U.S.A.: Uncontrollable Sovereign-debt Actions

If the United States are not careful they will have the largest sovereign debt problem the world has evern seen. Europe's own problems have caused U.S. government debt to hit absurdly low yields, but soon enough investors will lose confidence in the U.S. debt market and realize how dangerous this market has become. In the foreseeable future interest payments on debt will exceed defense spending in the country, which is a feat in itself, and will undoubtably cause investors to realize the problems in this market. If changes are not made to the mounting debt problem in the U.S., Ben Bernanke will be looking more like a chump than the champ he was after the financial meltdown. If you can wait it out. Betting against U.S. Treasuries seems like an unparalleled investment.

Sometimes you just cant make sense of everything

Invsetors have recently been pouring money into bond markets and seeing gold prices soar as a flight to safety. Talks of a double dip recession and financial bailouts have dominated the news lately and at yesterday's close there was a death cross in the S&P 500 where the 50 day average falls below the 200 day average, a typical signal of a market decline...but wait! the S&P 500 was up 3.13% on the day and people will get to go home today feeling a little bullish about their investments. This just goes to show that no matter how much analysis and economic data that is produced, nothing can predict the movements of the market. As an investor, if you cannot come to terms with this you might want to think about a different way to spend your money.

Good ol' boring bonds

There has been huge speculation recently about a potential double dip recession and worries about growth in China, which has led many investors to shy away from the risky stock market. I wouldn't blame worrisome investors either, as markets have shown extreme volatility this year and the Dow Jones Industrial Average now sits below 10000 points. Investors have been reverting to bond investments this year, but if you look back to the past decade, there is evidence to prove that bonds have outperformed stocks not only this year, but for the whole decade. If dividends are included in gains, the S&P 500 lost close to 10% over the past decade, while bonds saw gains of around 4% depending on the coupon and maturity of the bond investments. My advice is unless you have expert skills to exploit the market's volatility, bonds look to be a safer choice in the unchartered waters ahead. Although the markets are failing right now, be prepared for a great buying opportunity to come; at that time you can use the money you safely invested in bonds to enter the stock markets again.

Digging for Dividends

The lastest worldly economic failures have caused interest rates to greatly fall and have directed investors towards government bonds in a flight to safety. What does this do? An increased demand in bonds increases the price of bonds, and falling interest rates cause coupons on bonds to fall, both creating lower yields on bonds. For ivnestors looking for higher yields and a little more risk, investors should look to long standing healthy companies that have dividend yields because these companies dividends are outyielding government bonds. Strong comapanies such as Coca-Cola, Johnson & Johnson, and Procter & Gamble have all had steady consistent dividend distributions for the last decade and yield more the the current 10 year government bond in the U.S. If you are willing to take a little more risk, not only can you have greater yield on your investments, but these companies also have potential for capital apprectiation, which is unlikely in this economic environment for bonds within the next five years. If you can afford to take a little more risk, these consistent dividend providers are a better choice than government bonds right now.