My Precise Prediction of Where the Market is Headed

Marc Lichtenfeld

Last weekend, I was reading a mainstream financial publication. I came across a section where they had asked several fund managers if the market had topped out.

The answers were definitive.

“Equities are just taking a breather….”, said one.

“The bull is not over yet…”, another declared.

There were a few more equally strong statements.

I wish they had asked me. Although I doubt they would have printed my answer. If they had, it might have looked something like this:

I honestly have no idea whether the bull market is going to continue for another six months, four years or if we’re about to slide 20%. That might not be what you want to hear from a financial “expert” who you (hopefully) read on a regular basis.

But it’s the God’s honest truth.

And the pundits who say, “The bull market will continue higher” or “We’re on the verge of a major correction,” don’t have a clue either.

They may think they do – but they don’t. They really don’t.

I have made my living in the markets since 1996. I have studied market history. I have never come across anyone who accurately predicted where the market was going on a consistent basis.

A few people have made some great singular calls, but they were usually completely wrong the next few times they tried to make another bold forecast.

If you want to make money in the markets over the long term, you need to ignore what everyone is saying will to happen to stocks over the next few months or even years.

Had you not done a darned thing as we were heading over the cliff in 2008 and simply held your positions, you’d have made all of your money back and then some. If you had listened to advice on when to get out and get back in, I guarantee you would have bought back in too late.

Even now, there is a ton of money sitting on the sidelines. Over the past two weeks $7 billion has been pulled from bond funds while only $4.1 billion flowed into stock funds. That suggests there’s nearly $3 billion sitting in cash – and that’s just for the past two weeks. This trend has been going on all year.

It just shows that many investors missed out on some serious gains this year. Had they simply held on through the Great Recession, they’d have been way better off than they are now.

So, how should an investor go about making money in the markets while ignoring the pundits?

By owning quality stocks that raise their dividend each and every year.

You get to participate in the growth when stocks go up, and then you get paid to wait when stocks go down.

And if you invest in stocks that raise the dividend every year, the yield on your original cost goes up. Today, you may be earning 3.5%, but perhaps in the next bear market, your yield on original cost will be 6%. That makes it a lot easier to ride out tough times. And the longer you hold on to these stocks, the higher the yield.
Let’s look at an example…

Five years ago, if you had bought Kimberly-Clark (NYSE: KMB), you would have received a yield of 4.8%. Today, your yield would be 6.8%. If you had bought it 10 years ago, your original yield would have been 4.0%. Today, you’d be collecting 9.8% on your original investment.

You would have ridden the ups and downs of the market, all the while collecting your dividends. Incidentally, Kimberly-Clark nearly tripled in price over the past 10 years.

And if you owned Kimberly Clark since 2003, were collecting 9.8% every year (and likely more next year as the company has raised its dividend every year for 41 years) and the market drops, would you sell your shares?

Doubtful. Unless you thought Kimberly-Clark was in for some serious problems, you would just keep collecting that ever-increasing dividend, which allows you to ride out the storms and hold on to stocks that outperform over the long term.

So the next time you read or hear someone’s prediction about which way the market is going, just hold your dividend stocks and ignore them. That’s the best advice you’ll hear an “expert” give all year.

Editor’s Note: Marc recently completed his latest report on how to supercharge your retirement account. According to Marc, this strategy can help anyone generate anywhere from 600% to 2,100% higher returns, over time, than the average investor. And it involves a little-known retirement plan called a Section 703 IRA.

To learn more about these Section 703 IRAs, click here.

19 Responses to “My Precise Prediction of Where the Market is Headed”

  1. Bob Stamper says:

    Dear Mr. Lichtenfeld, Thank you so much for your calm, reasoned comforting analysis of this market in particular and the market in general. For relatively inexperienced older individuals like myself who manage to make a little money from our investments, listening to the “experts” on CNBC and Bloomberg can be disquieting to say the very least. You are a nurturing oasis in a desert of cacophonous assertions for the sake of filling TV time. Thank you again, Mr. Lichtenfeld. Gratefully, Bob

  2. Paul says:

    I appreciate honesty. Thanks for your article. Honesty is a rarity these days. You are an honest man. God Bless you.

  3. Guner says:

    Very. Nice you tell everyting short open,not like long boring ,yack yackk. Thank you.

  4. George B says:

    Where are we in the Kondratiev Wave Theory Roller-coaster configuration – it’s been accurate before, so why aren’t the investment pundits looking at it for potential guidance instead of sitting around waiting for the next guy to say something to disagree with…?

  5. Lawrence L says:

    You are absolutely on target. I sold ko in 08 @ 62 it went down t0 38 then gained to 85 prior to the split. I lost not only on the stock but all the dividends I would have collected all these years.

