It could be professional suicide, but Bill Gross, a name synonymous with bond investing, has been saying that the yields on Treasury bonds are in the garbage. Long-term Treasuries’ prices may fall as inflation rises and the shorter-term alternatives aren’t looking too peachy either. He’s been all over the news circuit casting a less-than-rosy picture about investing in government debt.
So, if you’re considering putting your money into the “safety” of the Treasuries market, this could be a bit unsettling.
Because you might just be making a terrible mistake.
Robert Shiller, the Yale University economics professor who predicted the collapse of the U.S. housing market, put it this way: “The U.S. bond market surge that has pushed debt yields to record lows may constitute a bubble…“
And that’s why you need to ask yourself… Do you really want to risk your money in yet another bubble?
Yes, Treasuries were very hot recently. If you held them in 2011, you probably did pretty well. And last week, Treasury yields rose faster than any week since last October, with the 30-year Treasury bond auction pushing yields up to 3.42%.
But when is hot too hot? Remember the dot-com fallout a decade ago? Or the real estate bust in 2007?
Without a doubt, I’ve seen smart analysts make the wrong call time and time again. But I have to say that in this case, I think they’re right. Treasury bond yields are relatively speaking…”in the garbage.”
Ten-year government debt is yielding about 2.28%. That just isn’t attractive enough to make investors park their cash for 10 years.
Especially when there are readily available investment vehicles that are yielding 5.4%, 5.8% and even 6.0% right now!
I’m talking about yields in the stock market.
In fact, for the last several months, I’ve been shouting from the rooftops that fundamentally sound stocks—specifically dividend-paying stocks—are THE financial safe haven for today’s crazy world.
A recent study by RBC Capital Markets showed that, from 1986 to February 2010, dividend-paying stocks were up an average of 12% every year.
In comparison, the S&P was up 6.1% per year. Even U.S. intermediate-term Treasuries, which had an excellent year, were up only 6.6% in 2011.
No wonder “Bond King” Bill Gross has been steering investors out of Treasuries. By investing in stocks, you get both higher yields (and bigger total returns!) compared to Treasuries.
As an example, let’s look at a dividend stock that I’m recommending in our Blue Chip Growth portfolio: Coca-Cola (KO). As I write this, Coke’s stock has a whopping 2.9% yield (which even after a recent run-up is still higher than the current yields for 10-year Treasury bonds).
But here’s where it gets really interesting.
Let’s say Coke can grow its earnings and dividend by 8% per year—pretty reasonable given the performance of the stock and the fact that it has raised its dividend for 47 consecutive years.
With that in mind, its 2.9% yield will swell to nearly 7% in 10 years, based on the current price-to-earnings ratio.
Meanwhile, you’d still only get only 2% to 3% from the same Treasury note.
If you are truly patient, Coke’s yield would rise to 15% after 20 years!
And talk about safety! More than two-thirds of Coke’s sales come from outside the U.S. So if the dollar were to plunge in the wake of a default or downgrade, Coke’s non-dollar-denominated assets would be worth a lot more in U.S. dollar terms. And if the euro takes a plunge, Coke can shift its money back into dollars.
This global diversification is just one reason why the dividend stocks I recommend, like Coke, are much safer and more profitable than government bonds.
Now, I could go on and on about why you need to own my solid dividend recommendations. But I’ll tell you what… instead let me send you a Special Report I just prepared called Better-Than-Bonds: Investments for 2012.
Inside this report, in black and white, you’ll find my reasons why I’m so excited about my stable of high-yield and super-safe better-than-bonds investments.
You’ll read about these four stocks in particular:
- Generating Electricity and Huge Dividend Checks: This major electricity provider pays a whopping 6.0% yield—almost three times what you get from a 10-year Treasury. It’s also located in one of the fastest-growing regions in the world. I’m expecting energy companies to be hot in 2012, so you’ll need at least a few shares in this cash-paying powerhouse.
- Smokin’ Hot Yields and Returns: In just one year, this iconic tobacco company gave my readers 16.2% returns on top of a 5.8% dividend yield. In fact, it’s outperformed the S&P 500 every year since 2000. Even better, it recently announced a new $1 billion share repurchase program for 2012.
- Drink Up 136.1% Returns: If there is one beverage company in my portfolio giving Coke a run for its money, it’s this one. So far, my readers are sitting on 136.1% returns, and that’s not including the 4.4% yield.
- The Clothing Company Set to “Beat the Pants Off” Bonds: This global clothing company set a goal of adding $5 billion in organic revenue growth and $5 in earnings per share by 2016. And with $2.88 in annual dividends, you get better yields than Treasuries.
All it takes is two minutes to reserve your FREE copy right now of my exclusive report Navellier’s Better-Than-Bonds Investments for 2012. That’s right, I’ll send you this report at no charge just for trying out my advisory service Blue Chip Growth.
Editor, Blue Chip Growth