'Quiet QE' Means Sizzling 60% Profits for Us: Here's How
Contrarian Outlook | Jul 19, 2023 05:13AM ET
Sixty percent gains, needless to say, are nice!
They can be the difference between a comfortable retirement and, well, one where we’re a bit too concerned about losses.
A million dollars is plenty to retire on dividends. But isn’t $1,600,000 even better?
With a million, an 8% yielding portfolio dishes $80,000 per year in dividends. Nice.
But that 60%-higher portfolio pays $128,200. Even nicer.
Why am I teasing 60%? Because we have the best opportunity to bank big gains—from safe dividend stocks, no less!—since the fall of 2020.
The opportunity is here thanks to a form of “quiet QE” from the Federal Reserve.
“Wait a minute, Brett,” I can hear you thinking. “The Fed is tightening, not easing… right?”
The Fed says as much, sure. Jay Powell and his cronies continue to talk tough about inflation while subtly providing ample liquidity to financial markets.
Powell’s words sound hawkish but look at his actions. AI stocks have shot to the moon! So too the tech-heavy Nasdaq and even the S&P 500 index!
Jay contends he is tightening the Fed’s balance sheet, but he’s really not. The stock market tape doesn’t lie. This may not be a dotcom 1999 scenario, but it’s a Fed-fueled mini-bubble nonetheless.
That’s a warning of persistently higher inflation. And don’t be fooled by last week’s “dovish” inflation number. The year-over-year comparisons are about to get tougher, starting next month. So buckle up.
By the way, there were already structural reasons for higher prices throughout the 2020s.
For one, there are no workers. This is due to demographics. The “employee shortage” made headlines in 2020, and it hasn’t gone away. There simply aren’t as many people in their 20s and 30s, on a relative basis, as there were in generations past.
Hence the laments from business owners that they “can’t find good people.” Hence wage inflation is likely to be sticky.
The only way the Fed can quell wage inflation is by completely crushing the economy with higher interest rates. But Powell & Co. stared into a potentially deep recession abyss in March—and blinked. They chose financial stability.
Aka liquidity. Discreet money printing.
It’s reflected in the mega-cap stocks that drive the S&P 500 and NASDAQ Composite. But quiet QE hasn’t yet driven up most dividend stocks.
Which is great for opportunistic income investors like us. We can bank gains (like the 60%er I mentioned) as history repeats itself.
The last time we had a “Fed fueled” dividend opportunity like this was September 2020. I pounded the table to buy Gabelli Dividend & Income Closed Fund (NYSE:GDV). It was trading at a 15% discount to its net asset value (NAV), which was incredible because:
- GDV owned high-quality, handpicked blue-chip dividend stocks.
- And Jay Powell was printing money like crazy!
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With Jay on our side, it was only a matter of time before the discount window narrowed. In the meantime, we collected GDV’s 7.3% yield while we waited. (And the kind folks at Gabelli paid us monthly, too.)
Over the next 14 months, GDV delivered sizzling 60% gains, including those steady every 30-day dividends. Awesome.
If you bought GDV when we discussed it, congrats because these 60% moonshots don’t come around often in Dividendland!
h2 GDV Soared 60% After We “Pounded the Table”If you missed GDV, don’t miss out on the next 60%er! It’s staring us right in the face. (And it’s not GDV this time.)
The monetary setup is, bizarrely, the same. We had loud QE then, and quiet QE now.
But the best dividend deals are in a discarded sector. I’m talking big yields, generous discounts and no love from the vanilla pundits.
Which is perfect for contrarians like us. We’re teed up for 60% total profits, collecting steady monthly dividends while we wait.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, "7 Great Dividend Growth Stocks for a Secure Retirement ."
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