The reach for yield must be carefully balanced against the inane ignorance of 'if it sounds too good to be true, then it is!' and it appears that there are plenty of sucker-draining entrepreneurial asset managers out there willing to create whatever the market will bear. To wit, the WSJ reports [2] on the growing size of the Master Limited Partnership (MLP) market; for years a haven for 'safer' income with upside potential this asset-class has been seized upon as "private-equity firms, eager to offload assets, are turning mountains of sand, gas stations and coal mines into a special type of security that offers investors annual yields as high as 19% for years to come." Seven of the last ten MLP IPOs have offered yields above 10% (sound reasonable?) and with the sector's market cap having risen from $65bn in 2005 to over $350bn now it seems like the thundering herd is willing to sell it to the blundering herd. Critically though, as WSJ notes, these new MLPs carry much more risk than their predecessors - as the promise of such high returns may be too good to be true. Indeed - though we assume that the Fed will be buying MLPs too by the time these go pear-shaped.
Perhaps most interesting is the final WSJ Headline: "Yield-Starved Investors Snap Up Riskier MLPs" and the print version was "Riskier Master Partnerships Tempt Yield Hungry" when one considers the original headline used before the editors got their hands on it "New Breed of MLP: Sky-High Yields And Increased Risk" (found from the URL designator on the online version)
[3]
We suspect that the latter was more honest but the former more palatable to their advertisers...