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How Low Interest Rates Lead to Pitfalls for the Equity Investor - Don Yacktman

March 15, 2014 | About:

Over the last 100 years inflation has averaged 3%. Over the last 50 years inflation has averaged 4%.

Investors today are very dangerously projecting extremely low inflation far out into the future.

The result is that investors are using Treasury bonds at 3% as a hurdle rate which is half of where they historically have been, and these low hurdle rates are driving equity valuations higher. Those higher valuations are likely to be temporary.

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