YIELDS ON SAFE investments—namely Treasurys, certificates of deposit, savings accounts and money market funds—are in the basement. Yes, Series I savings bonds currently offer an annualized 7.12%. But that rate is only guaranteed for six months, plus regular purchases are limited to $10,000 a year.

“Where can I go for yield?” goes the cry heard throughout the land. Nowhere, of course. As put by money manager Raymond DeVoe Jr., “More money has been lost reaching for yield than at the point of a gun.”

Still,

IF THERE’S ONE THING that confuses me no end, it’s this: Why are interest rates—specifically long-term Treasury yields—so low?
The yield on the 10-year Treasury note has lately been close to 1.6%, with 30-year Treasurys at around 2%. Yet year-over-year inflation is currently somewhere between 4.4% and 5.4%, depending on your favored metric.
Think about what this means: Inflation-adjusted yields for both 10-year and 30-year Treasurys are deeply negative, assuming inflation remains elevated. Here are five theories for why Treasury yields are so low:
1.

WE SPEND TOO MUCH time worrying about stagflation. The term describes a period of high inflation with stagnant growth—a disastrous economic condition. It was seen at times during the worst of the mid-1970s recession, and again when inflation spiked in the early 1980s.
Do we see it today? No way.
Everyone over 60 surely recalls how difficult it was decades ago. Consumer prices were out of control. The unemployment rate jumped. Real wages were on the decline,

I’M PLAYING ECONOMIST today, looking ahead to third-quarter GDP, the first estimate of which will be released Thursday. No, I won’t be offering a forecast. There are plenty of highly capable economists doing just that. Rather, my goal is to discuss what few in the media are talking about. Could a recession be in the offing?
According to economists Paul Samuelson and William Nordhaus, a recession is defined as “a period of significant decline in total output,

DO I SOUND LIKE a broken record? Last week, the performance gap between U.S. and foreign stocks widened even further. Vanguard Total Stock Market ETF (symbol: VTI) has now returned 21.6% so far in 2021, while Vanguard FTSE All World ex-U.S. ETF (VEU) is up just 9.4%.
International funds’ relative weakness has become so routine that it rarely makes the financial news. What’s different this time: The economic landscape would seem to favor foreign shares,

THE S&P 500 STOCKS are up roughly 100% since March 2020’s market low. I’m 100% clueless about how much longer this remarkable run will last. But I’m 100% confident that, when the next downturn comes, many investors will rush for the exit, fearful that their stock holdings will soon be worth little or nothing.
Which brings me to one of the most important investment concepts: intrinsic value.
No, intrinsic value isn’t a simple notion and,

I RECENTLY WROTE about the fallacy of time diversification. Time diversification is the widely held belief that market risk declines as our holding period lengthens. It’s one of the cornerstones of many investors’ approach to asset allocation and risk management.
Financial theory, however, refutes time diversification because market risk—as measured by standard deviation—actually increases with longer holding periods. The math tells us that the dispersion of potential results widens with longer time horizons. This counterintuitive insight rests on the assumption that total returns have a normal,

IT’S A COMMONLY HELD belief that market risk is a function of time in the market. Simply put, risk falls as our holding period lengthens. This is the notion behind time diversification—the idea that more time allows us to diversify across different investment periods, resulting in reduced risk.
For example, the S&P 500 has historically generated positive returns in nearly every 20-year holding period, even after adjusting for inflation. Armed with this data, one of the first things financial advisors ask clients is about their time horizon.

ONE OF MY FAVORITE pastimes is listening to podcasts. I subscribe to about 20—half of them related to finance.
One series, produced by a large Wall Street investment house, features three-to-five-minute episodes. They’re usually about market trends or economic analysis. Truthfully, they aren’t among my favorite podcasts. But I like their short length when I don’t have time for a 30- or 60-minute episode.
On a recent podcast, listeners were told that the firm’s economists believe that U.S.

CAST YOUR MIND BACK 10 years—to Oct. 3, 2011. There was a fire-sale on Wall Street. Two months earlier, brinksmanship on Capitol Hill had culminated in Standard & Poor’s first-ever downgrade of the U.S. government. Meanwhile, Greece was on the verge of collapse, prompting the European Central Bank to take extreme measures to combat the region’s debt debacle.
It was a scary time. But—as is so often the case—the dire stories on financial television marked the beginning of a great period for long-term investors.

SUPPOSE THE S&P 500 ended the year at Friday’s close of 4455.48. Let’s also assume that the analysts at S&P Dow Jones are correct, and the S&P 500 companies have 2021 reported earnings equal to an index-adjusted $185.32. That would put the S&P 500 at 24 times earnings, versus today’s 34.8.
That would be considered high by historical standards, though it isn’t outrageous given today’s low interest rates. But what would it take for stocks to look like a compelling investment?

OPEN AN ECONOMICS textbook, and you’ll find this fundamental principle: When the money supply expands—that is, when the government prints more money—higher inflation is often the result. This topic has, for good reason, been on investors’ minds lately. Since the pandemic began, the Federal Reserve has increased the money supply by several trillion dollars.

Is higher inflation inevitable? I see five possible answers to this question:

1. Yes, of course. Between 2010 and 2020,

DIVIDEND YIELDS MAY be tiny, but they sure they get talked about a lot. As Rick Connor pointed out on Friday, the S&P 500 stocks collectively yield just 1.3%—near 20-year lows. Yields have fallen as share prices have climbed and as companies have put more emphasis on stock buybacks. In fact, today, companies spend more on buying back their own shares than paying dividends.
Companies continuously manage their capital structure—how much of the enterprise is funded by issuing stock and how much with debt.

WE’VE ALL BEEN looking for signs that the financial world is returning to some semblance of normalcy. I recently read a CNBC article that gave me hope. The article said that worldwide dividend payouts were expected to reach $1.39 trillion in 2021, almost back to pre-pandemic levels.
The data came from a report by Janus Henderson, a U.K. money manager. Dividends in this year’s second quarter increased 26% from 2020’s second quarter and were only 6.8% below 2019’s second quarter.

AT THE CRACK OF DAWN each day, I grab a cup of coffee, and then dig into the latest investment articles and research reports. Last week’s most intriguing insight: According to data from Emerging Portfolio Fund Research, investment flows into global stocks are on pace to hit $1.048 trillion this year.
To appreciate the magnitude of this year’s inflows, consider that 2017 ranks as the next strongest year—at a relatively paltry $300 billion. Other years,