Up, up and away…
In the blink of an eye, the share market is again flavour of the day.
Which should surprise no-one, especially regular readers of Motley Fool Take Stock, given how low interest rates are, and how supportive central bankers remain to global economies.
By comparison, whatever the day to day movements, the share market still remains the only game in town.
The past few weeks, markets have been in a lull, having no obvious catalyst to move higher.
Add in the usual suspects of a potential Greek default or exit from the euro [unlikely to happen], the prospect of higher US interest rates [they are coming, it's just a matter of when] and the great China slowdown [it's here, now], and it's no wonder the ASX has been stuck in a rut.
Thank goodness for dividends, I say, especially this time of year, when I'm being inundated with cold hard cash payments from the many dividend-paying shares I own. They make up for a flat share market, more so when they are of the fully franked variety.
It's like Christmas in April.
Thank goodness too for our American friends.
Overnight, the Dow surged over 200 points to over 18,000 and the tech-heavy Nasdaq jumped the most in two months, closing just short of 5,000.
You can't keep a good American investor down. Optimists as ever. Realists too, given their equivalent of a term deposit earns them the princely interest rate of 1% per annum.
Unlike the Australian love affair with property — which surely will end badly — the Americans have a love affair with stocks.
I'm with them, not only in their choice of investment vehicle (the share market), but in their actual stocks, including some of the overnight big tech gainers, Facebook, Google and Apple. Happy days for the US portion of my portfolio. Even happier when translated back into a lower Aussie dollar.
In morning trading, the S&P/ASX 200 Index has jumped back towards 5,900 on the back of Wall Street's lead, but also on comments from Reserve Bank of Australia governor Glenn Stevens that he effectively stands ready to cut interest rates even further next month.
Now I'm no professional RBA-watcher, and certainly no expert when it comes to predicting the RBA's next move, but to me, it sounds awfully like Mr Stevens is setting up the market to expect an interest rate cut in May.
The currency markets certainly think so, with the Aussie dollar falling one cent against the greenback, back down at close to US77 cents.
Local economists are on the bandwagon too, the AFR reporting the boffins at St George Bank as saying…
"…we continue to expect the RBA will cut the cash rate by another 25 basis points in May."
The same publication quotes HSBC's Paul Bloxham as saying…
"We expect one more 25 basis point cut from the RBA, most likely at the next meeting in May."
It's almost getting to the stage where you can legally, "front run" the RBA decision, buying shares now in anticipation of interest rates being cut to just 2% on May 5th 2015.
Just two short weeks to go, Foolish readers. The countdown to the RBA's May meeting is well and truly on.
And that may not be the end of it either, with The Age reporting Capital Economics as predicting…
"… the Reserve Bank will cut rates three more times, including in May, which would take the cash rate down to 1.5%."
I'm not waiting around for 2% interest rates, let alone 1.5%, having recently transferred $15,000 to my family's Commsec account, earmarked to buy Andrew Page's brand new ASX stock recommendation to members of his Motley Fool Dividend Investor subscription-only service.
As usual, it's a stock that's flying beneath the radar of most investors, which suits me perfectly fine. Given Andrew's track record to date, I'll take my dividend stocks any way he can find them.
This one looks to be a real doozy… an ASX tech stock, a growth stock and a dividend stock all rolled into one convenient package.
You may remember the last time the RBA cut interest rates, in February this year, the S&P/ASX 200 Index jumped higher, at the time The Sydney Morning Herald reporting…
"Shares have closed up for a 10th straight day, in a spectacular rally that has added about $145 billion to the market's value, as investors remain intoxicated by the prospect of even lower rates."
Those were the days. When there was more to life than obsessing over surging house prices.
Since then, despite on numerous occasions threatening to surge back through 6,000, the S&P/ASX 200 Index has stagnated.
But maybe not for much longer, as once again the very real prospect of even lower interest rates, by comparison makes the share market look very attractive.
Not that this should be news to regular readers of this Motley Fool Take Stock missive.
To my simple way of thinking, it's share market investing 101 — interest rates down = share market up.
It's all about dividends. Regular, rising, reliable dividends. An investor's life doesn't get much better.
In fact, as I'm writing this, another email just popped into my in-box, this time from the company I named as my Top Dividend Stock to members of Andrew Page's Motley Fool Dividend Investor advisory service.
So far so good for that stock recommendation — the shares are up around 20% over the last six months, the fully franked dividend coming on top.
It's the absolute best of both worlds.
And it'll get better too, given the vast majority of dividends I've received have been fully franked, meaning I'll be able to offset the franking credits against my income, including my wages.
It's almost like free money from the taxman.
And since Smokin' Joe Hockey and his friends have effectively ruled out any changes to the dividend imputation system in the upcoming budget, the fully franked dividend party is set to roll on, and on.
Still, you've got to be in it to win it.
Sitting on the sidelines may make you better looking, but when it comes to locking in lower share prices and higher dividend yields, nothing beats getting in ahead of the RBA, and getting free money from the taxman.
