I agree with you about the risk, socratt. That being said, 2009 was my worst year for returns (~3.5% total) because I largely exited out of everything in October 2008 (mostly as a short seller), because it was obvious markets were not going to behave rationally due to all the manipulation.
The problem with the Fed’s ZIRP program, is that it causes normally conservative investors to go much further out on the risk curve. I’ve always been a control freak when it comes to managing our money, and have stayed away from wealth managers, hedge funds, etc. because I like to control everything on a day-to-day basis. Now, I’m finding myself re-evaluating everything because conservative investors are getting creamed in this current environment.
This is exactly what the Fed wants, and this is exactly why we’re in the mess we’re in. Any conservative fixed-income investors (seniors, pension funds, etc.) have been slaughtered this past decade. BTW, this is one of the biggest reasons Cal-PERS is in trouble, IMHO. It’s only partially due to “overly-generous” pensions. They’ve not been able to attain their forecasted returns due to the low interest rate environment, because low interest rates cause the mispricing of risk and force investors to take on more risky investments. They’ve made some risky choices because they were left with no options, and now many of those investments have blown up.
