Tags: Graves | stocks | value | europe

Author John Graves: Shrewd Investors Should Buy When All Others Flee

Tuesday, 07 Aug 2012 11:24 AM

By Forrest Jones and Kathleen Walter

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The sky is not falling, despite current market turmoil, and the days of investing in stocks won't become relegated to a thing of the past, said author John Graves.

Value is everywhere, including in crisis-ridden Europe, and the shrewd investor should look for it when the masses flee an asset class out of fear.

"Look for opportunities when everyone else is running for the exits,” Graves told Newsmax.TV in an exclusive interview.

Watch our exclusive video. Story continues below.



Legendary investor Bill Gross, founder of Pimco, with $1.8 trillion in assets under management said recently "the cult of equity may be dying, but the cult of inflation may only have just begun."

Markets have heard such gloom before, and equities aren't going to disappear.

"It reminded me of 1979 when the cover of Time had the same story — the death of equities. So there’s always a reason for a concern but there’s always more reason for optimism," Graves said.

One such venue is Europe, where value may be found, said Graves, author of "The 7% Solution: You Can Afford a Comfortable Retirement."

Editor’s note: To order ‘The 7% Solution' at a great price — Click Here Now.

Yields on government debt have shot up in Spain and Italy, as investors have demanded hefty returns in exchange for putting their money in those countries out of fear the debt burdens are so high and growth so paltry, default may be looming on the horizon.

But Spain, Italy and Greece don't represent all of Europe.

"First of all we can always find interesting opportunities in corporate bonds in Europe. By Europe I mean Switzerland and Great Britain, because those countries are not tied to the euro. They are capital flight countries," Graves said.

"Bonds of banks in those countries, for example Credit Suisse or UBS or Royal Bank of Scotland, et cetera, those bonds tend to be interesting opportunities for five and six percent yields."

Dividend-paying stocks serve as good investments today as well.

Low interest rates have made returns on U.S. Treasurys fall short of inflation rates, though dividend stocks in healthy companies can return nice yields, especially for investors looking for income from their nest eggs.

Look for companies carrying low debt burdens and strong free cash-flow numbers, especially organizations that have been paying dividends for a long time, from five years out to 20 years.

"Those types of companies will continue to increase their dividends in all likelihood. We Boomers when we retire really want to live off of our portfolios so that’s the first reference point, dividend-paying stocks,” Graves said.

Municipal bonds paying interest rates of 3-4 percent, especially in municipalities and states not burdened by fiscal crises deserve consideration as does corporate debt, which can pay up 6 percent interest over five to ten years.

Gold should occupy a corner of a portfolio as well since it serves as a hedge to weaker currencies, the dollar especially.

Lastly, don't get caught up in the daily headlines that suggest the economy is doomed one day and soaring from the edge of doom the next, Graves advised.

"It’s better to ignore a lot of the financial news because it’s nonstop, it’s largely repetitive and it’s 'The sky is falling. The sky is falling,'" Graves said.

"Well as a matter of fact, the U.S. economy, despite the serious challenges that it faces, is still doing reasonably well. Not as good as it could, but certainly better than most.”

Editor’s note: To order ‘The 7% Solution' at a great price — Click Here Now.

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