We decided to give Steve McDonald a break from slapping faces. Today, we thought you’d enjoy reading his fantastic article on income plays. We initially published it in April. Hope you enjoy it!

According to a new Swiss Re report, the Fed’s efforts to maintain a zero interest rate environment have cost income investors $470 billion. Almost half a trillion dollars!

And those numbers include only losses up through 2013. The real number could be another 40% to 50% higher.

Maybe it’s more accurate to put it this way: Investors’ unwillingness to read the writing on the wall has cost them almost half a trillion dollars. That’s probably closer to the truth.

The average investor has hung on to their beloved FDIC-insured bank CDs and savings in the hopes that something would change.

It hasn’t.

And if the numbers I am seeing are even close to accurate, they won’t.

The Swiss Re report called the money printing and forced zero interest rate market “financial repression,” and it sees this causing more problems than just the loss of $470 billion in interest income.

Swiss Re Chief Investment Officer Guido F?rer said in a statement, “Crowding out investors due to artificially low or negative yields will reduce the diversification of funding sources to the real economy, thus representing a risk for financial stability and economic growth potential at large.”

That’s not great news for the real economy.

But whether the reduction of funding sources has long-term implications or not, the more immediate problem for those retired and about to retire – the main income buyers in this country – is how to pay their bills on yields of 1% and 2% from their bank investments.

Most already know they can’t. But most importantly, they are finally realizing this low-rate environment is not changing anytime soon.

The Royal Bank of Canada’s (RBC) head of fixed income said in a recent MarketWatch article that he can’t see anything on the radar that would cause a change in the current market. In other words, rates will remain low.

Print Friendly, PDF & Email