For those of you who have hibernating in your bear caves, wake up, take a look at the chart at the right.

We estimate that dividends for S&P 500 companies will rise by over 10% this year. If we are right, it will be the first year since 2007 that dividends for the S&P will have risen on a year over year basis. Indeed, dividends have taken a beating over the last two years, and there are those who say that dividend investing is dead.

Wells Fargo's (WFC) stock appears to be trying to break to a new high. Could this possibly mean that Wall Street is underestimating their earnings over the next couple of years?

Our Investment Policy Committee spent most of last week's meeting discussing whether or not the stock market may be at an inflection point that could lead to significantly higher prices. There were five key points running through our discussions.

1. 80% of S&P 500 companies beat their earnings estimates for the fourth quarter, much higher than expected.


2. Fourth quarter US GDP growth significantly exceeded expectations at 5.9%.
   
3. Economists surveyed by Bloomberg are now estimating 3.0% GDP growth for 2010, up from 2.5% at the beginning of the year.

Federal regulators are apparently telling the major US banks not to hike dividends or start share buyback programs anytime soon. The regulators want the banks to keep their capital ratios high because of the continuing loan losses the banks are experiencing. That might mean that the government's interference may push dividend hikes into next year.

My first visit to the circus was a big disappointment.  I can't remember when or where it was, but I remember that it was a three-ring circus in a small town in Southern Indiana.  I remember to this day the anticipation as I walked toward the huge tent and heard the sounds of hundreds of circus-goers pouring out into the steamy summer night.

After the close of the market today, the Fed raised the "discount rate" by .25% to .75%. Headlines immediately appeared on many Internet sites that the Fed had begun the process of tightening interest rates. Stock futures fell by 1%.

On one of the blackest days of the financial crisis in late 2008, I received a telephone call from a fellow investment manager. He is a person I respect very much and has built a great firm. He said he wanted to pick my brain on a matter that was urgent. He went on to explain that on that day he had $40 million in bonds coming due and the reinvestment options he was being given by his institutional brokers were all bad. Remarkably on that day he was being told that T-bills had a negative return.

From Mike Hull, President
Donaldson Capital Management
Consumer Strategist