Rate Fearmongers Wrong Yet Again

For anyone worried about the prospect of "rising interest rates"- and I hear it so often I'm ready to throw a rock at Bloomberg TV- the 10 year Treasury just dropped into the 2.20% range- about where it was in February 2009, when the world was coming to an end, and before Quantitative Easing began. I had listened to this drumbeat so often, even I had my eye on the exits for mortgage REITS and other rate sensitive products we own. So, what happened? As always, a combination of things- Europe is now in another slowdown, partially because it didn't follow our stimulus policies, which despite criticism, wound up working better than the others. Interest rates in Germany and the Netherlands are now effectively negative. So that sends more funds here seeking higher yields, and of course, demand for our debt brings prices up and yields down.

Second, the dollar is now very strong, and this has all sorts of good implications. Since global oil prices are dollar denominated, oil prices are shrinking. A 27 month low, finishing at $87.39 a barrel yesterday. You may see gasoline as low as $3.00 a gallon in the coming months. Geopolitically, it puts a big squeeze on Mr. Putin- Russia needs oil at $100 a bbl. to keep its economy afloat. At these prices, Russia is losing 1.3% of its entire GDP in currency shortfalls. It may be a hard winter in Moscow. King Dollar is stronger than any missile.

And other commodities? See what's happening to corn, soybeans and wheat. Pretty deflationary. You can go back to ordering that steak again.

A couple of years back, I warned about the poisoning of economics by political prejudices. Here is a letter signed by 30 "economists" back in 2010, warning of the perils of Fed policy and inflation:

http://www.bloomberg.com/news/2014-10-02/fed-critics-say-10-letter-warning-inflation-still-right.html

With the exception of Jim Chanos, the other signatories are charlatans.

As my dear friend Dr. Goose, of Limericks Economiques says:

Those in the habit of glancin'

At yields on sovereign financin'

Must plainly agree

The Yanks seem to be

The engine of global expansion.

Featured Posts
Recent Posts
Search By Tags
No tags yet.
Follow Us
  • Facebook Classic
  • Twitter Classic
  • Google Classic

FloMartin Securities, Inc.

Donald R. Davret, Investment Advisor Representative

www.sec.gov

www.sipc.org

 

Investment advisory services are offered through FloMartin Securities, Inc, an Investment Advisory firm. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.
All investment strategies have the potential for profit or loss. Changes in investment strategies, economic conditions, contributions or withdrawals may significantly alter a portfolio’s performance. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. Past performance is no guarantee of future success. We cannot guarantee that a portfolio will match or outperform any particular benchmark. None of the content should be viewed as an offer to buy or sell, or as a solicitation of an offer to buy or sell the securities discussed.



This website is a publication of FloMartin Securities, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.​


Information on this website does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information on products and services. A professional adviser should be consulted before implementing any of the options presented

  • Wix Facebook page
  • Twitter Classic
  • Google Classic