The following information is quoted from an article: "Stocks are safer than bonds, fund manager says" By Chuck Jaffe, MarketWatch, May 23, 2010, 12:01 p.m. EDT
“Quote”
Chris Davis: Investors should be worried about bond bubble
..... "The only real bubble in the world is bonds," Davis said, at the CFA Institute annual meeting. "When you look out over a 10-year period, people are going to get killed." .......... Davis did not predict an immediate implosion in the bond market -- he said it might hold up well for up to two years -- but he said he believes a fall is inevitable .......... "When you have deficits this high and rates this low, something has to give," he said, "and I don't think you can look at this and think the deficits are going to give any time soon." .....Stocks as safe haven
..... Davis urged looking at the "earnings yield," which goes beyond the dividend payout to include what the business itself keeps .......... he said that investing in bonds when the government is so deep in the financial hole is much riskier than buying a stock like Nestle, "which has a 7.5% earnings yield, where it is reinvesting half of that money in the business and pays the other half to you in dividends." .......... corporate yields tend to adjust automatically to inflation, through the price increases that big companies can pass along to customers, whereas bond yields lose ground if inflation returns to the market .....
“Unquote”
Click on the following link to read more detail on this article:
http://www.marketwatch.com/story/stocks-are-safer-than-bonds-manager-says-2010-05-23
“Quote”
Chris Davis: Investors should be worried about bond bubble
..... "The only real bubble in the world is bonds," Davis said, at the CFA Institute annual meeting. "When you look out over a 10-year period, people are going to get killed." .......... Davis did not predict an immediate implosion in the bond market -- he said it might hold up well for up to two years -- but he said he believes a fall is inevitable .......... "When you have deficits this high and rates this low, something has to give," he said, "and I don't think you can look at this and think the deficits are going to give any time soon." .....Stocks as safe haven
..... Davis urged looking at the "earnings yield," which goes beyond the dividend payout to include what the business itself keeps .......... he said that investing in bonds when the government is so deep in the financial hole is much riskier than buying a stock like Nestle, "which has a 7.5% earnings yield, where it is reinvesting half of that money in the business and pays the other half to you in dividends." .......... corporate yields tend to adjust automatically to inflation, through the price increases that big companies can pass along to customers, whereas bond yields lose ground if inflation returns to the market .....
“Unquote”
Click on the following link to read more detail on this article:
http://www.marketwatch.com/story/stocks-are-safer-than-bonds-manager-says-2010-05-23
