Jason Zweig’s Wall Street Journal column this week, Don’t Trip In Your Search of for Higher Bond Yields, does a nice job of tapping into the investor zeitgeist:
Last month, investors put twice as much money into intermediate-term and junk-bond funds as into short-term bond portfolios. As a result, they have exposed themselves to much greater risk from rising rates or falling credit quality. When interest rates go up, as in 1994, investors in longer-term bonds can get slaughtered.
“People feel they have to choose between the frying pan of zero yields and the fire of risk,” said Crane Data’s president, Peter G. Crane. “And they’re sick of the frying pan, so they’re jumping into the fire.”
I have to say, though: it’s nice for a change to be talking about the straightforward perils of chasing yield, rather than the almost unimaginable threat of global economic collapse. Dare we say it: maybe things are getting back to normal after all.
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