No Fear, Again: Market Participants Are Opting For Extra Yield, Risk Be Damned

Last week, a buddy from college sends me an email:

"Hey, I got a little bit of cash sitting around, earning next to nothing in a savings account. Anything you'd recommend to get this cash working for me?"

"Not really - everything looks pricey right now...hey, does that mean you paid off your law school loans?" I asked.

"Actually no," he informed me.

I suggested he may want to work down the debt first, no matter how low the interest rate.

Meanwhile, California pension funds are still counting on a cool 8+% annual return to deliver on existing obligations - based on historical returns, of course, which only includes the greatest bull market of several generations.

Anyone want to take the other side of that bet?

Not to be outdone, junk bond funds are back in vogue once again. And of course, the crappiest quality bonds are the hottest!

Chart courtesy of EconomPic Data.

It's hard to believe that this time last year, we were talking about how Return OF Capital was the new Return On Capital!

So is everything rosy again, or is this "reach for extra yield" mentality exactly what a bear market bounce is supposed to engender during it's final phases? My bet is on the latter, but in any case, we should find out soon!

Yields on Greek Bonds Soars Past 7 Percent

The bond vigilantes are circling the wagons in Greece, as investors are coming to grips with the obvious fact that Greece is not going to be able to honor its debt obligations.

Yields on Greece's 10-year bonds soared above 7 percent today. Reuters reports:

Jitters about Greece resurfaced following reports that Athens wants to amend a deal struck at a European Union summit last month to bypass a contribution from the International Monetary Fund, which could impose tougher conditions in exchange for aid.

I don't know about you, but a 7.1% yield is still not nearly enough for me to touch Greek debt! Especially when we are talking about a potential default that could occur in mere months - not years.

Where's the money, Lebowski?

Recommended reading: Bill Gross' thoughts on the Sovereign Debt Trap