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

March 15, 2014 | About:
Canadian Value

Canadian Value

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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.

About the author:

Canadian Value
http://valueinvestorcanada.blogspot.com/

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