The Dividend Alternative

Big Picture
Europe gets back on its feet

Following record second-quarter growth, Germany’s economic forecast for 2010 was raised to 3%, up from a previous forecast of 1.9%. The central bank in Germany reports that more than half of the decline in production due to the global economic crisis has now been made up. Global ratings agencies affirmed France’s top-notch triple-A credit rating as President Sarkozy planned a meeting with his top ministers today to gear up for a tough battle to cut the deficit and reform the pension system. The French economy grew by 0.6% in the second quarter, stronger than most economists had expected.

British retail sales jumped, with sales at non-food stores rising 1.8% in July versus June, strengthening the pound. The yen fell after expectations rose that Japan might take monetary easing steps. Canadian manufacturing sales rose for the 11th time in 13 months in June, up 15.3% from its May 2009 low. The use of shipping containers, a barometer of the global economy, has risen sharply this year, indicating stronger international trade, according to AP Møller-Maersk, the world’s largest shipping line.

Markets
U.S. data disappoints again

World stocks briefly hit a one-week high on Thursday, but fell back after reports that U.S. jobless claims rose and manufacturing in Philadelphia unexpectedly shrank. Canada’s dollar touched US$1.03 on Wednesday, amid speculation that a US$40-billion hostile bid for Potash Corp. by mining giant BHP would spark demand for commodity producers, but gains were erased when crude oil dropped below US$74 a barrel for the first time in more than a month. General Motors filed for a potential $20-billion public offering that will ask investors to look past declining market share and an ailing European division.

Intel will buy security software maker McAfee for $7.7-billion, as security becomes vital to Internet-connected devices. Facebook unveiled “Places,” a service that allows mobile phone users to share their location with friends, and opens the door to location-targeted advertising. Video website Hulu, owned by three U.S. broadcast networks, plans an IPO that may value the company at more than $2-billion. Profit rose 47% at John Deere, as U.S. farmers benefited from high crop prices and rushed to buy tractors before emission standards, and prices, rise next year. Staples’ revenues remained flat as small businesses spent cautiously.

Sectors
An Alternative to Sub 3% Bond Yields

10 year US Government Bond yields are below 3%. Credit Suisse believes the sharp decline in long-dated U.S. Treasury yields is an important event. They think three forces have driven 10-year yields down through 3.0%. One is investors lowering their U.S. economic growth expectations. A second is good old fashioned performance chasing. And the third, and perhaps the most important, is many Americans losing their appetite for risk. They believe the demand for U.S. financial assets with relatively high yields and relatively low volatility could remain elevated for several years. In their full research report, they list 24 U.S. equity securities that may be attractive in this environment - each has a current market capitalization in excess of $15 billion, a yield of 2.75% or greater, and a beta of 0.75 or less versus the S&P 500. For a copy visit Yourlifeyourplan.ca. The chart was produced by Bespoke Investment Group.