GO
Loading...

Cramer: Treasury Two-Year Yield 'Outrageous Rip-Off'

Tuesday, 3 Aug 2010 | 8:01 PM ET

After the yield on the two-year Treasury note traded to an all time low Tuesday for a 0.51% return, Cramer called fixed income securities "an outrageous rip-off."

"I am not willing to get that little for my money," he said. "I don't care if it is risk-free. I don't care if it is liquid."

Stock Market Sweep
Cramer walks you through the different aisles of investing.

Investors are going with these securities or certificate of deposits because they fear the uncertainty in the stock market, Cramer said. As a result, he thinks the fixed income market has become overvalued.

Those investing in Treasury notes should consider a stock like Verizon , which thanks to its "notoriously big dividend," provides 13 times the return of what the Treasury bill offers. It hands out 20 times the return after taxes, he added. There is, of course, risk associated with this or any other stock. But because it's a stock, it could go up in value. The two-year, however, just hit its all-time low and so the upside is capped. Verizon will also likely pay more by increasing its dividend while the two-year remains the same.

Cramer also recommends shares of DuPont over Treasury notes. It is $41 a share with a 4% yield and a secure dividend. If the stock drops below 41 bucks a share, the dividend yield swells and investors are able to buy more. The Mad Money host also favors Weyerhaeuser , which is a timber company in the process of becoming a real estate investment trust. To be in par with its competitors, Cramer said WY would have to pay a 4 to 5% dividend yield.

"We call the two-year risk free, but when it only gives you a half of a percent, to me that says you are risking something," Cramer said. "The opportunity risk to pick up a company that gives you a better yield the chance to of some upside."

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the Mad Money website? madcap@cnbc.com

  Price   Change %Change
DD
---
VZ
---
WY
---

Contact Mad Money

  • Showtimes

    Monday - Friday 6p ET
  • Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

Mad Money Features

  • Grab the latest CNBC gear from the NBCUniversal Store!

  • Get a behind-the-scenes look at how Cramer formulates his investment advice. "Inside the Madness" is a column, which features e-mails and more with Cramer and his researcher Nicole Urken.

  • You’ve always wanted to hit the “Hallelujah!” button. Here’s your chance.