Times must be pretty hard in the financial world when the Secretary of the US Treasury has to reassure bank depositors that their money is safe...and he has to do so on a Sunday, before the banks open for business. Hmmm...I wonder what he's trying to prevent?
Paulson said the number of troubled banks will increase as they struggle to cope with big losses on bad mortgages. The government this month took over IndyMac after a run led it to become the largest regulated thrift to fail.
"Of course the list is going to grow longer given the stresses we have in the marketplace, given the housing correction. But again, it's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation," he said in broadcast interviews.
Paulson used appearances on the Sunday talk shows to tell people that deposits up to $100,000 are fully insured. He said no one has lost a single penny on an insured deposit in the 75 years that the Federal Deposit Insurance Corporation has operated.
"We're going through a challenging time with our economy. This is a tough time. The three big issues we're facing right now are, first, the housing correction which is at the heart of the slowdown; secondly, turmoil of the capital markets; and thirdly, the high oil prices, which are going to prolong the slowdown," he said.
Four Stocks for a "Tough Time"
I, for one, will take Paulson at his word, but I think he is in a position where he has to downplay the severity of "the three big issues" and the crises that all investors are now facing.
So we began to examine stocks that our mentors have recommended to us that should hold up well during tough times and also grow well during the good times. The criteria we are aiming for include: 1. High Credit Rating, 2. A Low Dividend Payout Ratio, 3. A History of Steady Dividend Increases, 4. Steady Sales Growth and 5. International Exposure.
The 4 that seemed to meet all of the above criteria are : Automated Data Processing (NYSE:ADP), Johnson & Johnson (NYSE:JNJ), Novartis (NYSE:NVS), and BPplc (NYSE:BP). A fifth "runner-up" was General Electric (NYSE:GE), but we were somewhat concerned about the exposure of their giant financial arm.
Here's a comment or two about the 4 All-Seasons Stocks:
ADP is a solid front-runner. They generate steady cash-flow and a strong long-term growth rate. Their 5 Year Dividend Growth rate is over 18%, and management's confidence in the company's future recently prompted them to up the payout by 26%. In the first quarter the company repurchased approximately 5.8 million shares, and it's likely they will continue to buy back shares going forward.
JNJ is a legend in the healthcare and pharmaceutical industry. So much has already been said about them.
