In another sign that investors are usually off in their timing, the Federal Reserve released a survey today indicating a renewed investor appetite for various asset classes previously shunned. During the financial shakeup of late 2008, investors rushed away from any investments associated with lending. The Fed survey shows demand increased in the last three months for assets such as high-grade corporate bonds, stocks, residential mortgage-backed securities issued by Fannie and Freddie and other asset-backed securities.
Investors are desperately seeking some sort of return given the low interest rate environment. In the case of residential mortgage-backed securities, investors are showing unparalled faith in the only institutions making a market in mortgage loans. Fannie and Freddie are continuing to dilute shareholder value by continuing to lose money. The residential mortgage market is desperately ill. Stocks are in the next phase of their multigenerational decline.
Investors are unconcerned about some of the economic realities facing them. This last gasp at reaching for yields will hurt those unconcerned about preserving their wealth.
Jim Mosquera publishes The Sentinel Economic and Financial Newsletter.
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Most investors are concerned and it shows.
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