Richard Young Gets It Right!

Veteran investor, Richard C. Young, understands risk management. In his latest Intelligence Report he lists some risky areas that are priced like Blue Chip investments. They are: China, India and Russian stocks (high P/E ratios), emerging market and high-yield corporate bonds (very low credit spreads), and oil (inflated futures prices).

You know that I’ve been all over the bubble in the oil futures. Here is what he said about the positively sloped Nymex Oil Futures Curve:

“When a futures curve is positively sloped, investors are willing to accept negative “roll yield” for the privilege of gaining exposure to the commodity. Historically, the oil futures curve has been negatively sloped, providing investors with compensation for taking commodity price risk. Investors have become so complacent with commodity price risk that they are now willing to pay for it.”

That’s well said, investors are paying up for risk and it should be the other way around.