  6. Steve Lombardi says:

    Marc: You make a good point. Allow me to share an example of what you described. A friend bought $10,000 of MO when everyone else dumped it during the tabacco litigation in the 80′s. For ten years he reinvested the dividends. Out of it was spun off Kraft. After the ten years his stake alone in MO was then worth $60,000. I didnt’ ask the value of the spinoffs. If I’m understanding your advise it is to be a long term investor with the right dividend stocks. It may seem somewhat boring, but the best advice for some people is to not look at the small gyrations in the market. My friend didn’t even look at his stocks during the last downturn. He just rode it out and with new cash bought more stocks. Good advice.

  7. luke dixon says:

    Greetings Marc,How refreshing to read your article that makes a statement backed up with concrete facts.Too many times I have fallen prey to those making statements based on their misdirected expertize of what they only think and wish happen.This scenario is not only the stock market but also true in real estate, crop yields, and the list goes on.
    Luke Dixon

  8. James Koontz says:

    Dear Sir,

    Would please comment on Harry Dent’s, Publication (“Boom & Bust”), which predicts a plunge by the DOW between 2013 and 2014 to 6,ooo or lower, and that it could ultimately go as low as 3,300-3,800 before the next long-term bull market begins.

    In his own defense he claims quite precise long term Market Prediction Results due to Population Make-up which controls whether the Bull Market goes, or Stays, and for how long. I did read it rather quickly, but he seemed to be advocating at least in part, that one could make a great deal of money by shorting stocks while riding the long-term downward trend of the Market.

    Your Response, Please

    James Koontz

    • James,

      I haven’t read Dent’s publication so I can’t comment on it specifically, but I would ask, what long term downward trend? We’re near all time highs in the market. If he is predicting a long term downward trend in the future, maybe he’ll be right, but that prediction seldom is.

      Since 1936, over ten year periods, the market has only been down 7 times. The market has a 91% win rate over the last 77 years. The times that the market was down were tied to the Great Depression and Great Recession. And keep in mind that not every ten year period associated with the Depression and Recession were down.

      Maybe Dent’s crystal ball is clearer than everyone else’s, but I’d take my chances on the side that’s been right 91% of the time.

    • Justin Dove, Editor says:

      James,

      Also, Alexander Green, from our sister site InvestmentU.com has written a lot about Dent’s failed market predictions.

      Here’s a couple of examples:

      http://www.investmentu.com/2011/October/the-harry-dent-indicator.html

      http://www.investmentu.com/2012/August/dent-tactical-etf.html

      Cheers,

      Justin

  9. Franklin D. Lomax, Sr. says:

    WastingtonDC: Still paying, quarterly, our Chevron shares, inherited at a basis price of $37, have always paid increasing DRIP dividends into our retirement accounts. Those inherited shares may well have been bought, during our tweens, for prices in the single digits, by a hardworking teacher. Now, those inherited originals are paying 16% or more per year, compounding strongly, and our grandkids, whom we intend to insure will inherit all of those original shares, along with all the DRIP dividend shares earned over their entire lives, as well as every share of our added purchases, plus their increasing dividends, over those same decades, will likely learn dividend investment, much as we did, but hopefully faster.

    The compounding rate for those shares are astonishing, and watching one’s retirement accounts’ various dividend earnings DRIP in over $30K/year, you learn, as we did, the value of last century purchased and long held dividend payers, like CVX. Since we have no intention of touching those ancient shares, except by adding more shares of strong dividend payers, along, we hope the kids who will inherit them, in another quarter to a half century, will be able to learn dividend investment much as we did, from their great grandmother’s investment genius, and her permanent approach to family retirement account dividends.

  10. Sam says:

    As an inexperienced investor I have followed your cash flow explanations and basically understand it. I have one question: where do I find the company’s cash flow? If you could explain where to look and how to figure it out it would help.

    Thanks
    Sam

    • Sam,

      When a company releases its earnings results, it usually includes a statement of cash flows. If it’s not in the release it usually is in the documents filed with the SEC, which you can find on the company’s website. Look for the 10-Q for quarterly results or 10-K for annual results.

      To figure out free cash flow, simply take cash flow from operations and subtract capital expenditures (both are on the statement of cash flows).

      Hope that helps.

  11. Elizabeth Smallfelt says:

    I think a person can always find value in the market regardless of how high the DJI is, but it’s just harder right now. That makes it scarier for investors who don’t know how to value stocks. They buy in too high. The trick is to find value AND growth. Right now that’s hard, so it makes the market riskier.

  12. Jimmy says:

    Please look at realty Income ( O ) please….

    Thank you

  13. Lew says:

    I am a strong advocate of your strategy.The fly in the ointment is stop losses.I would really like to see some data.How would a 25% trailing stop have performed in your examples.

  14. KH1ZRV A big thank you for your blog article.Much thanks again. Great.

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