Market Wrap-Up for Oct.2 (PVH, MOS, PM, TWC, PNC, BLK, more)

It was another mixed bag for the markets today, as the indices continue to diverge on a daily basis from a “value” focus to a “momentum-based” investing/trading approach.

Apparel maker PVH Corp (PVH) continued to push toward new all-time highs, as the company increased its earnings guidance once again, but late-day profit-taking pushed to stock to little changed. The stock’s dividend is unfortunately miniscule at just 0.16%, so it’s not a name income-focused investors can wrap their arms around. In other news, fertilizer play Mosaic (MOS) finished lower following the company’s earnings release.

Wall Street analyst upgrades helped shares of PNC Financial (PNC) and Family Dollar Stores (FDO) end the day in positive territory. Elsewhere, we were watching other big names move in opposite directions with the likes of Time Warner Cable (TWC) and Phillip Morris International (PM) attracting buyers, while shares of Yum! Brands (YUM) and Blackrock (BLK) saw some investors head for the exits.

“You Won’t Even Feel It”

I clearly remember the fear of going to the doctor’s office as a kid. Knowing I’d be getting some sort of vaccine shot, I’d always ask my mom if the shot would hurt. Without fail, she’d answer “It’s be so fast, you won’t even feel it.” Time and time again I hoped for that claim to prove true, but alas, I felt the sting of every one of those shots.

Fast forward to today, and we hear plenty of similar economic anecdotes from the Federal Reserve. Current policies center around printing massive amounts of dollars to get the U.S. out of its economic funk. “It won’t even hurt,” they say.

We all know that printing money equals inflation, but Washington would have us somehow believe otherwise. If you look only at the suspect inflation metrics that regulators publish, then sure, inflation isn’t happening. The real world tells a much different story, however.

Want proof? How about the data point from AAA reported yesterday, showing the national average price of gasoline reached daily record highs every day for six consecutive weeks. The average price this past Monday of $3.78 a gallon was 16 cents more expensive than the previous record for Oct. 1 in 2008. The effects of continuously rising commodity costs aren’t just detrimental to consumers, either. Manufacturers and transports are also seeing costs rise significantly, and in turn, pass these costs on to the consumer. By Federal Reserve standards, though, we shouldn’t feel it!

At some point I realized asking my mom about pain from the doctor’s needle was pointless. I’m guessing consumers are going to start having the same reaction, if they haven’t already. Whether it’s pulling up to the pump or checking out at the grocery store (food companies keep reducing the size of the packages, but the prices remain the same or even go higher), just getting by is getting harder for everyone. So when it comes to analyzing economic data points these days, I suggest believing your wallet, not the regulators.

Buying Power Erosion

As the Federal Reserve continues to punish savers, investing in income-producing assets is one of the few options investors have to remain ahead of real-life inflation. A report from Allianz Life Insurance Company of North America a while back on “Transition Boomers” (age 55 to 65) found that one-quarter of the group was uninformed about the effects of inflation, while more than 40% lacked a realistic idea of when retirement planning should begin. Now here’s an even bigger shocker from the report: forty-three percent of respondents said they will not focus on retirement income strategies until they are less than five years from the start of retirement, with 16% waiting until six months to one year prior.

With inflation always pecking away at your buying power, investors need to move beyond the traditional “safety” of near zero-interest banking products (CD’s, savings accounts, money markets, etc). Quality dividend plays are able to continue to grow profits in times of higher inflation, and then pass the proceeds to shareholders in the form of higher dividends, allowing many to outpace inflationary effects. Whether you are of retirement age or not, you must consider this information pertinent to planning your future income options appropriately.

Income, Income, Income

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