The Reach For Yield...And Its Consequences

October 1, 2012

Strategies emphasizing flexible asset allocation and fairly concentrated equity bets stand
the best chance of outperforming in this otherwise underwhelming world.

-Doug Ramsey, chief investment officer, The Leuthold Group

Yields on long-term Treasury bonds have ticked up from their record July lows, but the bond market still managed to make history last month as junk bond yields fell to an all-time low of 6.73% on August 30th. (Yields near the 7% level have typically spelled trouble for the junk market.)

Maybe we've forgotten the economic law of scarcity, but we remain struck that investor infatuation with portfolio income is higher than ever (read any recent issue of Barron's), just as there's less of it available than any time in history.

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