tylee100 (97.70)

The Long and Winding Road

February 10, 2012 – Comments (0)

In 2008 and 2009 I blogged about dividend paying stocks.  Fortunately that choice has proved to be correct and currently I sit in the top 3% of the CAPS group even though I refuse to pick 100's of stocks to enhance my rating.

I expect this trend of dividend payers succeeding to continue as long as the Fed keeps interest rates at near zero.  However, at some point the Fed will not be able to continue to do this.  Right now they say they will maintain through 2014. 

This action on the Fed's part is a crime.  They are robbing the people who have savings and companies with cash on their balance sheets in favor of people and companies who have borrowed money.  At some point the lenders will rebel against this and the Fed will have to relent.  The Fed may be powerful, but they can't overpower the laws of supply and demand and beyond that they can't continue to distort reality and expect the lenders to always go along with it.  Since the dawn of time, there has always been a cost (interest) for borrowing money.  Historically this figure has been inflation plus 2%.  The rates will eventually swing back there. 

So I'm staying in dividend payers until the Fed rates begin to rise.  When that happens, hold onto your hat as it may be a wild ride.