2010 when global stock returns were actually negative.

In addition to performing better than stocks on a per-decade basis, real-estate’s worst year was never as bad as stocks worst year but its best year was better than global stocks best year. More so, it had fewer years in which it fell more than 10% than the number of years in which stocks fell 10% or more. Continue reading "REIT ETFs May Be Better Than Equity ETFs"

Treat Yourself To An Early Christmas Gift

The Christmas season can be a time that makes or breaks a retailer's entire year. With that being said, most investors already know this information. It's not typical for a retailer's stock to experience a major pop or drop around the holiday season just because of revenue and earnings were three times that of the previous quarter.

But most reports currently indicate the American Consumer is healthy and feeling good. Which would indicate this holiday shopping season could be a record-setting year regarding the amount of money spent buying holiday presents. And a record-setting year is the type of event that would make a retailer’s stock pop. A large year-over-year revenue and earnings beat is the type of performance that Wall Street likes and rewards with a higher share price.

One report, in particular, the University of Michigan Consumer Sentiment Index was unchanged in November and remained higher thus far in 2018, at a 98.4, then in any prior year since 2000. Furthermore, the report indicates "income expectations have improved, and consumers anticipate continued robust growth in employment." "The renewed strength in nominal income expectations is critical to overall spending prospects. Among the working age population, those between the ages of 25 and 54, the anticipated annual gain in nominal household income was 3.6% in November, the best in the past decade" per the November report.

If the University of Michigan Consumer Sentiment Index is correct, we could be in for some really big number this holiday season. That being said, to fully realize the share price increase, it is best to buy the retailers before early holiday shopping reports are released. Obviously, by doing so, you take the risk of this year being an average or poor shopping season, but if you’re willing to take that risk, it could pay off nicely this year.

So, let's take a look at a few of the Exchange Traded Funds that you could purchase if you want to attempt to ride the retail waved this holiday season. Continue reading "Treat Yourself To An Early Christmas Gift"

It's Still Not Time To Buy A Marijuana ETF

The month of October was terrible for the marijuana Exchange Traded Fund MG Alternative Harvest ETF (MJ). After some months in which we witnessed the share price of the marijuana ETF climb higher, we saw it drop like a rock following the October 17 date for the legalization of marijuana in Canada. For October, MJ was down just slightly more than 27%.

MJ rose and fell due to some big winners followed by big losers in the marijuana industry. But the problem is, the moves we have seen by these stocks have for the most part been based solely on speculation and rumors. We have not received an earnings report indicating profits from Canada were going through the roof; we receive any real meaningful information from the companies themselves that would have indicated now was the time to buy because the stock prices were just going to run higher. It was all just speculation and hype that was causing stock prices to move higher. I recently warned investors that now was not the time to jump on the MJ train, back when the ETF was at loftier levels, but now that is has fallen, you should remain on the sidelines and see how things play out in the industry.

The first reason of why is because of the recent decline the industry has gone through. The majority of the drop has been due to nothing more than profit-taking after the boom, ‘hype cycle’ played out leading up to the October 17 legalization of marijuana in Canada. Common sense would say the marijuana stocks would climb higher after the law went into effect. But all too often, the opposite happens because the ‘hype’ over the recent change dies off after the actual event takes place, and no new information comes available to keep the ‘hype train’ rolling. Savvy investors bought shares of the marijuana stocks ahead of the legalization date, road those stocks higher due to the “hype” and then sold them after the October 17th date when the catalyst for the move higher played out.

Which leads us to reason two of why you should stay on the sidelines. Continue reading "It's Still Not Time To Buy A Marijuana ETF"