Wake up, No Such Thing as a Screaming Buy: CIO

Bonds look more attractive than stocks in the current climate, as share prices may take another dive, and investors should worry about preserving the money they have rather than making any more, Hugh Hendry, chief investment officer and partner at Eclectica told CNBC.

"There's no sudden re-emergence of risk-taking, because there's no volume out there," Hendry said about the stock rallies in the past few weeks. "The S&P could easily be above 1,000 for a few months but likewise, it could be 600."

He said it is like in cowboy movies, where everybody is wondering where will the S&P be, will it reach 1,000 or plunge to 600, with investors facing a painful dilemma: "go on punk, I dare you, press the trigger."

Deleveraging is still taking place, and "there's no such thing as a screaming buy," Hendry said.

"Forget it, guys. How do I preserve the money and the wealth that I have today? If you promise me 6 percent for next year, I'll take it today. Let's wake up," he said.

"I manage an European long-only fund. I've made money in conventional government bonds this year," said Hendry, adding that his fund was up 30 percent this year.

"The 2-year US security yields 6 percent yield and it's beginning to look tantalizing," he added.

End of the Euro?

Other analysts said corporate bonds' dividend yields have increased and a lot of investors at looking at them, especially since major companies' recent bond issues have been oversubscribed.

The central guess in the bond market is that inflation will fall by 10 percent, Hendry said. "If that happens, that's a scary world," and in that case stocks will fall by 50 percent from the current levels.

Commodities are likely to recover even though they have been "devastated," but the price of gold is still too high right now to get in, he said.

"The point is when a population are bullish, it's not good for prospective returns. The gold guys are all bullish, right?" Hendry said. "I've got to be tactical and I'm waiting, I'm waiting, I'm waiting. I think I can get it (gold) in the five hundreds."

The euro may not be here in the same form in 10 years as richer Germany will not want to pay for the weaker PIIGS (Portugal, Italy, Ireland, Greece and Spain) anymore, he predicted.

Wages in these countries will have to fall in nominal terms to counteract the lack of flexibility in monetary policy "and that creates the anarchy that we see on the streets on Greece today," Hendry said.

"We have gone to economic war and the euro won't survive the economic war," he said.