This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Buy U.S. Bonds and European Stocks for the Second Half of 2014

Stocks in this article: VGK

NEW YORK (TheStreet) -- Equities in the U.S. look expensive but our debt looks cheap. Overseas it's the exact opposite.

Despite the fact that yields here in the U.S. are "below historical norms" there is still an enormous global appetite for our debt. The full faith and credit of the U.S. government -- the sole issuer of the world's reserve currency -- is still worth a great deal. Even at an annual coupon of just 2.50%, U.S. Treasuries serve as a universal safe haven for investors when things get shaky in the capital markets.

We saw evidence of this Thursday as equity markets were disturbed by geopolitical events in Ukraine (and then Israel). The piddly current coupon did not dissuade investors from piling into Treasuries, the price of which rallied more than a full percent.

Everything Is Relative

Consider the added reward for taking on a bit more risk -- investors currently earn a whopping 30 basis points over U.S. Treasuries by lending to Baa2-rated Italy, a country whose outlook was raised to stable from negative by Moody's earlier this year.

Cramer: The Tell of When to Sell

What Yum! Brands Tells You About the World Economy

Spain only offers an extra 15bps over the U.S. Treasury on its 10-year paper today. The unemployment rate in Spain is closer to 50% than it is to 0%. The opportunity here may not be to invest in Treasury Bonds, necessarily, but to glean from the macro picture that there may still be more downward pressure on our interest rates than many believe.

The traditional metrics -- economic growth rates and inflation estimates -- can no longer be effectively used to gauge whether our nation's debt is fairly valued. As I see it, there are at least three major factors working against that logic:

1. Federal Reserve intervention/manipulation of both short- and long-term interest rates.

2. The nature of the global debt markets today and the need for fixed income among funds and governments with enormous pools of capital.

3. Our stock market being at a record high -- investors subsequently rebalancing and taking profits -- may be forcing capital back to bonds, a "great rotation" in reverse.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs