Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Interest Rates & Investing - Investing Simplified – Part One

Interest-Rates / Learning to Invest Sep 14, 2007 - 01:17 AM GMT

By: Investmentscore.com

Interest-Rates Best Financial Markets Analysis ArticleIf you were playing a competitive game of chess for a grand prize of a million dollars, would you ask your opponent what strategic move you should take next? No. So why do investors and analysts ridicule and blame the banks for offering poor advice on the future direction of interest rates? If a bank is going to lend you money for their profit, what is their incentive to give advice that is in your best possible interest?


Investing and economics can be very complicated and confusing so we try to focus on simplified common sense guidelines. This helps us to be less emotional about investing decisions, thereby improving our probability of profitability. We think this focused mindset is a key for success during times such as what we are currently experiencing. This article will try to clarify one strategy we use to help us keep our mind focused during these times.

For example: We regularly read analysts contrarian commentary about the foolishness of large banking institutions advice, financial policy etc. But are large banking institutions and the “establishment” really foolish? Do they really not get “it”?

Because our strategies are contrarian in nature one may expect us to agree with the above statement but we do not. Instead we believe these institutions are brilliant and run by exceptionally smart people. We believe the error is on the part of the analyst or individual assuming these institutions are operating in their best interest. Why do investors assume the advice they are receiving from a bank is in their best interest when giving the client that good advice will likely mean less profit for the bank. Does the bank have a responsibility to make you, the client profit, or is their responsibility to make their shareholders profit? Do you see this obvious conflict of interest?

The above chart is of a short term, three month US Treasury Bill interest rate since January 1957. You will notice that rates appear to be at historically lower levels around February 2004 and have since headed higher. We recall back in February 2004 the continued promotion of floating mortgages and the benefits of adjustable rate loans from various lending institutions. Also roughly around this time we recall the Federal Reserve Central Bank of the United States suggest lenders offer a “variety of product alternatives”, suggesting mortgages other than traditional fixed rate mortgages. Knowing that interest rates have risen since 2004, should these comments be considered poor advice just because long term it was likely not the most profitable advice from the borrowers perspective?

We always try to keep in mind that institutions may not always have our best interest at heart when providing their opinion in the financial papers, on television, in person etc. We recognize that conflict of interest is simply a reality of the financial markets.

So how can we use this insight to our advantage?

First, being aware of potential investing challenges makes us better able to recognize and deal with them. The above example helps us clarify what we think is the obvious conflict of interest that exists in the world of finance. We do not believe that all professional and printed or televised advice is poor or corrupt but being aware of these problems does remind us to reconsider and challenge others opinions.

So what seems to be a generally accepted theory about current market conditions?

First, we must remind our readers that we are not economists and we are not offering financial advice but rather our opinion on recent market conditions. Generally speaking it appears to us that the current popular discussion in the financial media is all about the recent “Credit Crunch”. The popular catch phrase of the moment seems to be “re-pricing risk into the system”. The general feeling we get from this relentless message is to avoid “risky” investments.

Indirectly we get the feeling investors are generally being told through various means to avoid commodity (“risky”) investments such as precious metals and energy and pay down all debt. This may prove to be a fantastic financial strategy but we wish to illustrate an alternative perspective. If interest rates are expected to rise over the long term from their lows of 2004, this recent “credit crunch” would be a fantastic opportunity for lending institutions to have low interest rate loans minimized. Therefore we think it would make sense for banks to tighten their lending standards during the highly publicized “credit crunch”. We believe this recent “credit crunch” event may provide a fantastic excuse for banks to reduce their lending during a time when it may be the most advantageous for the public to borrow with potentially lower fixed interest rates.

This article only outlines one simple example of a contrarian viewpoint but we use many indicators and methods of drawing our final conclusions. We believe long term interest rates are heading higher as inflationary pressures build. Actions speak louder than words and reading between the lines, we think this is what the non verbal actions of the banks are telling us. We believe this will be more advantageous for commodity based investments such as precious metals and less advantageous for stocks and bonds, therefore we are more inclined to add to our precious metals investments than sell. We think commodity based investments such as precious metals are a fantastic opportunity from an intermediate, long term perspective.

We intend to write more free commentary about our opinions on “Investing Simplified”. If you wish to be notified when these articles are available please subscribe to our free newsletter at www.investmentscore.com . You may also wish to visit our website to learn about our custom built investment timing charts. We hope to see you there and good luck.

By Michael Kilback
Investmentscore.com

Investmentscore.com is the home of the Investment Scoring & Timing Newsletter. Through our custom built, Scoring and Timing Charts , we offer a one of a kind perspective on the markets.

Our newsletter service was founded on revolutionary insight yet simple principles. Our contrarian views help us remain focused on locating undervalued assets based on major macro market moves. Instead of comparing a single market to a continuously moving currency, we directly compare multiple major markets to one another. We expect this direct market to market comparison will help us locate the beginning and end of major bull markets and thereby capitalize on the largest, most profitable trades. We pride ourselves on cutting through the "noise" of popular opinion, media hype, investing myths, standard over used analysis tools and other distractions and try to offer a unique, clear perspective for investing.

Disclaimer: No content provided as part of the Investment Score Inc. information constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers, including the staff of Investment Score Inc. or their affiliates will advise you personally concerning the nature, potential, value or suitability or any particular security, portfolio of securities, transaction, investment strategy or other matter.  Investment Score Inc. its officers, directors, employees, affiliates, suppliers, advertisers and agents may or may not own precious metals investments at any given time. To the extent any of the content published as part of the Investment Score Inc. information may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Investment Score Inc. does not claim any of the information provided is complete, absolute and/or exact.  Investment Score Inc. its officers, directors, employees, affiliates, suppliers, advertisers and agents are not qualified investment advisers.   It is recommended investors conduct their own due diligence on any investment including seeking professional advice from a certified investment adviser before entering into any transaction. The performance data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that such calculations are not guaranteed by these sources, the information providers, or any other person or entity, and may not be complete.   From time to time, reference may be made in our information materials to prior articles and opinions we have provided.   These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current.  As markets change continuously, previously provided information and data may not be current and should not be relied upon.

Investmentscore.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in