Investors are starving for income like never before. Most recently, retirees, insurance companies, pension plans and others are tossing caution to the wind and desperately reaching for yield wherever it can be found. Based on history, this will not likely end well.

This summer has marked a new low in yields and a corresponding new wave of investor desperation. After the surprising U.K. vote to exit the European Union, interest rates plunged throughout the globe. Government bonds – about $12 trillion worth – now trade at negative yields. No modern-day finance textbooks discuss the notion of investors literally paying a government for the right to lend them money. Yet, this is the upside-down world of finance in which we now live.

Dealing with this world of low interest rates has pushed investors to seek alternatives to owning high-quality, low-yielding bonds or CDs. As a result, traditional income-oriented stocks, such as utilities and telecom companies, have surged about 20% in just the first seven months of this year. These are astounding returns for companies operating in slow-growing industries. Nonetheless, investors today view 3% dividend yields as mouth-watering. There appears to be very little fear of paying too much for these dividends. There should be.

Let’s put the current price of utility and telecom stocks into some historical perspective.

Currently, investors are so happy to receive their dividends that they have now bid up utility stocks to nearly 20 times their annual earnings. During my career, it has not been uncommon to see utilities trading about 30% to 50% lower than they do now. It is a basic fact of math that any return to normalcy – even a move in the direction of normal – will wipe away many, many years of the dividends these investors so craved. It takes a lot of years of dividend payments to make up for a 30% drop in the stock price.

It is ironic that Warren Buffett’s warning that investors “pay a very high price in the stock market for a cheery consensus” has been so turned on its head. Four decades later, it is now investors’ un-cheery consensus about ever being able to earn enough income on their money that has led them to ignore Buffett’s advice. Whether it is optimism or pessimism that leads investors to pay too much, the outcome will be the same. You should review your own portfolio now for any hints of desperate thinking.

Once again, the US economy is simply confounding investors. 

While the consensus view of economic growth in the 2nd quarter of 2016 was about 2.5%, the first estimate came in at only 1.2%. This followed a very weak 1st quarter of 2016 at 0.8%, according to the third and final estimate. Together, the first half of 2016 showed GDP growth of about 1%. It appears the Fed is going to hold off on raising interest rates for a while longer. The data just doesn’t support the decision. 

The big bright spot in the 2nd quarter was consumer spending growth that offset a large drop-off in business investment. 
As has been the case for sometime now in this recovery – marked by low interest rates, steady job growth and a strong auto and housing market – the US economy has not been successful in achieving what Larry Summers once called, economic “exit velocity” – that speed where the positive fundamentals begin to reinforce more growth on its way to a virtuous cycle of economic recovery. 

Instead, it’s been a long period of spurts, stutters and stammers. That trend continues now seven years into the recovery. 

In addition, it looks like the 2nd quarter will mark the fifth straight quarter of declining corporate earnings. See pictures below. Yet, stocks hover near there all-time highs and prices relative to earnings are high on many broad measures. 

Yes, it’s confounding. So it has been in an extended era of extraordinarily low interest rate policy around the world.  

Back in 2009, I attended the annual meeting of Berkshire Hathaway, the conglomerate controlled by famed investor Warren Buffett. That year’s meeting held special attraction, taking place just weeks after the stock market hit its low during the financial crisis. Buffett served that day as investors’ North Star.

Prior to his much anticipated Q&A session, Buffett made a short presentation to a crowd of over 40,000 worried shareholders. His clear mission that morning was to calm and teach.

Buffett, in full professorial mode, highlighted a trade he made at the crisis-induced market low. In the midst of market panic, he had managed to sell a US government bond at a price that produced a negative yield for the buyer. Obviously, stuffing money under their mattress was just not a practical alternative.

Buffett’s lesson was clear. Investors had temporarily gone insane and rational behavior always returns.

Seven years have passed since his lecture and now trillions of dollars of government bonds across the globe trade at negative yields. Perversely, the US 10-year bond is now seen as attractive with its mouth-watering, positive yield of 1.5%.

What was once abnormal has become normal. Justifications abound. 
Central banks will hold rates low for much longer. Inflation is dead. Global growth is slow. As long as these conditions hold – and the cascade of consensus thinking says they will – yields will stay low or go lower.

The panicked investor Buffett once mocked is no longer. Interest rates at these absurd levels are now accepted as normal. There is no panic, but rather a cold calm about it all.

As the internet would transform the economy during the tech-stock bubble and the Fed-induced low interest rates justified ever-rising house prices and a credit bubble, what assumptions have we adopted as certain today?

Has Japan’s economic disease – following the bursting of their own credit bubble and marked by economic stagnation, demographic decline, persistent deflation and, yes, aggressive zero interest rate monetary policy – become investors’ new North Star?

The habit of real-time diagnosis is often a fool’s game in investing. Only in the aftermath of a burst bubble does a consensus narrative form.

Today, a new, dangerous consensus may be forming. With the justification and acceptance of insanely low interest rates across the globe – creating massive problems in meeting society’s future needs, such as pension and other retirement obligations – stocks are increasingly seen as the only alternative.

In the midst of a bubble, anchoring yourself to what you know can do wonders. While the chase for investment returns never ends, what I know is the desperate reach for returns never ends well.

A solid week has passed since British voters shocked the world with their decision to exit the European Union. This has given us some time to analyze the possible economic impacts of Brexit, as it is now known.

From an economic viewpoint, its ramifications on global growth are negative. When borders become more closed, impairing the flow of capital, decreasing access to workers and lowering trading opportunities, the impact on the economy is obvious. Just imagine if California or Texas or New York decided to secede from our union. It would affect not only the citizens of those states, but also people in Michigan and the rest of the world.

A growing and healthy economy lifts most people, to varying degrees. On the flipside, a stagnant and shrinking economy – a result much more likely after Brexit – disproportionately hurts people living on the lowest rungs of society’s economic ladder. Early voter analysis shows that poorer, less educated voters chose to leave Europe. Voting against one’s own economic interest is not a new phenomenon.

The vote to leave Europe was clearly based on non-economic reasons.

With the Brexit vote, the deciding factor hinged on issues of cultural sovereignty, rather than economic theory. Specifically, concerns of immigration policy played a serious role that tipped the balance.

Regardless of the motivations of the “leave” voters, the implications for the economy were indicated by the upheaval in financial markets. In part, the unprecedented decline of the pound sterling and stocks throughout Europe was a result of surprise. Unexpected events aren’t normally positive for financial markets. Nonetheless, the recovery in stock prices this past week could have been expected. Nothing moves in a straight line in capital markets.

However, the likely longer term effects can be visualized by watching an inchworm. The stuttering, stop-go nature of the economy’s forward progress can result in miscalculations along the way by businesses and investors. Those newly-launched expansion plans or that just-signed contract now face a different set of assumptions than originally planned. The global economy just became a bit more like an inchworm.

Looking forward, business confidence has also been impaired. Whether this hit to confidence is longer lasting will depend on how politicians throughout Europe and the UK handle the aftermath. Since the vote, uncertainty is heightened. In addition, the realities of the massive complexity of actually exiting the European Union hasn’t helped. It’s been aptly described as a messy divorce.

In my view, the Brexit vote has injected tangible uncertainty for businesses and markets, on a global scale. What affects the UK, affects the rest of Europe. And, what affects Europe, affects the US and Asia. With central bankers running out of policy bullets – with interest rates already at rock-bottom levels – and with global politics running on a potent mixture of anti-establishment and anti-globalization fuel, the situation will likely be uncomfortably volatile for investors.

In investing, discomfort can be a red flag or an opportunity. It is never easy to spot the difference.