December 1, 2008
2, Issue #44
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2. First Trust Dividend Income (FAV)
3. Market Vectors Gold
5. Investor Trivia -- Digging
Deep for Gains
6. Featured Topic --
High Yields from the World's Soundest Banks
7. Free Investing
reading this email? View
Top Stock Picks
a Good Old Fashioned Yield of 22.9%
Many income funds use risky strategies to maximize
distributions, but not this fund. First Trust Dividend
Income (FAV) does it the old fashioned way, by holding
some of the most stable and respected dividend-paying
equities in the world. Read More. . .
an Uncertain Market, this ETF is as Good as Gold
Investors can get double-barrel protection for the tough
economic times ahead with this gold ETF. Gold prices rise
with market uncertainty and inflation -- and both are likely
in the foreseeable future.
Read More. . .
A great way to get extra cash right
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that there's nothing new you have to invest in or buy.
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Thanksgiving week, the market gave investors a little something
extra to be thankful for. The Dow posted five straight days of gains
and the S&P 500 closed the week up +12%.
The week-long rally was triggered by the government's pledge to
assume any losses beyond $29 billion associated with Citigroup's
(NYSE: C) $306 billion of troubled assets. As part of the plan, the
government will also invest another $20 billion in warrants for
The market continued its rise on news that the government would pump
an additional $800 billion into the economy. This latest bailout
plan calls for the Federal Reserve Bank of New York to make $200
billion available for consumer credit, including student loans,
credit card debt and auto loans. According to the plan, the
government will also buy $600 billion worth of mortgaged-backed
securities and debt from mortgage agencies Freddie Mac (NYSE: FRE),
Fannie Mae (NYSE: FNM) and Ginnie Mae.
Wall Street also seemed generally pleased with President-elect
Barack Obama's choices for his economic team. The market hates
uncertainty and is inherently suspicious of the unknown. So the fact
that Obama's new team will be made up of familiar and experienced
names allowed the market to continue its rise, unfettered.
President of the Federal Reserve Bank of New York Timothy Geithner
will be put up for the post of Secretary of the Treasury. Geithner
was also former Under Secretary of the Treasury for International
Affairs under both Treasury Secretaries Robert Rubin and Lawrence
Summers. Summers has been tapped as the next Director of the
National Economic Council. And former Federal Reserve Chairman Paul
Volcker has been named to chair a new panel, the President's
Economic Recovery Advisory Board, which will advise the president on
how to best stabilize financial markets and mitigate the length and
depth of the pending recession.
The market rally was predictably led by the financial sector, but
was mostly broad based -- with one exception. Retail stocks stalled
as investors nervously awaited the results of "Black Friday."
As one of the busiest holiday shopping days of the year, the day
after Thanksgiving has always been a litmus test for the health of
the retail sector. With the country's current economic woes, retail
investors were taking a "wait and see" attitude.
But even as the markets rose, we were reminded that we still live in
challenging times. On Tuesday the Commerce Department announced a
downward revision of GDP, showing that the U.S. economy shrunk by
-0.5% in the third quarter versus the -0.3% it reported a month
earlier. And although the government's new economic plans were
heartening, investors are still understandably cautious.
With our near-term economic realities in mind, Nathan Slaughter,
The ETF Authority, profiles an income fund representing some
of the most trusted and stable dividend-paying equities in the
world. Without using risky techniques like leverage and fancy option
plays, First Trust Dividend Income Fund (NYSE: FAV, $8.03)
offers an enormous yield of 22.9%, boosted by the fact it
now trades at a historic discount of -24% to its NAV.
With all the money being pumped into the economy here and abroad,
Market Advisor newsletter Editor. Paul Tracy, correctly
warns of the long-term inflationary pressures it represents. Gold is
not only a safe haven during economic uncertainty, but offers one of
the best protections an investor can find during inflationary
periods. For these reasons, Paul thinks Market Vectors Gold
Miners ETF (NYSE: GDX, $26.57) is a compelling and timely
-- Amy Calistri
How Paulson and the Treasury Can
Hand You 87%
Hank Paulson and the U.S.
Treasury just gave Wells Fargo a secret $5 billion
"gift." While this overnight ruling is helping Wells,
it's about to destroy a whole crop of weak companies...
and make a few others cash cows. There's a small window
to pocket 87% on this play right now. Other gainers to
Go here for all the details...
Capture a Good Old
Fashioned Yield of 22.9%
by Nathan Slaughter, Editor --
The ETF Authority
Take a quick glance at First
Trust Active Dividend Income Fund's (NYSE: FAV, $8.03)
portfolio, and you get a pretty good idea of what management is
after: fat dividend payments. Top holdings like Altria (NYSE:
MO), AT&T (NYSE: T) and Merck (NYSE: MRK) offer some of the
market's richest yields.
Overall, the portfolio contains about 75 stocks ranging in size
from up-and-coming firms like Trinity Industries (NYSE: TRN) to
mega-caps like Microsoft (Nasdaq: MSFT). Shareholders will own a
balanced mix of domestic and foreign names representing a wide
variety of industries -- most notably financials, energy,
healthcare and consumer staples.
