Big Tech stocks are better repositories of wealth than bonds, says Jim Cramer
CNBC "Mad Money" host Jim Cramer said that Big Tech stocks like Apple, Alphabet, or Amazon are much better repositories of wealth than bonds, owing to their strong balance sheets and financial performance.
Credit: WikiCommons
The TV personality and former hedge fund manager made that claim in a recent episode of the CNBC show, and used the Big Tech stocks as a example of why investors may need to "re-think [their] notions about stocks versus bonds."
"This year we're witnessing the passing of the torch. Bonds were the safest assets back in '82, back when treasuries yield double digits," Cramer said. "Now they're risky assets, maybe riskier, riskier than anyone thinks."
Cramer said that for many major companies that he follows, the equity side is much safer than bonds. That translates to big tech stocks like Facebook, Apple, Amazon and Microsoft being a "much safer repository for wealth."
Although he cautioned that this isn't the case for all companies, he said that the Big Tech stocks are sitting on more cash than most countries. Microsoft has $138 billion, Alphabet has $133 billion, and Apple has $192 billion.
"They survived The Great Recession, and what happened? They came out stronger. The countries didn't," Cramer said. "In the great pandemic, they're not just thriving but they are actually putting up unbelievable numbers."
Cramer added that Facebook, Apple, Amazon, and Microsoft are the "Fort Knoxes of our era."
Although the "Mad Money" host admitted that this is a brand new thesis, he said that the real lesson of the era is that "stocks are the ones that don't need government help here."
"That means if you're a young, wet-behind-the-ears broker at Goldman Sachs, I would tell you to forget all those bond ideas," Cramer concluded. "Just tell your clients to buy the stocks of terrific companies with nation state-sized balance sheets. You'll do much better with a heck of a lot less long-term risk and more dividends."
Credit: WikiCommons
The TV personality and former hedge fund manager made that claim in a recent episode of the CNBC show, and used the Big Tech stocks as a example of why investors may need to "re-think [their] notions about stocks versus bonds."
"This year we're witnessing the passing of the torch. Bonds were the safest assets back in '82, back when treasuries yield double digits," Cramer said. "Now they're risky assets, maybe riskier, riskier than anyone thinks."
Cramer said that for many major companies that he follows, the equity side is much safer than bonds. That translates to big tech stocks like Facebook, Apple, Amazon and Microsoft being a "much safer repository for wealth."
Although he cautioned that this isn't the case for all companies, he said that the Big Tech stocks are sitting on more cash than most countries. Microsoft has $138 billion, Alphabet has $133 billion, and Apple has $192 billion.
"They survived The Great Recession, and what happened? They came out stronger. The countries didn't," Cramer said. "In the great pandemic, they're not just thriving but they are actually putting up unbelievable numbers."
Cramer added that Facebook, Apple, Amazon, and Microsoft are the "Fort Knoxes of our era."
Although the "Mad Money" host admitted that this is a brand new thesis, he said that the real lesson of the era is that "stocks are the ones that don't need government help here."
"That means if you're a young, wet-behind-the-ears broker at Goldman Sachs, I would tell you to forget all those bond ideas," Cramer concluded. "Just tell your clients to buy the stocks of terrific companies with nation state-sized balance sheets. You'll do much better with a heck of a lot less long-term risk and more dividends."
Comments
Conversely, we also have the greatest threat to democracy coming from some of those same corporations.
Reuters had to tell Facebook about groups using their platform to openly advocate replacing democracy with armed and violent revolt. "Time for a civil war!"
"It is absolutely, 100%, undeniably true!"
.
.
.
"Until it isn't"
"This is where to invest for the best return"
"We will never sell your personal information"
"We will only raise taxes on the rich"
"Your data is only accessible to you"
The list goes on and on...
Absolutely, 100%, undeniably, guaranteed true... Until it isn't.
Shows my age... and cynicism.
Buy low, sell high is often easier said than done. My approach is to buy stock in companies which produce products I like. An approach which has served me quite well.
A potential problem with all the cash these companies have is (frankly) the government. Once the workers have been bled dry, things like retirement accounts and corporate piggy banks will start to look like a ripe feeding ground for the insatiable hunger of the politicians. If you think the government will never seize assets of this sort, I agree with you. They absolutely, 100%, undeniably, guaranteed will not... Until they do. :-)
** Begin Rant**
I live in Illinois and my taxes seem to go up every day and my wallet (and bank account) seem to get lighter every day because of the unfunded pensions. Pensions need to be (MUST be) defined contribution and NOT defined benefit. Period! and before I get banned...
** End Rant**
Have a wonderful day. :-)
Oh yes... My wonderful wife just reminded me:
Who pays for the PBGC? It was "supposed" to be paid for by the companies - sort of like an insurance policy. Of course, since it was yet another poorly run government program (like flood insurance - don't get me started on that one!) the rates paid were far lower than any reasonable risk analysis would have called for. As a result the PBGC is woefully underfunded and who (in the end) ends up paying out those pensions... Ding-Ding! You guessed it... The taxpayer! Yeah for us!