Monday, April 24, 2017

Its not different this time

The Fed will continue to raise interest rates—we cannot continue like this—negative interest rates in most parts of the world are destroying a lot of people. 

Many pension plans, insurance companies and trusts are suffering badly now—you are going to have some pension plans in America go bankrupt, or not earn any money. They have the obligations to meet their promises as people continue to get older. When interest rates go higher, they are going to make bonds go lower—it is going to help the US dollar. Historically, in the US, if the Fed raised interest rates four times, it meant the stock market would go down and go down substantially for a while—it is clear that the Fed will raise interest rates four times, and it does not mean that it has to happen that way. 

One could counter and say, rates going up from zero to four times is not such a big deal and, therefore, it is different this time. Four of the most dangerous words in the financial markets are: “it’s different this time”. It is very dangerous when you hear people say that.