No. of Recommendations: 6
The theory is that when rates for safe investment options are good, money remains there safely tucked away in a bank or money market account. When the savings rate is very low investors seek yield elsewhere and are willing to take on more risk in securities.
It has some merit as an explanation, even if it isn't the most intelligent thinking for investors.
Perhaps strengthening this is the observation that the "flat 2% yield" effect I noticed started around 2002, with the noted exception of around the credit crunch when everything got a lot cheaper. The 2% yield notion certainly wasn't true in the last century. Essentially never below 2.7% at the lowest, before the tech bull started around '95.
By sheer coincidence, short bill interest rates have been pretty low since early this century, almost always under 2.4%.
Until recently. So maybe my lovely observation was posted right when it stopped being useful... : )
Jim
