Cash pays 5.5%. What is your money doing?| Signals and Noise, August 14
There is an iron law of investing. It is called opportunity cost.
Right now, risk-free cash pays around 5.5% a year. That is the bar every other investment has to clear after risk.
The S&P 500 dividend yield is now 1.03%, the lowest ever recorded. The ASX 300 sits at about 3%, well below cash. And the sudden wave of private credit offerings quoting 7.5% and 8% paid monthly? Almost no one is talking about the risk sitting underneath those returns. Most of it is lent against property, which is exactly what the headlines say is breaking.
This week's Signals & Noise walks through the arithmetic. The Saudi Aramco commentary on the oil supply shock, the $3 billion sitting inside 18 private credit funds tied to one Sydney developer, and China's new formal exit ban on rare earth scientists that takes effect September 15.
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