Bonds Versus Stocks
Sprint has $6.26 billion of junk bonds coming due over the next two years, data compiled by Bloomberg show. The Overland Park, Kansas-based company's 6 percent notes due 2016 have returned about 10 percent since Oct. 9, 2007, versus an 87 percent drop for shares of the third-largest U.S. wireless carrier.
J.C. Penney shares have lost 51 percent since Oct. 9, 2007, versus a 35 percent return on the Plano, Texas-based company's 7.95 percent securities due April 2017. The third-largest U.S. department-store chain posted its first loss in two years last quarter amid declining revenue.
U.S. Steel Corp.'s 6.05 percent bonds due 2017 have gained about 25 percent, compared with a 78 percent plunge in the shares. The Pittsburgh-based company that makes flat-rolled steel for use in autos and appliances posted a third-quarter profit that exceeded analysts' estimates.
Stocks are cheap compared with credit. Junk debt offers an average yield of 6.73 percent, compared with an earnings yield of 8.21 percent for the S&P 500, data compiled by Bloomberg show. The gap reached 1.86 percentage points in October, the most ever except for the six months after Lehman Brothers Holdings Inc. fell in 2008.
"Equities hands down," Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a telephone interview on Nov. 22. His firm manages $300 billion. "I have no interest in fixed income at this point of the cycle. I'm in a camp that we're not going into a recession."