I am not sure if the impact of countless investors in financial stocks facing both the plummet in the value of their shares as well as the slashed dividends they receive is being taken into account when it comes to a market stabilization. There are people who depended on these dividends to live. With WB paying over .60 quarterly the first half of the year, then dropping it to about .35 then .05, this caused some, many of whom are elderly, *major* financial problems. Even with WFC buying WB, the dividend they shall receive, assuming WFC does not cut theirs [unless they already have and I missed the announcement], will still only give the ex-WB shareholders slightly more than .05/share in old, WB terms. WB is only being used here as example (due to it's current top news stories status). Then there are countless other banks, big-boy names as well as regionals, that have announced dividend slashing.
With dividends coming in being insufficient to meet one's financial needs, no matter how one cuts back on spending, people who have not sold things yet will have no choice. I think this will further contribute to price erosion of quality stocks.
Yesterday one of my cousins asked me to go with him to a Mennonite health food/bulk store in Berks County, PA. Its a place I enjoy going, partially because it's a beautiful drive through PA farmlands, and I had not seen this cousin in quite a while. I knew he was living off bank stock dividends plus a small trust fund. During our drive he shared that the trust fund (bank stocks with the vast amount of shares in WB) had been dissolved because the value fell beneath a certain amount. He said, "I'm afraid of becoming an indigent, but I don't want to talk about it right now." I said nothing and waited for him to say something else so conversation could be on some level of comfort to him.
Although some people on this and other threads have occasionally mentioned buying or already having financials stocks, it seems to me that SI really is not the place where shareholders who hold financials and/or limit their investments to the likes of KO, PEP, MER or other normally yawn companies hang-out. In the current market disaster, I do wish there was such a site to go to read how this type of investor is coping, what they are doing. Yahoo! message boards are basically useless (IMO) and the WSJ does not have a message board area for subscribers.
Lynn |
