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  • Michael Livian

Lost decade for savers?

Bloomberg Businessweek last week published a good story ( about a potential lost decade for savers:

... when the Federal Reserve comes out and commits to buying hundreds of billions in mortgage-backed securities, it is explicitly prioritizing the interests of borrowers—borrowers who keep seeing record-low mortgage rates.

Where does this leave an elderly couple that was banking on income from their ladder of CDs? Or a soon-to-retire baby boomer who pulled money out of stocks ahead of and after the crash on the assumption that some modicum of bank yield would help tide them over to age 65? And this is hardly just about widows, orphans, and retirees. What of the owner of a business or home who was planning to sell and draw income from the proceeds of the cash? In the desperate search for yield, these and other forgotten cash constituencies have been forced deeper into the yield curve, where obliging corporations have been issuing 30-year debt on record-low terms.

We were quoted in the piece:

“Policymakers had to pick between saving the system and punishing the savers, or letting the market fail and punishing everybody,” says Michael Livian, a Manhattan money manager who has written (PDF) on what’s increasingly being called the financial repression exacted by negative real interest rates. “They went for the first one.”

What the story did not mention is our belief that the next decade may not turn out to be a lost decade for savers. In fact, savers and investors will have to get used to searching for income in places other than CDs, US Government and Municipal Bonds. Our white-papers on income investing elaborate on the different areas where savers can look for reasonably conservative income.

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