Investors Chasing Yields Forces Vanguard Dividend Fund Closure

Investors Chasing Yields Forces Vanguard Dividend Fund Closure

 

Investors’ headlong rush into high-yielding stock funds has prompted Vanguard Group to close a popular dividend fund from accepting new cash. The Pennsylvania-based fund giant announced on Thursday that the $30.6 billion Vanguard Dividend Growth Fund (VDIGX) will no longer accept money from new. Full Story

The 1st move towards the feeding frenzy stage is the desperate search for higher yields. We are going to reach a point where 5% a year will be viewed as great return by those who cling on to the past.  10% might resist until the end, but they will be beaten so badly that they will not know whether it is day or night. The other 90% will embrace the concept that the Fed is silently pushing “speculate or scorch”. Resistance is utterly futile at this point in the game only because the resistance is being mounted in the wrong manner.  You never fight a trend in motion no matter how smart you think you are. Hence, Gold bugs have a very good strategy they could put into play while embracing the Fed’s new game plan of inflating to infinity.  They can take paper and turn into more paper and then use this paper to buy the Gold they love at a discount.  For example, you take  5K to invest in stock X; stock X rises 30%. You can then take the 30% gain and buy some Gold. Net result, you bought this gold for free. The Fed is slowly gearing up to move to the stage where they will start to buy everything to maintain the illusion that all is well. For now, the Fight has been restricted to the major indices, but soon it will move to liquid large cap stocks, then to mid caps and then finally to small caps; the idea is to maintain the illusion all is well.

By the way, it costs them nothing to do this; if they need a trillion, they just create it. So you need to understand that Fiat is stronger than nuclear weapons. It takes the time to make an atomic bomb, it takes second to create Fiat but the power Fiat has is 100 times stronger than the strongest nuclear weapon out there and so is the damage Fiat can cause and is causing.

Do not get emotional over these things; once emotions rule, you are no longer in charge.  Negative interest rates are going to create massive market distortions and before this market crashes and burns we should witness one if not two moves over 3500 points; one downward move could even surpass 5000 points on the Dow. However, each one will most likely prove to be an incredible buying opportunity.  The Crowd has to turn insane; they need to love this bull market just as much as they hate it now, and it will take quite some work to get this crowd there, meaning that Dow 30K might be a possibility. However, don’t focus on this target as we are a long way from it.

Taking an educated guess based on the current pattern and V readings (both of which will change, we are sure the V-indicator will be trading at a much higher level) a move to the 21,000-21,500 should lead to a pullback of 3,500 points or move.

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