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The herd continues to stampede into U.S. Treasury debt of every possible maturity to, theoretically, avoid risk. Yields on AA+ 10-yr bonds can be locked in to yield 2.11% per year and you get your principal back in 10 years. [As we see it, though] the only justification for [such a meagre] return on invested capital must be tied to the belief that a return is better than nothing given the prospects of a future depression. We believe, however, that fighting the Fed and investing like a depression is coming is not the right way to position your portfolio. [Below are 20 suggestions on how to generate in excess of 2.11% returns plus strong appreciation potential with modest risk.] Words: 657
So says Nick Elsworth (www.AssetInflation.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Elsworth goes on to say:
Do We or Don’t We Fight the Fed?
Bernanke said that the Fed would not allow deflation to set in, understanding [just] how damaging it was, and felt its mandate was to create inflation (granted only up to 2%) and the time-tested adage is do not fight the Fed. When they make a decision, and then decide to raise or lower rates, print or contract money, etc., they succeed in what they intended.
- Volker’s Fed succeeded in raising rates to the point where inflation started its multi-decade long slide to near zero.
- Greenspan’s Fed succeeded in printing so much money that we blew not one, but two bubbles.
- Now Bernanke’s Fed has clearly said that they fear deflation and it that won’t happen under their watch…backing up their words with deeds such as quadrupling their balance sheet, moving money at light speed throughout the world, and even covertly moving cash to foreign financial entities to prop up the system.
We believe Bernanke’s Fed will succeed in the stated mission, just as former Feds have, and in fact we would argue that history has shown the “risky” strategy has been trying to bet against them.
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20 Blue-Chips That Are a Bet the Fed Succeeds
We can think of many stocks that will yield more than [the abovementioned] 2.11% and that we believe will be higher in price over the next 10 years. To refine the list down, we are using the following criteria:
- Must be a large multinational diversified large cap of $25B+
- Must operate as a top leader in a major industry
- Must believe value will grow over the subsequent 10 years
- Must yield over 2.11%
The following are our recommendations ranked by yield:
1) Kimberly-Clark (KMB): yield 4.35%
2) Conoco Phillips (COP): yield 4.03%
3) Philip Morris (PM): yield 3.94%
4) Intel (INTC): yield 3.66%
5) General Electric (GE): yield 3.64%
6) Arcelor Mittal (MT): yield 3.52%
7) Wal-Mart (WMT): yield 3.51%
8) Procter and Gamble (PG): yield 3.44%
9) Home Depot (HD): yield 3.41%
10) Pepsico (PEP): yield 3.30%
11) Time Warner (TWX) : yield 3.08%
12) General Dynamics (GD): yield 3.05%
13) Boeing (BA): yield 2.93%
14) Coca-Cola (KO): yield 2.85%
15) 3M (MMM): yield 2.7%
16) JP Morgan (JPM): yield 2.7%
17) Exxon Mobil (XOM): yield 2.66%
18) Microsoft (MSFT): yield 2.5%
19) BHP Billiton (BHP): yield 2.42%
20) Caterpillar (CAT): yield 2.13%
We are confident the 20 stocks listed above will provide yields greater than U.S. Treasuries over the next 10 years, along with strong appreciation potential with modest risk. We do not believe Bernanke’s Fed will allow a depression to take hold, so don’t fight the fed – buy these 20 blue-chip [stocks instead] for long-term potential.
*http://assetinflation.com/blog/2011/08/11/dont-fight-the-fed-instead-buy-these-20-blue-chips-seeking-alpha/
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Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.