Alert! My Payday Indicator is signaling the worst environment for investors during my investment career. Conservative investors have been left with scraps on the floor; there isn’t even a decent chuck burger to be had, let alone a T-bone steak.
At the end of 2009, investors were asked to take on more risk and receive less reward than at any other time since I’ve been in this business. My Payday Indicator replicates a portfolio invested 50% in Dow Jones Industrial Average stocks, and 50% in three-month T-bills. As you can see from my chart, the yield on this portfolio is the lowest on record.
Mismanagement by the Federal Reserve has left retirees and those on a fixed income to pick up the slack for banks that are borrowing cheap and leveraging for earnings. What are retirees going to live on when they’re earning 0.28% on three-month CDs? Inflation is running over 2%. This is an unsustainable situation for retirees and conservative investors.
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