Income-starved investors could be heading for disaster

Our low-rate world has meant income-starved investors are ignoring risk in their desperation to get a decent yield, says John Stepek.

"We are experiencing a bubble, not in stock prices, but in bond prices." It's a dire warning about the state of the markets, and it's not really one I'd be inclined to disagree with. But I am rather more inclined to take issue with the person who uttered these words to Bloomberg in an interview earlier this week none other than former Federal Reserve chairman Alan Greenspan.

You see, if there's genuinely a bubble in the bond market (and I think there is), then there can be few human beings on earth who did more to make it happen. While he was in charge of the Fed, there was no financial wobble that couldn't be sorted out by cutting interest rates and organising bailouts for the banks and financiers involved. And even after he'd gone, his disciples Ben Bernanke and current incumbent Janet Yellen picked up right where he left off, printing money and setting rates as low as they could go. In short, if as Greenspan avers "real long-term interest rates are much too low and therefore unsustainable", it's in large part because he put them there.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.