Stocks Vs Bonds - Which is a Better Investment?

[Conrad Ladd]

Recently since the stock market has turned around a bit, we have been
hearing the experts say that Bonds may be a better buy than stocks
right now. I have to say that I respectfully disagree with their
thinking. Ok, so Stocks have gone up over 30% since they bottomed back
in March, however, Bonds are still paying extremely low interest
rates. Here is my take on each:
Stocks The stock market is still undervalued in my opinion, especially
if this recession has turned around, and will likely be over with come
the 3rd quarter. Business's are stripped down, and much more efficient
than they were just 3-4 months ago. This means that once the economy
completes it's turn around, many companies will have higher profit
margins. There are dozens of solid companies with safe dividends
paying as much as 5-7% returns. This is not to mention the fact that
the stocks themselves will increase in value most likely.
Bonds A ten year treasury bond is currently paying 3.6%. With
inflation expected to rise, likely to the 5-6% range sometime by next
year, these bonds will actually be losing money in a real sense. If
inflation goes up only mildly to a 4% rate, than it is likely that the
same 10 year treasury released next year will have a 6-7% coupon. Why
buy bonds now, when you can wait till they yield more?
Conclusion I would recommend buying high paying safe dividend stocks
until we see where inflation is headed. Likely by next year, you will
be able to sell those stocks for 30-50% more than what you paid, plus
buy treasuries at that time that yield probably close to twice what
they are yielding now. Don't rush into anything, and diversify.

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