The fund's managers take a rather straightforward approach and
avoid leverage or covered call writing. Instead, they stick to
the shares of established companies offering an attractive
combination of current income and capital appreciation
potential. But to make the $80 million asset base work just a
bit harder, they will also rotate in and out of different
holdings to collect more frequent distributions using a
"dividend capture" strategy.
And over the past twelve months, shareholders have raked in four
quarterly payouts of $0.46 per share for a total annual payment
of $1.84 -- not counting another $0.375 per share in capital
gains distributions. Excluding the capital gains (which may be
tougher to come by this year), the regular distributions alone
equate to a hefty yield of 22.9%.
In the latest semi-annual report, the fund's managers reiterated
a preference for financially sound companies with robust balance
sheets -- those able to comfortably meet current dividend
obligations with room for possible increases in the future. This
should minimize the threat of dividend reductions among
Furthermore, an impressive net investment income/net asset ratio
of 10.4% as of last quarter also bodes well and should continue
supporting sizeable distributions. In other words, for every
dollar in assets, the portfolio is generating about a dime of
dividend income after expenses. That rate should be
substantially higher after this severe market downturn.
Through the first half of the year, the portfolio generated $6.5
million in net dividend income, or about $0.90 for every one of
the fund's 7.2 million shares outstanding. And the two quarterly
distributions of $0.46 also totaled $0.92 -- meaning dividend
income alone has been enough to cover the generous payouts
without management having to dip into returns of capital.
Yet, FAV has been hit along with everyone else lately, and the
shares have slid from $20 to around $8. But this income stream
remains just as deep -- and now you can drink from it for half
Don't be fooled. There are many funds that claim to have monster
yields, but FAV is one of the few to have the actual investment
income to back it up. Along with those steady paychecks, I
believe the portfolio has the potential to deliver considerable
appreciation as well.
Better still, after commanding a premium price earlier this
year, the shares are now trading at an attractive discount to
NAV of -24%.
These Stocks Should Rebound
First as the Market Recovers
In this brutal
market, most stocks are dead money. But when the huge
snapback rally happens -- and it might have already
started -- a handful of stocks are going to jump twice
as fast as the rest.
Are you going to miss the boat? Get the names of these
stocks before the market really takes off.
Go Here to
Get the Names of These Stocks
In an Uncertain
Market, this ETF is as Good as Gold
Paul Tracy, Editor --
There are many compelling reasons why
gold should rise in value over the next few years. But instead of
mining for just the right gold stock, why not let Market Vectors
Gold Miners ETF (NYSE: GDX, $26.57) do the heavy lifting for you.
Gold is one of the rarest metals on Earth -- scientists believe that
all of the gold ever mined could fit underneath Paris' Eiffel tower,
forming a cube of just 60 yards on each side.
As a result of its rarity and traditional role as a store of wealth,
gold tends to perform well during periods of financial turmoil and
when there's risk of acceleration in inflation. And since gold is
priced in U.S. dollars, it also acts as a hedge against a falling
With these points in mind, the current environment is conducive to
higher gold prices. Turmoil in global financial markets has
investors worried about the stability of the global financial
system; many are reaching for gold as a hedge against instability.
In fact, gold one of the only commodities that's trading higher than
it was before Lehman Brothers filed for bankruptcy in September.
U.S. inflation appears to be receding for now, thanks in large part
to falling food and energy prices. However, the Federal Reserve is
adding more than a trillion dollars to the global money supply to
attempt to stem the pain of the recent financial crisis. The Fed has
also cut interest rates aggressively and hinted at more rate cuts to
come. And governments the world over are spending hundreds of
billions purchasing preferred shares in banks in an attempt to
recapitalize the financial system.
It's likely some of this spending will ultimately be financed by
creating new money. That means that attempts to stabilize the global
economy and financial system are ultimately likely to be
inflationary. This is another big positive for gold.
GDX is an exchange-traded fund (ETF) that invests in shares of firms
involved in the gold mining industry. Clearly, gold mining companies
benefit directly from rising gold prices via higher sales prices for
the gold they mine and sell. The cost of mining gold is less than
$300 per ounce for some gold mining firms; with current gold prices
of close to $800 per ounce, these firms are highly profitable.
Individual firms in the gold mining industry can be highly volatile.
Sometimes, planned new mines just don't pan out as expected or costs
are higher than originally anticipated. And some mines are located
in politically unstable regions of the word -- political strife can
harm stocks of individual mining firms. By purchasing a broad,
diversified portfolio GDX reduces these firm-specific risks.
GDX offers an outstanding hedge for investors against resurgent
inflation risks and continued turmoil in the global financial
system. The ETF looks like a solid "Buy" candidate under $28.
Additional Investing Ideas
Investor Trivia -- Digging Deep
Which of these
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Oilwell Varco (NOV)
Dive International (DVR)
click on one the links above. After you make your choice, we'll show
you the correct answer on our web site.)
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