Minack: I can see the yield pain trade continuing

Minack: I can see the yield pain trade continuing. Gerard Minack from Minack Advisors comments on lower rates and implication for equities. For local investors I can see this 'yield pain trade' continuing... Every mum and dad who has a term deposit expiring in CBA [Commonwealth Bank of Australia] can roll it back into the term deposit and get a crummy yield, or they can roll it back into the equity and get a better yield... Now that's befuddling some people who are looking at [the valuations of] these banks, which are among the most expensive in the world... I'm not saying you should buy banks, my point is that that if yields stay low, then that process will probably make them into a bigger bubble. Minack says a downturn in the domestic economy will have a big impact on the banks, That's when you go from holding your nose, gritting your teeth and buying the banks to saying 'I'm out completely. Full article (paywall) (VIEW LINK)


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