Google partly defines alchemy as “a form of chemistry and speculative philosophy practiced in the Middle Ages and the Renaissance and concerned primarily with discovering methods for transmuting baser metals into gold”.

Today, investors and their advisors are faced with historically low yields on fixed income securities. Many investors have generally assumed that their fixed income portfolios should provide a current return on the order of 4-5%. Today, the yield on the benchmark ten-year treasury is less than 2%.

As a result, investors are open to strategies that could increase the returns on fixed income securities. The financial services industry has responded to this demand with increasingly complex securities that purport to provide the desired rate of return without materially increasing risk. The claims regarding risk are very difficult to assess.

Caveat Emptor.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA