Bond Bubble? Marc Faber Says Time to Move Into Equities

Bond Bubble? Marc Faber Says Time to Move Into Equities

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In a recent interview with Bloomberg Television, publisher of the Gloom, Boom & Doom Report Marc Faber certainly had gloom and doom to say when asked about the direction of US bonds. The good news, however, is he believes equities should benefit (at least in the short term).

See the interview here.

When asked about whether he would choose Spanish or Italian debt over US Treasuries, he said (paraphrased):

I would take the U.S. because they can print themselves out. I would not take them as a good investment because I think you have today a yield on the 10-Year of around 1.7% and on the 30-Year around 3%. I think eventually in the next few years yields will be much higher and the purchasing power of the dollar will have depreciated significantly.

Faber is actually quite bearish about the entire financial system, as he indicates in the interview. However, even in this doomsday scenario, he believes investors are better off in stocks than debt:

Relative to government bonds, equities are attractive. If you really think it through and you are bearish as I am and you think the whole financial system will one day collapse, maybe three years or five years or 10 years, one day there'll be a reset and everything will be essentially started anew. Then you are better off in equities than in government bonds because a lot of government bonds will either default or they will have to print so much money that the purchasing power of money will depreciate very rapidly.

Business Section: Investing Ideas

So if Faber's doomsday scenario plays out, where should investors be hiding for cover? For ideas, we ran a screen on institutional stock picks paying handsome dividend yields even with recent outperformance.

We screened for stocks paying dividend yields above 2% that are currently up over 20% for the month. We also screened for stocks with the most significant net institutional purchases over the current quarter, indicating that hedge fund managers stand behind these names.

Do you think these stocks could weather a financial meltdown like the one Faber predicts?


Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for all the stocks mentioned below:

List sorted by net institutional purchases as a percent of share float.


1. Janus Capital Group, Inc. (JNS, Earnings, Analysts, Financials): A publicly owned asset management holding company. Market cap of $1.38B. The stock has risen 27.81% over the last month. Dividend yield at 2.70%, payout ratio at 10.75%. Net institutional shares purchased over the current quarter at 10.3M, which is 5.73% of the company's 179.72M share float.


2. Ternium S.A. (TX, Earnings, Analysts, Financials): Engages in manufacturing and processing a range of flat and long steel products for construction, home appliances, capital goods, container, food, energy, and automotive industries. Market cap of $4.58B. The stock has risen 35.81% over the last month. Dividend yield at 3.29%, payout ratio at 10.31%. Net institutional shares purchased over the current quarter at 2.4M, which is 4.91% of the company's 48.88M share float.


3. Thor Industries Inc. (THO, Earnings, Analysts, Financials): Manufactures and sells a range of recreation vehicles and small and mid-size buses, as well as related parts and accessories in the United States and Canada. Market cap of $1.63B. The stock has risen 23.34% over the last month. Dividend yield at 2.02%, payout ratio at 23.80%. Net institutional shares purchased over the current quarter at 2.0M, which is 4.50% of the company's 44.49M share float.


4. Belo Corp. (BLC, Earnings, Analysts, Financials): Operates as a television company. Market cap of $768.39M. The stock has risen 37.20% over the last month. Dividend yield at 2.68%, payout ratio at 15.60%. Net institutional shares purchased over the current quarter at 3.1M, which is 3.33% of the company's 93.12M share float.



(Written by Alexander Crawford. Institutional data sourced from Fidelity.)


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