Lots of fuzzy thinking in that YOC article. I bought a few fixed rate preferreds 2 years ago for pennies on the dollar. My YOC was north of 30%. Guess what it is today? Hmmm, let me see, add the rate of..., subtract the tax-free...., divide by the long-term... I get > 30%. And, oh yeah, the price of the shares has quadrupled. And since interest rates are somewhere near zero, I'm kinda comfortable with 30%. Or is that an illusion? Or delusion?
As for making the mistake of assigning a 30% YOC to one's entire portfolio, that would take more than a newbie. Only a mouth-breathing, knuckle-dragger would do that.
I could see how the story might change in an environment of rising interest rates, but they've been dropping for 30 years. The author seems to think he's revealing a subtlety few can grasp, when, in fact, he's just plain wrong. Sheesh.... |
