With interest rates at historically low levels, more and more senior investors are adding dividend paying stocks to their retirement portfolios. This message has resonated throughout the financial services community and Barron's magazine has now entered the fray with a cover story on "10 Terrific Dividend Stocks."

My first reaction to any article such as this is to ask, "What would VectorVest say about these stocks?" In this case, I was familiar with all ten of the stocks, CVX, INTC, JNJ, MCD, NVS, NSRGY, PEP, PG, STD and VZ cited in the article because they all represented large, well established companies. So I created a new WatchList Group called "Dividend Stocks." I put the 10 stocks into a WatchList called, "Barron's 10 Terrific Dividend Stocks." Oops, Nestle, a pink sheet ADR, was not found in our database and was not added to the WatchList. (We are seeing if we can get the data required to add it.)

Nevertheless, the WatchList showed that on 11/20/09, seven of the 9 stocks were rated "B" and two "H." The average RV and RS of the 9 stocks were above 1.00, and that is good. The average Forecasted Earnings Growth Rate, GRT, was -1, and that is not good. The average Dividend Yield, DY, was an acceptable 3.50%, but the average Dividend Growth, DG, was only 3.00%/Yr. Overall, I thought this was an OK portfolio, but not too exciting.

Could VectorVest do better? To answer this question, I created five more WatchLists, one for each of the five Retirement Strategies we have created, and put them into the Dividend Stocks WatchList Group as well. Here's a summary of what I found as of 11/20/09:

Name...........	Avg$/Sh	AvgRV	AvgRS	AvgGRT	AvgEPS	AvgDiv	AvgDY	AvgDG
Barron's 10	49.63	1.24	1.16	-1.0	3.85	1.72	3.50	3.0
Blue Chip Bnzs	52.78	1.47	1.18	11.0	4.72	1.16	2.20	13.0
Don's Dandies	29.36	.32	1.02	6.0	2.32	0.93	3.20	6.0
Optionable 2x4s	32.98	1.59	0.95	19.0	4.13	3.36	10.20	12.0
High VST+YSG	50.93	1.57	1.41	19.0	2.98	0.54	1.10	16.0
High Yield	24.18	1.48	0.89	13.0	3.38	3.29	13.60	7.0

Life is a matter of trade-offs. If you want high performance, i.e., the WatchList with the highest RVs, RSs and GRTs, you get low yield. If you want high yield, you get low safety. All of the WatchLists created by VectorVest searches had higher average RVs, higher average GRTs and higher averages DGs than the stocks in the Barron's 10 Watchlist. Only two of the Vectorest WatchLists had higher average RSs, and only two V V WatchLists had higher DYs than the Barron's 10.

If I had to pick one strategy to run with, I'd pick the High VST+YSG strategy and trade Covered Calls to generate income. But you, dear reader, can pick and choose your stocks one by one. See if you can put together a 10 stock WatchList that is better, in all respects, than Barron's 10 Terrific Dividend Stocks.

CHERRY PICKING HIGH PERFORMANCE STOCKS.
The VectorVest RealTime Tote Board makes it incredibly easy to see which strategies have performed the best each day. But the real question is which strategies are most likely to perform the best tomorrow? We want to pass this information on to you because the best way to make big profits is to place your bets BEFORE the market opens. How can you do that? Mr. Jerry D'Ambrosio, Product Support Specialist and Instructor, will show us how. So visit the VectorVest University to see this week's terrific "Strategy of the Week" presentation: "Cherry Picking High Performance Stocks."

Since writing the essay "Retirement Strategy - Part I" on September 18, 2009, I have continued to receive a steady stream of emails from subscribers seeking a combination of safety, capital appreciation and current income. In this regard, I tested an old favorite strategy of mine, Vector + Vector.

