What do the years 1939, 2009 and 2017 have in common?
If you’re an investor… the news is not good.
In fact, it’s downright ugly.
It’s not all that intentional, but money’s on our mind this week. Yesterday, we explored the reason we all want more of the stuff.
Thanks to our DNA, we never have enough.
For a man to be truly fulfilled, we argue, he must acknowledge this trait and work around it.
It’s not to say we shouldn’t strive for more. No, no… wanting more is how we grow. We simply must understand that it’s our nature to never be happy with what we’ve got.
But just as readers were digesting that idea yesterday, the folks at General Electric hit us with some bad news.
Perhaps it’s the worst news of the year.
The Death of Widows and Orphans
The company – a supposed stalwart of every conservative portfolio – told us it is slashing its dividend.
And it’s not just a trim… it’ll be cut by 50%.
For folks instinctually wanting more, it’s horrible news. And as we hinted at the top, this marks just the third time in the company’s storied dividend-paying history that it’s cut its payout.
GE’s first dividend cut came with the Great Depression. Then came the Great Recession. And now, what’s this, the Great Disappointment?
We’ll let the financial hacks cover why the company’s out-of-whack balance sheet requires such a massive move. The topic led just about every financial rag yesterday.
That’s not our beat…
Instead, we’re interested in seeing what it all means. What effect does such a move have on our ability to generate Liberty-granting wealth?
What does GE’s Great Disappointment mean for folks seeking a secure income… and, perhaps, a modicum of growth?
Ah, the news isn’t good.
We see what’s happened with GE merely as a headline-grabbing example of what’s happening all across America’s economy and her culture.
It’s the death of something great.
It’s the death of a do-anything America.
Get this. Just five stocks are responsible for some 60% of the Nasdaq’s gains this year.
Without the earnings power of Apple, Microsoft, Amazon, Facebook and Google, the record-breaking run we’ve enjoyed in 2017 would all but disappear.
We don’t need to scratch our heads and ponder what those companies have in common.
They’re tech giants. With the exception of Apple’s, their products aren’t physical. What they “make” lies entirely in the digital realm.
That’s certainly not true of General Electric… the company synonymous with America’s once-great industrial might.
The idea becomes even scarier when we toss in what is perhaps the year’s biggest millionaire maker – bitcoin and its cryptocurrency brethren.
For most investors, what’s happening isn’t all that scary. They’re making money, after all.
We should say, though, that they’re making money… for now.
There’s no doubt these companies have changed our lives and the nation’s economy. The technology they created is absolutely revolutionary.
But the tech sector is a fickle beast.
Take Netflix, for instance. With gains of well over 50% so far this year, it’s led the sector.
But investors have – rightfully – worried that it’s one competitor away from becoming the next Blockbuster (the now-defunct behemoth Netflix’s technology stomped out of existence).
For investors looking for reliable income that won’t be here today and gone tomorrow (we’re looking at you, bitcoin), the tech sector is a scary place to be.
And yet we fear many, many investors are looking at the recent gains and are pouring into the sector.
It will cause trouble.
If we peel back the layers just a bit, what we’re talking about in all of this is the failure of the American economy. While it was once robust and highly industrialized, we’re now dependent on new technology replacing the old.
We think GE is right. The stock market of 2017 may not look anything like it did in ’39 or ’09… but the pain could be just the same.
The Great Disappointment won’t be a label that’s slapped only on a former industrial giant. No, investors could soon wake up to trouble throughout their portfolios.
Our solution lies in an asset class that few folks are aware of. Most folks have never heard of the “1531(b) program,” but it offers a shot at ultra-reliable income… and it exemplifies what we believe is the only way America will get back on track.