Trick or Tweet

     It's the day before Halloween and it has been two months since my last post. The stock market has managed to drop about 9% in that time as measured by the S&P 500 ETF (SPY). While a drop in stock prices is always painful, this is a healthy and normal correction. Is there more pain to come? My guess is yes, stocks will move lower before slowly moving higher. Since I haven't sold anything lately, I haven't realized any losses on my holdings. Valuations of the S&P 500 index based on expected earnings have returned to a more normal 15.6x, down from a lofty 18.8x. I have explained the P/E ratio or "valuation" in my previous post "Exploiting the P/E Ratio", from 11/19/2016. So what should the investor do now? I still think stocks are the best game in town. While I have hedged my bets by buying a laddered portfolio of Federally insured CD's, I am not willing to give-up on stocks at this time. Some good companies are paying attractive dividend yields while trading at very reasonable valuations. One example is AT&T (T) which pays a 6.9% dividend and trades at only 5x earnings. I also like its competitor- Verizon which pays a 4.3% dividend and trades at 7x earnings. Both of those yields beat anything I can get at my local bank or credit union and the stocks offer the potential for capital appreciation over time. While I can't control the next tweet coming from the White House and the market's reaction to it, I sleep better knowing my stocks are actually paying me a return for using my money. One other interesting investing opportunity is playing out in the stock market now-legislation legalizing medical and recreational marijuana in Canada and some states in the USA. So far 9 states have legalized recreational pot and 30 states have legalized medical marijuana. I have been watching 3 stocks that supply the Canadian market-Tilray (TLRY), Cronos Group (CRON), and Canopy Growth (CGC). While I don't own any of these currently, I would consider the last two because of their capital structure and the medical benefits their products offer to patients. I tend to avoid "sin" stocks in my portfolio but I view these companies more like pharmaceuticals that help people who suffer from disease.