Listen to this post
I’m talking about the Consumer Price Index (CPI) report for June.
Right now, the consensus view is that we’ll see a “cooldown” in the pace of price escalation — from a 4% annual rate increase in May to a slightly cooler 3.1% surge for June.
But I don’t need to see the numbers.
Because no matter what those numbers are allegedly trying to tell us, I just don’t trust the Fed.
Nor should you.
I refuse to put my financial future in the hands of an institution run mostly by academics and economists who haven’t spent a single day running a real business and have never managed money for clients.
I grant you — there are exceptions. But most of these folks have worked with the market equivalent of “play money” — and have never had real “skin in the game.”
The world of “proper economic policy” — a theoretical world that lives in the textbooks of the last generation — leaves them undermanned, undergunned, and underprepared for our current times.
I’ve watched how the Fed’s flailing fight against inflation has led to cost-cutting layoffs — a line item on an income statement, but a trend with a true human toll when someone loses their job and feels like they can’t keep their family “safe” any longer.
That saga leads to such conversations as “we can’t afford your favorite cereal,” or “we can’t join the pool this summer,” or “you need to start at the community college,” or “we can’t afford to retire,” or “we can’t make the mortgage payment.”
Because no matter what Wednesday’s CPI report says — and despite the surprising rally we’ve seen in stocks this year — I’m still pounding the table to own shares of companies that do one thing — pay you income in the form of dividend payouts.
Inflation is nowhere near the Fed’s target goal of 2%. And even the “brain trust” in Washington says that inflation will remain “elevated” until 2025.
That reminds me of the family member who says they’re running five minutes late — but is 30 or 40 minutes behind. So when it comes to the Fed’s “inflation-under-control” by 2025 projection, don’t count on it.
Inflation will keep eating away at your savings, and again, that can lead to dire consequences.
Just check out this latest headline from Fortune.
While those retirees-to-be believed they had enough to exit the 40-hour-a-week “rat race,” the higher prices ignited by the inflationary inferno changed their retirement calculus.
And now they lack the money to make ends meet.
When I worked on the institutional side — and managed money for clients — the focus was making sure they could retire in a way that allowed them to enjoy their days… and sleep at night … no matter what the markets threw at them. And the foundation of that whole approach was income.
Let me say that again… income.
But not income in a classic sense — where you’re limited to bonds, money markets, and CDs.
The world of income has advanced a long way from those basic, foundational days.
And that’s created massive new opportunities for income generation.
Many of TradeSmith’s tools were crafted to help you maximize the income you generate.
And today I want to share two ways that you can do that by using those tools.
The Easiest Investment to Make for Regular PaydaysIf you’re just getting started with income generation or are looking for a “set-and-forget” investment, take a close look at a dividend ETF.
Like the SPDR S&P Dividend ETF (SDY).
SDY screens for companies that have consistently increased their dividends for at least 20 consecutive years and are weighted by projected yield.
The ETF is also a diversified approach — to make sure it doesn’t fall victim to having “all of its eggs” in one basket. The fund includes a mix of such sectors as Utilities, Industrial, Information Technology, and Financials, just to name a few.
Using our TradeSmith tools, we can see SDY packs a 1-2 punch of being in our Green Zone (meaning it’s in a healthy, investable state), and our Volatility Quotient (VQ) also tells us that SDY is a “low-risk investment.”
SDY pays out $3.19 a share in dividends, which at current prices represents a very solid yield of 2.6%.
But we can take things a step further and see what’s “under the hood” of SDY, looking at the individual holdings and cherry-picking those in our Green Zone.
Green Zone IncomeOf SDY’s 121 holdings, 45.45% are in the Green Zone, and I’ve screenshot 15 to give you a taste of the individual stocks in the fund.
Peeking into a highly-rated ETF is one of my favorite ways to start my investment research since it gives me some great ideas for income-generating stocks.
And once you have that list, you can zero in on the companies that fit your investment goals and risk tolerance.
For instance, if you’re looking for some additional income opportunities — but also want the capital gains generated by stocks that could go up a lot — check out H.B. Fuller Co. (FUL), a chemicals firm that produces adhesives and sealants for things like food and beverage containers.
Fuller pays a dividend of 79 cents a share, which (at its current trading price of around $69) works out to a yield of 1.1%.
But it also has a one-year price target from analysts of $87.50, indicating a potential upside of 27%.
If you’re looking for higher yields versus capital gains, Consolidated Edison Inc. (ED), which delivers electricity to 3.6 million people in New York City and Westchester County, just blasted through its one-year price target of $89.92 (trading at $91.66 as of this writing). But ConEd offers a higher dividend payout than H.B. Fuller — $3.24 per share at a yield of 3.5%.
The bottom line here…
When Wednesday rolls around, I absolutely want to hear the latest inflation numbers.
But I’m not waiting for that to happen.
I’m taking action.
I’m looking for income.
And so should you.