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
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

R.I.P. Interest Rates

Interest-Rates / US Interest Rates Sep 20, 2015 - 01:22 PM GMT

By: Investment_U

Interest-Rates

Andrew Snyder writes: I went to the doctor Friday morning. What a problem we have.

“How’s the pain? Do you want some pills for that?” he asked.

“No thanks, doc. Let’s just figure out what’s causing it.”


“How about stress? We can treat that, too.”

“No, doc. Unless you give those pills to somebody else, pills won’t fix my stress.”

I don’t blame the doctor. He’s doing his job. Most of his patients likely walk away with a stack of prescriptions and are happy with it... lots of different ways to hide what’s really going on.

Long-term solutions like eating right, exercising more and drinking less aren’t what we want to hear. We want a pill.

It’s a dangerous idea. But it’s certainly not something that’s constrained to the medical community. Oh no, laziness is a pandemic.

In fact, it’s how we got to the death of interest rates. Instead of fixing the problem, we took a pill.

On Thursday, Janet Yellen gave the American economy another whopping dose of free money... and permanently rewrote the rules of economics.

interest-rates-why-fed-decision-rewrote-rules-of-economics

For most American investors, Yellen’s decision was devastating. Not for the short-term effects - the markets barely moved on the news.

It’s the long term that has us worried. It’s now quite likely we will never see a return to normalcy in our lifetimes.

Thanks to the death of interest rates... gone are the days of “safe income.” Gone are the days of selling our “risky” stocks as we age. Gone are the days of traditional investing.

Take, for instance, a conversation I had at dinner on Thursday night. “We just bought an annuity,” my freshly retired friend said. “We’ll get $400 a month for the next 20 years.”

“Hmm,” I replied. “What did it cost you?”

“About $40,000. But we’ll get paid a total of $89,000.”

My first thought... wow, a 4% annual return; you got ripped off. But then I was reminded that these aren’t the rules of investing we grew up with. These days, a guaranteed 4% return isn’t something to sneeze at.

That has us worried. From here on out, we need to get creative about where we make our money.

On Friday, the Club’s Chief Investment Strategist Alex Green told readers about the virtues of investing in bonds at a time like this. He summarized the situation well.

“When the Federal Reserve took short-term rates to zero in the fall of 2008, no one was predicting that rates would still be that low seven years later.

“Yet they are. And rates could stay low a lot longer, especially since the futures markets are indicating that inflation will remain negligible for the next 10 years.

“Sounds unlikely? Think again. Add up slow economic growth, stagnant wages, a strong dollar, global outsourcing, cheap raw materials and plunging energy prices and see what you get.”

I think we know what we get... the need for more pills.

That, too, has us worried.

We wonder how long banks and insurance companies - nay, the entire financial system - can survive after the death of interest rates. How can an annuity provider offer 4% for 20 years when it needs to go way out on the risk spectrum just to earn 4%? How can a pension fund earn the 8% it needs without risking the ability to pay its pensioners today?

To be sure, Wall Street will use all sorts of derivatives to keep the system on life support, but eventually spreads will wither and the Street will be forced to pull the plug.

Yellen and her troops at the Fed know dirt-cheap money won’t fix what ails us. It only masks it... cheap money is a pill. It makes us feel better so we stop griping about the pain.

It’s now clear we’re addicted. There’s no way to quit the pain pills without forcing us into an all-out crisis.

That’s what has us worried.

R.I.P. interest rates.

Good investing,

Andrew

Source: http://www.investmentu.com/article/detail/47645/interest-rates-why-fed-decision-rewrote-rules-of-economics#.Vf7qmk3bK0k

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U 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