Dec 7, 2016
You’ve heard me talk about following cycles. We are in the midst of several cycles happening simultaneously.
Bonds lost over $1.7 trillion in November. The FED was talking about raising rates and bond market anticipated FED raising rates.
Five year Treasury note went from .91% in July to 1.87% recently - a double!
Thirty year yields went from 2.1% to 3.06% or a 50% move.
A 30 year mortgage is now 4.125%, still a good, low rate historically, but that rise in interest rates could move some adjustable rate mortgages by 25%!
Interest rates are a 30 year trend and are rising again. This has had a negative impact on real estate since some sales have slowed and foreclosures are actually on the rise again. It’s not surprising since interest rates have been skyrocketing. Interest rates also impact currencies and although the dollar has trended stronger, other currencies around the world have had wild swings in value, not the least of which is the pound, which was recently at a 31 year low!
Higher rates make the dollar stronger which impacts many other currencies whose currency and/or debt is tied to the dollar.
This is the largest debt bubble the world has ever had in history. It’s in the US, Japan, China, Europe and other countries. The debt has been growing since 2008 and our problems didn’t get fixed - they got worse!
We have more debt and have not solved this, so somewhere ahead of us is a crisis greater than 2008.
It’s like if I gave you a credit card and another and another and you maxed each one out - your problem isn’t solved, it’s worse.
Eventually it will impact the dollar, but for now it’s going to get stronger as other currencies have issues. The Euro is a good example. I’ll save that for another podcast.
For now what you want to do is get rid of any variable rate interest you have - an adjustable rate mortgage, line of credit, etc.
Anything that has an interest rate that can change you need to pay off as soon as possible, because rates are going up.
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