That
interest rates are rising, and set to rise for years to come, should be no
surprise to you.
Nor
are they difficult to forecast. After all, the granddaddy interest rate cycle
of 64 years in duration, which I’ve tracked back thousands of years in economic
history, bottomed in June 2012, just as I said it would.
Rates
have risen steadily since then. When the next peak in interest rates comes, on
the half cycle of 32 years, in 2044, interest rates will exceed the highs of
1980, at 20 percent-plus.
That’s
a long way off, and rates will climb pretty steadily the whole time, sometimes
thrusting sharply higher, and sometimes pulling back or going sideways.
But
there are two important “big picture” aspects of a rising interest rate
environment that I want you to be aware of.
First, from a longer-term perspective, and for your
investments. As I have discussed many times
before, although the initial turn higher in rates is considered bearish for
most asset classes, in reality, rising interest rates are bullish long term.
All great bull markets in stocks, commodities and, yes, even real estate, occur
during rising interest rate environments.
In
other words, as far as the markets go, and with a longer-term view, do not fear
rising interest rates. Gold, stocks and real estate prices will all rise
together in the years ahead, with rising interest rates.
Second, from a short-term perspective, regarding
your personal finances, take appropriate steps now, while
rates are still extremely low on a historical basis.
A.
If you haven’t already done so, refinance any property mortgages you have and
do so on a 30-year fixed rate. I recommended that in the summer of 2012, when
rates were at all-time lows, and if you acted on my advice, you are sitting
pretty.
Nevertheless,
if you have not refinanced, refinance now!
B.
If you are not a homeowner yet, buy your home as soon as possible. Same reason:
Mortgage rates are headed higher for some time to come. Opt for a 15- or
30-year fixed mortgage.
If
you are looking to buy or own your business’ commercial building, do the same.
C.
Importantly, stay away from revolving debt loans for consumer goods, etc. Those
rates are already usurious, and they are going to go even higher.
Ditto
for credit cards. Pay off as much credit card debt as you can, and stay out of
debt on your credit cards. That way, instead of paying those usurious rates,
you will be able to save the money and invest it in instruments that will offer
you a rising rate of return via rising rates.
Lastly,
be sure to keep abreast of my colleague, Mike Larson, and his work on interest rates.
He’s on top of the many different profit opportunities that are available from
a rising interest rate environment.
Source: Larry Edison Monday, February 3, 2014 at 4:00 pm
http://www.moneyandmarkets.com/how-to-prepare-for-many-years-of-rising-rates-57969
Comments:
The increase in the money supply is already
approaching 400%. Instead of 10%
inflation for the next 40 years, Larry predicts it will increase steadily and
peak in 30 years. For more accurate Real
inflation numbers, don’t count on the government version. Instead, look at commodity price net
increases each year.
Norb Leahy, Dunwoody GA Tea Party Leader
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