Longer term interest rates have gone to nearly zero.
I won’t quote the yield curve but suffice to say at the March 17-18 Federal Reserve meeting, they will drop the federal funds rate another half point to a target of 0.50% to 0.75%, or perhaps even to 0.25% to 0.5%.
Either way, this is close enough to zero.
After the 2009 economic crisis the yield curve more or less did the same thing (except yields were slightly higher). The name of the game was the following: Anything with a yield is an eligible investment. Anything without a yield is trash.
The trick, as always, is to ensure that the companies that you’re investing in have the organic cash generation capability to give out those yields.
Those that can buy sustainable yield will do well. Those companies that don’t give out yield will probably trade at a discount to those that do, except for those that are of speculative value (the Teslas and the like).
Finally, using my “Coronaproxy” stock, Alpha Pro Tech (NYSE: APT), it looks like the hysteria is dissipating. Be warned that I’ve been so wrong on the psychological impact that this flu has had on society that I don’t blame the readers of this site for using me as a contrary indicator.
Good post as always – thanks. Re sustainable yields – will you be looking into any Canadian REITs? Maybe excluding those with retail/lodging exposure or those with limited AB exposure. CUF/APR/SMU (despite AB) coming to mind. Thanks!
REIT’s are not on my target list at all here. There might be a few distressed cases here and there that will come up but overall I think it will underperform.
Appreciate it – thanks.