OECD Joins Warning Club: Yield-starved investors driving asset prices to dangerous levels

The OECD joins the warning club again. They have done so September 2014  and this March.

Mainstream institutions, like the OECD, IMF and the ADB used to be blind to such scenarios. But apparently, as I previously noted, global political or mainstream institutions or establishments, CANNOT deny the existence of bubbles anymore, so their recourse has been to either downplay on the risks or put an escape clause to exonerate them when risks transforms into reality

From Reuters: 

Encouraged by years of central bank easing, investors are ploughing too much cash into unproductive and increasingly speculative investments while shunning businesses building economic growth, the OECD warned on Wednesday.

In its first Business and Finance Outlook, the Organisation for Economic Cooperation and Development highlighted a growing divergence between investors rushing into ever riskier assets while companies remain too risk-averse to make investments.

It urged regulators to keep a close eye on investors as they piled into leveraged hedge funds and private equity and poured cash into illiquid assets like high-yield corporate bonds.

Meanwhile, judging by stock market returns, investors were rewarding corporate managers focused on share-buybacks, dividends, mergers and acquisitions rather than those CEOS betting on long-term investment in research and development.

"Stock markets in advanced economies are punishing firms that invest," OECD secretary general Angel Gurria said in a presentation of the report. "The incentives are skewed."

According to the OECD's research, over the 2009-2014 period buying US shares in companies with a low investment spending while selling those with high capital expenditure would have added 50 percent to an investor's portfolio.