If we had told you 25 years ago–when you were earning 8.5% on a 30 year U.S. Treasury bond—that you would be earning 2.5% today on that same bond, you would have labeled the thought sheer madness. Yet, that is today’s reality. This week we review why low interest rates may be with us for a long time. Also, another ‘madness’ we discuss is the lack of fiduciary protection for the elderly.
Gundlach – Don’t Bet on Higher Rates– Even if the Fed raises short-term interest rates as many expect, longer-term bond investors won’t face a decline in prices, according to Jeffrey Gundlach of DoubleLine Capital. Indeed, the market may have already priced in the effect of rate hikes, he said. He believes rising interest rates for longer-term bonds will not happen for three to four years.
Strong currents that keep interest rates down. Interest rates are so low because advanced economies are still in a “managed depression”. The malady is deep and it will not end soon, according to Martin Wolf of the Financial Times. Ultra-low rates are not a plot of central bankers. They are a consequence of contractionary forces in the world economy. Financial Times