Young Research & Publishing Inc.

Investment Research Since 1978

  • About Us
    • Contributors
    • Archives
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investing Analysis
    • The Efficient Frontier
    • Bonds
    • Commodities
    • Currencies and Gold
    • Dividend Investing
    • Economy
    • ETFs & Funds
    • Investment Strategy
    • Real Estate
    • Retirement Investing
    • Stocks
    • Taxes
    • Facebook
  • Money Management
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

Stock Market Bulls on Shaky Ground

November 12, 2010 By Dick Young

The chorus of bullish stock-market pundits on CNBC has become deafening in recent months. The justification for buying stocks that I hear most often from this crowd is that stocks are cheap because bond yields are low. Many bulls will tell you that you should dump your bonds in favor of stocks because stock yields are higher than bond yields. This sounds like a compelling argument in favor of stocks. And based on the multiyear highs of recent investor-sentiment polls, many individual investors agree.

After being conditioned by inflated stock prices for two decades, loads of investors believe that stock yields are most often lower than bond yields. But did you know that for the first 60 years of the last century, stock yields were almost always greater than bond yields? Why would stocks yield more than bonds? Well, setting aside the fact that anybody valuing stocks on the basis of bond yields either has an ax to grind or a fundamental misunderstanding of proper asset valuation, a simple response would be that stocks are riskier than bonds. Stocks are more volatile and rank lower in the capital structure, and companies have no legal obligation to make payments to shareholders as they do to bondholders. Why shouldn’t stocks yield more than bonds?

With Treasury yields at multi-decade lows, the drumbeat of market pundits panning bonds and touting stocks will grow louder. Ignore it. Bonds offer the safety and diversification necessary to craft a properly diversified portfolio.

The following two tabs change content below.
  • Bio
  • Latest Posts

Dick Young

Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.

Latest posts by Dick Young (see all)

  • What Are You Getting Paid? - February 15, 2019
  • When You Get OLD, Things Have to Be RIGHT - February 13, 2019
  • Build Your Investment Strategy for the Field of Play - February 8, 2019

Related Posts

Our Most Popular Posts

  • Your Retirement Life: What States Did Americans Flee in 2018? Where Did They Go?
  • When You Get OLD, Things Have to Be RIGHT
  • The Power of a Compound Interest Table
  • Morgan Stanley Calls an "Earnings Recession"
  • Build Your Investment Strategy for the Field of Play
  • Can America Afford the Green New Deal?
  • Bank Bulk Up: BB&T Buys SunTrust
  • Americans Most Optimistic in 16 Years About Their Finances
  • The Dynamic Maximizers® Solution
Fidelity: #1 Online Broker

The Global Bear Market

American Factories Booming

Is This Just the Beginning of the FAANG Collapse?

My Concentration Is on Full Faith & Credit Pledge U.S. Treasuries

This is What Can Happen When You Invest Without a Margin of Safety?

Search Young Research

RSS The Latest at Richardcyoung.com

  • The Curse of Obama Wreaked on Our Society
  • Trump Must Fight to Exit Syria
  • Buchanan: The Decline of Congress not a Recent Phenomenon
  • Is Trump’s Border Wall Emergency Declaration Legal? Yes. Here’s Why.
  • Donald Trump Seeks to End the Diversity Visa Lottery, Instead Reward High Skilled Immigrants
  • Democracy & Diversity: Not In the Constitution
  • Happy Presidents Day!
  • Immigration, the Unifying Force of Europe’s Right Wing
  • Republicans “Sabotaging” Green New Deal?
  • Do You Have What it Takes to be a Great One?

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Social Media

  • Facebook
  • Twitter
  • Youtube
  • Pinterest

Copyright © 2019 | Terms & Conditions