Alas, I found that the RS requirement was too stringent to find enough stocks under current market conditions, so I lowered the RS requirement from 1.5 to 1.25. Indeed, this adjustment did allow the search to return more stocks, but the dividend yields were pretty skimpy. So I adjusted the search again to find only optionable stocks, thinking that I could generate current income by selling Covered Calls. I named the new strategy "High VST + YSG Stocks," and put it into a new strategy group in the UniSearch Tool called Strategies - Retirement.

The following week, September 25, 2009, I created another search which was designed to find reasonably safe stocks with high dividend yields. I called it "High Yield 2x10s" and put it into the Strategies - Retirement Group in UniSearch. The top 10 stocks found by this search on September 25, 2009 had an average dividend yield of 13.64%.

On October 2, 2009, I created a third search, called "Optionable 2x4s," which aimed to find optionable stocks paying dividends of at least $2.00 per share and yielding at least 4%. This search was also placed into the Strategies - Retirement folder in UniSearch.

Finally, on October 9, 2009, I wrote an essay called, "Managing Your Retirement Stocks," which explained and illustrated how one might go about capturing both the dividend and the option premium. Although I thought I had written all that I needed to on the subject, the e-mails kept coming in, especially in regard to bond funds. So I wrote an essay on October 16, 2009 called, "Relatively Safe Bond Funds Paying 6%."

But the emails keep coming in. So what else can I do? How about trying to combine some of our bottom fishing ideas along with capturing high dividend yields? How could we do this? Well let's find some of the biggest, safest stocks that have been beaten down in price and still pay juicy dividends. Hmm, our Blue Chip Bargains strategies find the biggest, safest stocks and they're nearly all optionable. But how can we find those with the highest dividend yields?

Simple. Just sort by DY Desc.

Hey, that works pretty well, but where does the bottom fishing part come into play? Well dividend yields go up when prices go down, so if you sort by DY Desc., you automatically find stocks that have gone down in price. It's a technique used by many money managers. Yes, but what about the quality of the dividends? Are they safe? Well let's sort by YSG Desc. Hey, that works even better, but I still want to do a little better job of bottom fishing. How should I do that? Try sorting by the YSG/CI Desc. That ought to do it.

Wow! I don't believe what I'm looking at - a 95.47% gain since March 10, 2009 with 100% winners and a 5.17% dividend yield. I think I've found a Retirement - Strategies - Blue Chip Bonanzas.

Blue Chip Bonanzas.
If you're interested in building a portfolio that has it all: safety, capital appreciation, above average dividend yields with optionable stocks and low portfolio turnover, join Mr. Steve Chappell, Director of Educational Services, at the VectorVest University to see this week's wonderful "Strategy of the Week" presentation: "Blue Chip Bonanzas."

I don't believe in buying stocks that are going down in price. A lot of people do, however, and it's a fact we have to acknowledge. It seems that more and more investors, who may have missed the rally from the March 9th bottom, have been waiting for prices to fall so they can get into the market more cheaply. I wrote about this in last Friday's "Strategy" section of the Views and it's a common practice called, "buying the dips."

It also seems there is still a lot of fear in the market, so traders have been quick to sell, nailing down small profits. The net result has been an up and down market, the likes of which we have never seen before. Specifically, the Price of the VectorVest Composite went up two weeks then down two weeks in five consecutive waves on a Friday-to-Friday basis since September 4, 2009. In the meantime, the Buy to Sell Ratio, BSR, went from above 1.00 to below 1.00, giving a C/Dn signal on Wednesday, October 28th; then, on the current up wave, the BSR went from below 1.00 to above 1.00 on Wednesday, November 11th, giving a C/Up signal. This event produced the third reversal of a confirmed signal so far this year...another first.

As you might expect, I have received numerous phone calls and emails complimenting me on this extraordinary feat and offering helpful advice. The only thing I can say is that we call it the way we see it. If the market goes up we report it, if it goes down we report it. Our Market Timing System has served us well over the years and I'm not going to ditch it now. But I am going to use it more wisely.

