A stock that's safer than a T-bill

This power company's shares are backed by the full faith and credit of people who don't want their lights turned off. Meanwhile, Treasurys are riskier than ever.

By Jim Cramer Jun 4, 2012 9:57AM

We all know that stocks aren't bonds. Stocks give you an ownership stake in a company and entitle you to some of the profits of that company. Bonds are loans to companies, senior loans, and even if a business turns down, taking its stock with it, the bond bills have to be paid. That's why people regard bonds as being safer than stocks.

 

The safest of all pieces of paper are Treasury bonds because they are backed by the full faith and credit of the United States, which is why they are called risk-free securities.

 

But right now we are seeing a bizarre moment that has stood the difference between a stock and a bond on its head.

 

Right now bonds, particularly Treasury bonds, may be risk-free as far as being backed by the full faith and credit of the United States government, but that income stream that they have to pay you has never been lower. In history. Even as our finances as a nation have, arguably, never been worse, except for perhaps during the Civil War. So we have this bizarre anomaly in which a paper that is guaranteed by the full faith and credit of the nation can't be considered as risk-free as it once was. So you are being paid the least amount of money ever for a security that is the riskiest it has ever been.

 

Now consider Con Edison (ED). Here's a company with one of the greatest dividend records in history. It is a company that has a fabulous balance sheet, arguably much better than that of the United States, and it is backed up by the full faith and credit of people who don't want their lights turned off. Those are some motivated people, especially in an era when almost everything we own of any value needs to get charged.

 

If you own Con Edison's stock, it gives you a revenue stream that is more than 2 1/2 times that of a 10-year Treasury and, unlike with Treasurys, you can expect that revenue stream to be increased, not kept at the same level. Most importantly, Con Edison actually has some upside because it provides power to one of the fastest-growing areas in the United States and it also can supplant expensive oil provided by others with cheaper natural gas. And, yes, it provides no power to Europe, where the lights are actually about to go dark in at least one country: Greece. I kid you not. The power companies can't pay their bills, because the people aren't paying theirs.

 

Now I ask you which is safer: Con Ed or Treasurys? Which has more value? Which is better for you?

 

Right now, I think the answer is clear: Con Ed gives you all the benefits of a good bond without any of the liabilities. Treasurys? They remind me of a stock that can only go lower and pays you no dividend.

 

Yep, if you like bonds, you will love Con Ed. And if you hate them, then you'll love U.S. Treasurys. Enjoy the irony, but take the stock, not the bond.

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in the stocks mentioned.

 

 

 

More from TheStreet.com

35Comments
Jun 4, 2012 2:26PM
avatar

These comments make me laugh.  Whether you are for/against Cramer is meaningless, do you honestly expect *good* advice for free?  These guys (financial writers) as a whole get paid to spout the same drivel every day 24/7 365.  Would you go to a used car lot to listen to the same sales pitch every morning?  No.

 

Wall Street has never, will never be about normal people making money.  It's made for big money, the system is set up to give all the advantages to the ultra rich and hedge fund managers.  If you want some good advice here it is:

 

Get a good personal finance manager and pay them to manage your assets.  If you don't have the means to do it then you shouldn't be picking stocks and should be looking at building up your net worth through other avenues.  That's the best free advice you're every likely to get.  You're welcome.

avatar
Well I don't know about you Mr. Cramer, but when congress and Mr.Obama were playing gunfight with the budget ie, OUR money and future, I put 10K in Vanguard Utilities Index.  It was paying 4% interest then.   I am an INVESTOR not a crap shoot gambler.  I will never sell this investment but will collect the interest and re-invest the cap gains.  Anybody that depends on just one stock is an idiot.  Anybody that advises them to do so is a crook.
Jun 4, 2012 2:30PM
avatar
Just about any stock is safer than a T-bill....

The USA has not paid off a dime of debt since before FDR.  We are the ultimate deadbeat nation.  We cannot pay our debts except by kiting the debt with more borrowing...

We owe almost 16,000,000,000,000 that's 52,000 per person.  A family of 4 owes 208,000!  When can we expect their check?

Stocks look way safer...
Jun 4, 2012 2:57PM
avatar

don't misunderstand people on this site ALERTING you to the cramer scam....

we are warning you about this shyster hack who knows nothing about the market but

everything about pumping and dumping stock while selling his hack newsletter to gullible

investors

Jun 4, 2012 12:30PM
avatar

keep following the news on chesapeake..........cramericans have been losing on this cramer favorite

since 35 dollars per share...now 15....a LONG  way to get back to even on this pump and dump

beauty............pay particular attention to all the bad LEVERAGED bets mclendon made

yet cramer kept having him on his show pumping the stock

PUT THIS CON MAN IN JAIL

Jun 4, 2012 1:37PM
avatar

I like Duke Energy (DUK) better than ConEd, personally.  To the naysayers, look at what utility stocks have done in the last few weeks while the indexes have fallen.

