Cramer declares bonds risky assets: ‘We’re witnessing the passing of the torch’

CNBC’s Jim Cramer on Thursday rewrote the rules about the risk behind stocks and bonds.

The bond market, considered the safest place to park large sums of money, has ceded its position to some of the most recognizable names on the stock market, according to the former hedge-fund manager.

“This year we’re witnessing the passing of the torch: Bonds were the safest assets back in 1982, back when Treasurys yielded double digits. Now they’re risky assets,” the “Mad Money” host said. “The truth is, for many companies that we follow, the equity side is … a much better repository of wealth for you, the individual, than the credit side. Not all [stocks], but a surprising number.”

Cramer highlighted Microsoft, Apple, Facebook and Alphabet as being a wiser choice for wealthy investors looking to find investment options that are even better than predictable returns provided in the debt markets. The four companies, or “FAAM,” as Cramer calls the group, are valued at more than $4.7 trillion combined.

Of the four tech giants, Apple has the largest amount of cash on hand, with $192 billion set aside. Microsoft has $138 billion in the bank, and Google-parent Alphabet has $133 billion. Facebook, the smaller of the bunch, has $55 billion tucked away, Cramer noted.

Cramer called them the “Fort Knoxes of our era.”

“These stocks are the new repositories of wealth,” he said.

The comments come after Wall Street extended its win streak to four days. Stocks rose, despite another record number of new coronavirus cases and another day without declaring a winner in the U.S. presidential race.

Earlier that day, the Federal Reserve said it would leave its benchmark interest rate near zero until the economy rebounds from the global health crisis. Chairman Jerome Powell reaffirmed his position to help the economy get through the storm, but Cramer said that creates a “more capricious and uncertain” future for the bond market.

“If you’re a young, wet-behind-the-ears broker at Goldman Sachs, I would tell you to forget all of those bond ideas, just tell your clients to buy the stocks of terrific companies with fantastic nation-state-sized balance sheets,” the host said. “You’ll do much better with a heck of a lot less long-term risk and more dividends.”

Disclosure: Cramer’s charitable trust owns shares of Alphabet, Apple, Facebook and Microsoft.

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