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One of the more perilous investment strategies a person can pursue particularly late in the credit and or economic cycle is reaching for yield usually done with high yield or junk bonds but also with alternative investments and by increasing duration or investing in a 30-year bond instead of a 10-year bond. Early in the cycle when credit spreads are relatively wide, debt to GDP or Gross Domestic Product is fairly low and the economy is emerging from recession and expanding this strategy often works quite well. When corporate debt levels exceed 45% of GDP as they have you see yet another warning light flashing indicating excessive risk.

Stock market valuations also flash a warning with Standard and Poors 500 valuations now higher than the average over the last 20-years by a substantial margin as they close rapidly on the Dot -Com valuation peaks following 5-consecutive quarters of falling earnings and 6 consecutive quarters of falling sales.


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