 

The U.S. isn't Greece.  We're still the largest single economy in terms of GDP.

Jun 4, 2012 1:29PM
avatar

The way I interpret this article is: a desperate search by a seasoned Wall Street professional for one stock that is a better investment than the worst T-Bill market ever. What a choice we’re being handed by this glorious, all knowing, all powerful financial industry. Is this really the best we investors can hope for in the future of financial advice? The truth is, it’s probably never really been any better than this.

Jun 4, 2012 2:23PM
avatar

And Facebook is going to spark the next tech rally. How are HP and Dell Doing lately Jimmy boy. Hit your bells and whistles on your TV show all you want. They are nothing but noise-just like you.

I doubt this post will even make it since you have had me blocked from posting on your articles.

Jun 4, 2012 1:08PM
avatar

Con Ed? Answer this Cramer. Did ConEd cut its dividend in half in the 90's like ALL utility stocks did?

Did the price drop by 50%? De-regulation brought the consumer an increase in bills because Newt and company wanted to privatize it. That effort was to lower your monthly utility bills! You expect me to follow your advice after experiencing that hit? Cramer, get real. Your advice is not timely, your advice is based on poor research. Did you even look at the history of this stock???????? Nope, you sure didn't.

Jun 4, 2012 1:30PM
avatar
If Greek utilities can't pay their bills because customers can't pay theirs what makes Cramer think it can't happen here. Unemployment rising, benefits ending for millions, and neither political party has any concrete answers, plus they refuse to work together for the good of America. I'd say it's a toss up as far as safety. Broke consumers and no return on Treasuries.
avatar
Hey Cramer, the days of throwing darts at the stock section of the news paper is over!  Now you have to have some knowlege!  I guess your screwed!!  Heres a stock tip for you, get the hell out of the market and take your money to Vegas...you have better odds there!!
Jun 4, 2012 2:17PM
avatar
I would think the utility indexes are doing well compared to the whole market because a big cost to them (oil) is getting cheaper (due to economic slowdown + stronger dollar relative to Europe) and natural gas production (I think) is still being ramped up in the US.
Jun 4, 2012 2:23PM
avatar

long term treasurys are up 30+% yr/date.

 

When you're talking about such low rates, 30% isn't that much.  Would you rather get 4.5% in dividends in very low beta stocks, or 1.3% on treasuries?  Goin from 1% to 1.3% is a 30% gain, but is 1.3% a rate to get excited about?

Jun 4, 2012 12:12PM
avatar
As usual, a day late and dollar short.

AEP is a much better choice in this arena of power generation / transmission.
Superior numbers and a whole point more in dividend income.

Jun 4, 2012 11:34AM
avatar
GETTING BACK TO EVEN IS A PITIFUL INVESTMENT CONCEPT
Jun 4, 2012 5:21PM
avatar
Once a Goldman hack, always a Goldman hack.  The thinking never changes: minimal risk over long term vs. increased risk over short term.  Of course increased risk over short term better?  Only if we make it sound better.  Can ConEd print its own money.  My government can.  Usually to bailout Goldman for retarded risk taking like Cramer.  Why because my government WILL print money.  I guess Cramer knows all about the bail out.  If ConEd goes under, will the gov let em go.  Heck no.  So maybe your money is safer there. 
Jun 4, 2012 3:40PM
avatar
You don't need to be so mean to Cramer.  You make him sound like the Wizard of Oz pulling levers behind the curtain, when in fact he's just one of the flying monkeys.
Jun 4, 2012 5:26PM
avatar

Cramer - Right symbol but wrong stock. The real stock is AT&T (T).

avatar
Yeah, Con Ed has always been a pretty good bet.  On the other hand, don't ask the people in Astoria, Queens where the generating plants are located about lights going out.  It happens here regularly even when our bills are paid in full.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

105
105 rated 1
271
271 rated 2
420
420 rated 3
633
633 rated 4
492
492 rated 5
532
532 rated 6
725
725 rated 7
515
515 rated 8
343
343 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
SWNSOUTHWESTERN ENERGY COMPANY10
TAT&T Inc9
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.