Andrew Snyder says this is not the time to be buying bonds. Yields on Treasury bonds are paltry, and over the next five years will pale in comparison to the rewards on offer in stock markets. Andrew says this is a great time to buy blue chips at penny stock prices.

This from Today’s Financial News:

With the stock market in turmoil over the past month or so, it is no wonder bonds are getting so much attention. Bonds can be safe and profitable investments for the right people. But not everybody should be fleeing towards the debt market, especially now.

Treasury bonds, those ultra-safe entities that fuel the government’s wild spending, have gotten the most attention. Almost every day, I read a headline that says something about investors fleeing to the safety of treasuries.

You and I are not the kind of investors they are talking about.

It is true that tens of hundreds of billions of dollars have suddenly been transferred to the treasury market. But it is not money from folks like you and I. When you and I have a pile of cash, we can put it in the bank. With the FDIC insurance limit up to $250,000, we can find a safe haven for our money, even if it takes a few different accounts to do it.

But what if you are a pension fund or hedge fund sitting on several hundred billion dollars in cash? You can’t just bury it in the backyard. And you cannot risk that much money in some shaky bank’s vault. So you have to find some other means, like treasury bonds.

The only reason these bonds, with their miserly interest payments, are getting such attention is because the Treasury is the safest savings account available for the world’s big-time investors.

Follow the leader… right off a cliff

But with so much attention focused on treasury debt, everyday investors are wondering if they should follow the big money. I have been asked several times over the last week or so if I believe it is appropriate to turn to government-issued bonds. Several people have noted deeply discounted I Bonds, which are designed to protect against inflation.

My answer to them is simple. Two months ago was the time to buy bonds. Now is the worst possible time. Sure, a certain portion of your portfolio must always be invested in the debt market, but now is certainly not the time to overweight that allocation.

For example, let’s take a look at those I Bonds so many people are watching. Bonds issued before November 1 will receive a coupon rate of 0% and an inflation adjustment of 4.84%. In six months, that payment will rise to 4.92%. Those are great rates, but as always, there is a catch.

To lock in those rates, you must hold the bonds for at least a year, and to avoid all penalties for early selling, you must hold the bonds for at least five years of their 30-year maturity. Sell before the five-year period is up and you will lose three-month’s interest, taking your payout to just 3.7%.  Obviously, if you are looking for short-term income, your money can work harder for you.

There are very few folks, even pundits calling for a deep recession, that believe the stock market will be lower in five years than it is today. We may have some ups and downs over the next few months, but in five years, you can rest assured we will be right in the middle of the next bubble.

That 5% you could get from I Bonds (interest rates will only remain that high if inflation remains high) will be tiny in comparison to the gains your neighbors and colleagues will be making.

Now is not the time to invest in bonds. It is time to dive right back into the equities market. If you need a few investing ideas, check out these Blue Chips that are selling for penny-stock prices. They are the ones that will earn you the kind of money you deserve over the next five years.

Sometimes it is good to follow the “big money.” Right now, however, it would be a tremendous mistake.

Source: The true story behind the bond market