Look at 10-year Treasurys, which are now yielding—what?—1.39 percent and they seem to be going toward 1 percent. They’re down toward 1 percent in Germany and Holland and Japan. And for a retirement plan—not as a trader—thinking you're safe by including those as one of your long-term assets is crazy. They are going to prove to be very bad investments.
Let me just mention that the last time 10-year Treasurys yielded 1.4 percent in the United States was in 1946. We had a big debt—we had a debt-to-GDP ratio of 120 percent after World War II. To help finance the debt, we pegged interest rates at very low rates. This is what’s called financial repression. Interest rates were pegged until the early 1950s. They then rose only slowly. But people lost enormous amounts of money on bonds.
By 1980, we had a debt-to-GDP ratio of 30 percent. We solved the debt problem, but we solved it on the back of the bondholders. And I think that that’s exactly what’s going to happen in the United States and also in Europe. That’s why I’m very negative on bonds. We know equities aren't the greatest inflation hedge in the short run. But, in the long run, they are an inflation hedge. They do represent real assets. And I think equities are unusually attractive today. And, having said that, I will say that not only are multinationals attractive in the United States, but even though I'm pessimistic about European governments, a stock like Siemens—which is a sort of German General Electric—is a very attractive investment, particularly as the euro declines.
I’m generally bullish on equities, and bullish on equities in emerging markets because, again, valuations are very attractive. Before the crisis of 2008 emerging markets equities sold price-earnings multiples of 15 percentage points higher than price-earnings multiples in developed markets. And now they're 10 to 15 percentage points lower. So I think emerging markets are also extremely attractive.
~ Burton Malkiel, from Don’t Get Buried By Bonds