As you know, as far as stocks go, I’m about as bearish as it comes. However, if you’re looking for income, stocks today are far more attractive than sovereign bonds.
Let me post a disclaimer on that statement: stocks are MASSVELY overvalued today and we’re likely going to see a sharp correction if not something worse before the Fed begins another round of money printing.
However, once this correction ends, those looking for income might want to consider looking at high quality blue chip companies, MLPs, and other equity-based investments that offer decent dividends, rather than bonds.
Consider Exxon Mobil (XOM) compared to US Treasuries.
Exxon is best known as an oil giant that produces “obscene” profits. However, its history of producing income for shareholders is beyond stellar: XOM has increased its dividend every year for the last 28 years.
Today, XOM pays 2.2%. That’s more than you’d make lending to the US Government (buying US bonds) for any period of time shorter than 10 years (the 10-year currently pays 2.95% while the 30-year currently pays 4.2%).
XOM also has the following advantages over US bonds:
1) It produces a good (oil) that people actually need
2) You can have some clue about the nature of its balance sheet
3) There are actual investors who want to own it (you don’t need the Fed/ Treasury to perform a giant Ponzi scheme to keep it going)
4) XOM isn’t run by clueless politicians/ bureaucrats (though they do TRY to control XOM)
Finally, and most importantly, with XOM you’re buying an investment that isn’t clearly bankrupt and destined to default in the near future.
In a world of absolutes, I think XOM’s chart is extremely ugly and we’re likely going to see a correction of some magnitude in the near future. However, investing in a world of loose money is not about finding relative values. And on a relative basis, today companies like XOM are a lot more attractive than US debt.
However, across the board I am wary of the financial markets right now. Indeed, I believe things are about to get REALLY ugly for many asset classes.
It’s clear that the US economy has taken a sharp turn for the worse in the last three months. Considering that we never had a recovery to begin with, I believe we’re heading into a very, VERY rough patch here in the US.
Without adjustments, the US economy LOST (not gained) over 100,000 jobs in April. Nearly 30% of all mortgages in the US have negative equity. Food prices are through the roof. And we’re actively raiding pension funds in order to fund debt issuance.
In plain terms, this is an absolute disaster. And as usual, stocks are the last to “get it.”
Now is the time to be preparing for what’s to come. If you’ve not already taken steps to protect yourself and your loved ones’ finances from what’s coming, I can show you how.
I’ve already got subscribers invested in several key positions that will pay off HUGE returns as the stock carnage escalates.
We’ve also take steps to prepare our families for the upcoming social upheaval that will be occurring shortly.
If you’ve yet to take these steps yourself, it’s not too late… but we’re getting AWFULLY close to it.
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