Shawn Matthews Comments: Cantor’s Chief Says Stocks Are Cheap, Time To Sell Treasuries

December 3, 2010, Bloomberg Businessweek

Stocks look better value than bonds as dividends rise above Treasury yields and corporate profits improve, said Cantor Fitzgerald & Co. Chief Executive Officer Shawn Matthews.

“Between the two, the equity market is cheap,” Matthews said in an interview in Hong Kong yesterday. “You’re looking at very strong companies with great balance sheets and a lot of cash, and dividend yields that are much higher than the risk- free rate.”

Stocks rose for the first week in four this week before a report on U.S. payrolls that may add to evidence the global recovery is strengthening. Treasury yields were near the highest level since July before the report that is forecast to show employers added jobs for a second month.

Ten-year Treasuries yield 2.99 percent. That’s less than some of the world’s largest companies. Johnson & Johnson, the world’s No. 1 maker of health-care wwwucts, has a dividend yield of 3.45 percent while Chevron Corp., the second-biggest U.S. energy wwwucer, yields 3.41 percent, data compiled by Bloomberg show. AT&T Inc.’s dividend yield is 5.88 percent.

“The opportunity in Treasuries has probably passed,”
Matthews said. “It’s now just a carry trade where people are looking for a currency play or for safety. I would certainly look to sell into strength, rather than being a buyer on weakness.”

 Inflation is a risk in coming years as central banks keep printing money, he said. “There’s a misnomer that fixed income are safe instruments. You’ll see a very bad year in the next few years.”

“The economic recovery is region by region,” Matthews said. “Asia is clearly going through a growth spurt that will continue for the foreseeable future.”

Cantor, the capital markets dealer that started an investment banking business in 2008 is expanding, Matthews said.
The New York-based firm, one of the 18 primary dealers authorized to trade U.S. government securities with the Federal Reserve, plans to hire 200 people in Europe over the next two years, and will hire about 100 people in Asia.