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May 2014

ZIRP and bond risk

ZIRP is an acronym that stands for “zero interest rate policy.” For the last five years, the Fed has employed a zero interest rate policy to help stimulate the economy. Investors need to understand all of the risks that their hard earned investment dollars can be exposed to. Most investors buy stocks and stock mutual funds when they’re in the accumulation phase of their retirement planning. As they age they …Read More

What’s Behind Falling US Interest Rates?

Federal Reserve policy and signals from the ECB have each played a part in the declining US yield curve. After being range-bound between 2.6% and 2.8% for most of 2014, the yield on the 10-year US Treasury broke out of the range last week and, for a brief time, was several basis points below 2.5%. This has confounded most macroeconomists, as a strengthening economy with rising inflation expectations and rising …Read More

Better safe than sorry on investments

The old adage “Better safe than sorry” always returns to popularity after financial collapses, mainly because many people are “sorry.” Because it has been more than five years since the last financial calamity and it feels like the distant past, many investors are now ignoring this advice. So it appears apropos that we have this discussion now rather than moaning after the next market downdraft. Mind you, I am not …Read More

Why Would You Ever Enter the Junk Bond Market?

How are you getting yield in your portfolio? The latest craze is through the junk bond market, where income starved investors are taking on more risk to generate only small amounts of yield. However, the mounting risks in the junk bond market are substantial relative to the return. The yields in that bond market are not only way below historic norms, but also below their historic default rates. This means …Read More

The value of a stock purchase plan

Planning for retirement early is very important. Boxing great George Foreman once said, “The question isn’t at what age I want to retire, it’s at what income.” Foreman was one of the most powerful punchers of all time. He became famous at the age of nineteen when he won the gold medal in the heavyweight division in the 1968 Olympics at Mexico City. Immediately following the bout, which was stopped …Read More

In the Fed’s Bizzaro World, Whose Economy is Yellen Looking At?

In her testimony before Congress on Wednesday, May 7, Fed Chairwoman Janet Yellen made three points that deserve further scrutiny: There is continued slack in the labor market; There is worrisome weakness in housing; Investors are “reaching for yield,” especially in the High Yield markets. As a result of the first two points, a continued ultra easy monetary policy is a slam dunk for the foreseeable future.  As far as …Read More