Twas the night before Fed Day

The seniors were nestled all snug in their beds, While visions of fixed income danced in their heads. And Geithner at Treasury, and I at the Fed, Had hooked up the banks with a risk-free spread.

In which Fed Chairman Ben Bernanke addresses victims of the Forever Zero interest rate policy. Despite rising rates on the long bond since Thanksgiving, retirees are still at a loss for what they should be doing for safety and income.

Here is the dangerous reach for yield expressed in the form of everyone's favorite yuletide poem...

Twas the Night Before Fed Day

Twas the night before Fed Day, when all through the Home
Not an orderly stirred, not even Jerome.
The grandkids were framed on the nightstands with class,
Next to bottles of pills and teeth in a glass.

The seniors were nestled all snug in their beds,
While visions of fixed income danced in their heads.
And Geithner at Treasury, and I at the Fed,
Had hooked up the banks with a risk-free spread.

When out at the Home there arose such a clatter,
I scratched at my beard thinking “what was the matter?”
And then it had hit me, just like a flash:
We had made it impossible for them to keep cash!

The yield on our bonds was incredibly low
Limiting how long their money could go.
When, what to my wondering eyes should appear,
But "Alternative Yield", the theme of the year!

Without any choice but to get a return,
The seniors were risking a lot just to earn.
Their brokers came calling, and products were made,
And they bought it all, below investment grade!

"Now Junk Bonds! Now, Pipelines! Now, Real Estate Trusts!
Are China stocks bubbles? Not if they don’t bust!
To the blue chips with divvies! To the ETF list!
Now locked-up annuities; not a yield to be missed!"

And then, in an inkling, I thought to myself,
"I’m forcing the old to take risks with their wealth."
As I called Thomas Hoenig, our resident hawk,
I said, “Hey Tommy Boy, it’s time for a talk.”

He sprang to the phone, not a moment too late,
And said “Ben, let us start with a one percent rate.”
The committee agreed and the seniors all squealed
"Happy Christmas to all, and to all a good yield!"

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