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Fed Low-Interest Rate Policy is  Forcing Investors To Take Dangerous Investment Risks in Desperate Search For Better Yield

Fed Low-Interest Rate Policy is  Forcing Investors To Take Dangerous Investment Risks in Desperate Search For Better Yield. The 30-year  chart below shows US corporate bonds moving into negative yields.  That’s the result of the Fed policy to keep interest rates low to stimulate the economy. However, those  negative rates also are causing many individuals and institutional investors, including insurance companies and pension funds, to take enormous risks for higher yields. For instance, to make up for actuarial deficiencies for underfunded pension funds.  The shifting money away from the corporate bond market into areas like the overbought stock market and many real estate classes is pushing up asset values beyond reasons.  And, that raises questions about whether the low-interest rate policy will ultimately do more harm than good when these investments come tumbling down.

Fed Low-Interest Rate Policy is  Forcing Investors To Take Dangerous Investment Risks in Desperate Search For Better Yield
Fed Low-Interest Rate Policy is  Forcing Investors To Take Dangerous Investment Risks in Desperate Search For Better Yield

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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