What the Stock Market Is Really Telling You
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For those of us who spend our days immersed in the madness of the stock market, it’s easy to feel overwhelmed by the constant flow of information.
Urgent headlines, serious price swings, and deliciously high dividend yields can grab our attention and seem to signal something important—but more often than not, they’re just noise.
Take share price performance, for example. At first glance, a drop might seem like a clear red flag and a sure sign that something is wrong with the company.
And sometimes, that’s true. A negative earnings report or other company-specific news can (and should) have an impact on the share price.
But oftentimes, price swings have little to do with the underlying business. Macroeconomic events like interest rate changes, CPI reports, or geopolitical tensions halfway across the world can cause stocks to move in a big way, even if the companies themselves are still fundamentally the same.
This dynamic works the other way too. Rising share prices might seem like undeniable confirmation that a company is thriving—but positive momentum often has more to do with how investors feel about the company (or how they think others feel about it) than with its actual, operational performance, at least in the short-term.
This is what Ben Graham meant when he said the market is a "voting machine" in the short term and a "weighing machine" in the long term. In the short term, popularity and emotions drive share prices, not fundamentals.
Still, it’s hard to resist the urge to react. We’re wired to feel like we need to do something when we see big movements—whether to chase a rising stock or cut our losses on a falling one.
I’m certainly feeling this right now with Clear Secure (YOU), which is the latest addition to my portfolio and currently its biggest loser. But as long-term investors, the key is knowing when to sit back, block out the noise, and focus on why you invested in the company in the first place.
Dividend yields can also create a lot of noise, particularly when it comes to flashy investment products like covered call ETFs. I don’t think all of them are bad, but a lot of these funds are marketed as income-generating powerhouses with bells and whistles that come in the form of sky-high yields and frequent dividend payouts.
As an example, look no further than something like QDTE and the other weekly-paying ETFs, which are all the rage right now.
At first glance, these funds seem like a dream come true for income-seeking investors. A 34% yield, paid every single week? On the surface, it sounds like a fast-track to financial freedom.
But these tempting attributes are often little more than noise. The high yields and frequent payouts aren’t designed to help you—they’re designed to sell the product.
The reality is that many of these funds are unsustainable, and some fade away as quickly as they arrived. Unfortunately, when one fades away, another will be there to take its place—just as enticing, just as misleading, and ready to reel in the next group of wishful and unsuspecting investors.
Having said all of that, the question every investor must ask themselves is this: How do you separate signal from noise? I’d love to get your thoughts on that. Write to me here and let me know.
And if you want to learn about 3 dividend growth monsters currently sitting at 52-week lows, check out this video here.
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SINCE YOU ASKED 💬
"I'm a newer investor and have been following you and Ari Gutman. Recently, I have been experimenting with some weekly dividend ETFs in my portfolio. Are these bad investments in your opinion?"
- Stanley | YouTube
This is a great question, and I've been getting a lot of questions about all these new, weekly-paying covered call ETFs like QDTE, XDTE, and the like.
Generally speaking, I think these funds are like Trojan horses. They lure you in with the promise of high yields (QDTE advertises a 34% yield on Seeking Alpha) and the idea of weekly dividend payments, but inside, they hide risks that can quietly erode your wealth over time.
The problem is that these high yields often aren’t sustainable. If they were, nobody (not even Warren Buffett himself) would be able to turn them down. After all, why wouldn't you take advantage of the opportunity to lock in a sustainable 30+ percent cash flow return?
The reality is that many of these funds rely on derivative-based strategies like selling covered calls. While there’s nothing inherently wrong with that, I believe it's too complex for newer investors to fully understand.
On top of that, many of these funds return your own capital as part of their distributions. For example, if you check out QDTE’s website, you’ll find this in the fine print: “Distributions in excess of the Fund’s current and accumulated earnings and profits will be treated as a return of capital.”
In other words, you’re essentially handing over your money to Roundhill (the company behind the fund), paying them a 1% fee, and then getting part of your own money back as a “dividend.”
Over time, as the fund continues to return your capital, the underlying value of the fund (or NAV - Net Asset Value) shrinks. This means that while you’re collecting dividends, the actual value of your investment declines, leaving you with less money overall.
Ultimately, these products are designed to generate fees for the companies that create them. The high yields and frequent payouts aren’t there to help you—they’re there to sell the product.
As a newer investor (or any investor, really), I think it’s best to avoid these types of complex investment products. This applies to all of the Yieldmax funds too, by the way.
Instead, you're better off focusing on more straightforward strategies like investing in reliable, growing companies or simple, proven ETFs like VOO or SCHD. These are much more dependable for building wealth over the long term.
Have a question? Ask me here to see it featured in an upcoming newsletter.
LAST WORD 👋
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