The Dow is doing well – and people are wondering why! – and nobody is sure why. Cannot blame the American investor / saver.

Let us look at what are his options

1. Government debt /Gilt: clearly the yield is a huge challenge. If your money doubles in 72 years while your cost of living doubles in 14 years, you are losing big time. Most retail investors may not understand the meaning of Real return, but all of them realise that debt investment will not grow.

2. The American investor does not have the government borrowing (or looting?) in the form of NSC, PPF, KVP, etc.

3. Banks pay almost NO interest on bank deposits, so it has to be FD (called CD) or Money Market Mutual funds. This is a pathetic state of affairs, but the banks really have no interest in your bank account.

4. The American investor now sees many corporates borrow at rates better than what the govt is offerring. This is sad because here he may not have enough options to lend direct.

5. He can invest in emerging markets – but he has been conditioned to think that India, China, Brazil, Mexico are DANGEROUS but France, Greece, UK, Germany are great countries.

6. Most world investors have to recalibarate their risky and non risky parameters if they have to invest for a real return….

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  1. He has also an option to invest in rental properties( mortgage rates are at all time lows and rental demand is high plus rentals are inflation linked) and another option to invest in high dividend yield stocks like Johnson and Johnson,PayChex etc.

    And Subra, for your point 4 , there exists peer to peer lending sites like Prosper.com and LendingClub where investors can lend directly and earn annualised returns of 10% on average.

  2. I am sure that FIIs poured more money in our markets than DIIs or Indian public this year.

    I think we should condition our own people’s mindset to invest or stay invested in our markets rather than blaming others.

  3. pick the right corporate bond for fixed income and easily get 5%+, also nt sure where subra gets the notion that france, greece are thought to be great countries by the US .. ..
    as far as FII pulling out: consider how the rupee has crashed from 45 to 55 vs the dollar (20% drop), foreign funds that didnt get trapped in this currency crash needed 20% market rise just to breakeven, not to mention that BRICs have massively underperformed for 5 years now ..

    lol post at best with little regards to fact checking (the norm more often than not)

  4. bernanke is clear that he wants the fraudulent and childish economic idea of ‘wealth effect’ to be in place.he is buying up MBS so that house prices go up.what a moron.by favoring one asset class,he is just bailing out onwers of MBSs who have invested in worthless houses. i cant believe these people have Phds.actually,i am suspicious of anyone who has spent all his lifetime in academia not making a cent in the real world.

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