I've known for a long time (see my essays of 01/04/08, 01/11/08 and 01/18/08), that the Pros "sell the rallies" in a Bear market and "buy the dips" in a Bull market. Even though I think we're in a Bear market rally, most investors believe we're in a Bull market, so they're "buying the dips." This means that it won't pay to sell-short when these guys are waiting to buy stocks every time they go down in price. You can't fight market psychology. I tried it during the 2003 - 2007 Bull run and it was largely unsuccessful. OK, so if we're going to "buy the dips," when should we do it and what Strategies should we use?

In my essay, "When To Go Long," dated January 4, 2008, I said, "An Aggressive Investor would wait until the Primary Wave gives an Up signal." This guidance is just as good today as it was then. So what Strategies should we use? I covered this subject on January 11, 2008, but a lot has changed since then. We have some great new Strategies now and the VectorVest RealTime Derby keeps us abreast of the Strategies that are cooking at the moment. Even so I wanted to put myself into the place of an investor who was actually "buying the dips." What would he or she buy?

I concluded that most of these investors would be "Value Investors," looking for beaten-down bargains. So I began to play with some of our Bottom-Fishing Strategies. I got some interesting results; then I asked Dan Misch, one of our Product Support Specialists, to dig into the problem. He got some stunning results.

Visit the VectorVest University to see what Dan found in this week's "Strategy of the Week," "Buying the Dips."

There is a direct correlation between the direction of stock prices and the anticipated direction of corporate earnings. Stock prices go up when earnings are expected to go up and stock prices go down when earnings are expected to fall. This relationship was vividly shown last week when we examined the All-Weekly graph of the S&P 500 WatchList. In my essay, I said as long as the S&P 500 EPS continues to rise, I am content to believe that we are on the road to recovery. So what are the impediments to rising earnings?

Of course, a weak economy, such as we have had for the last two years, has made it very difficult for earnings to rise. Workers have lost jobs and they have less money to spend. So the demand for goods and services has decreased and employers discharged more workers, which further reduced demand and so on. In order to reverse this vicious cycle, politicians enacted a massive stimulus bill, the Treasury Department printed tons of money and the Federal Reserve lowered the Fed Funds interest rate to essentially zero percent. Therein lies a tale.

The Federal Reserve is the key player here because it has the responsibility of maintaining a stable currency and of ensuring full employment. This is an impossible task. One conflicts with the other. If The Fed wants a stable currency, it must favor high interest rates which will slow economic growth and raise the unemployment rate. If it wants to have full employment, it will favor low interest rates which will debase the currency and invite rampant inflation. Right now, The Fed is doing all it can to stimulate the economy and reduce the unemployment rate.

Earlier this week, The Fed announced that it will keep its benchmark short-term interest rate "exceptionally low" - near zero - for a long time to come. The decision not to raise rates seems prescient given today's jobs report which said that the unemployment rate hit a 26-year high of 10.2%. But it wasn't that hard to make. The Fed never raises interest rates until after the unemployment rate has peaked and begun to go down.

So the threat of high interest rates will not impede earnings growth for the foreseeable future. What about inflation? Inflation is not a problem right now. Banks are hoarding money and inflation won't start going up until they begin lending and consumers start spending big time. So inflation, in the classic sense of higher prices for goods and services, is benign and it will not hamper earnings growth for some time to come. But there is a problem.

The weak economy, excessive government spending and loose monetary policy are driving the value of the U.S. dollar down. This is driving up the price of oil and other commodities. In the long run, high oil and commodity prices will have the same damaging effect as rising inflation and interest rates, The Enemies of Earnings.

HOW TO PICK HIGH PERFORMANCE STRATEGIES.
Once again we mine information generated by the VectorVest RealTime Derby. This time Mr. Todd Shaffer will show us a simple but effective technique of finding Strategies showing the highest performance in several ways. So join Mr. Shaffer at the VectorVest University to see this week's "Strategy of the Week" presentation: "How to Pick High Performance Strategies."