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.

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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

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Lack of Fiduciary Protection for Elderly is ‘Insane’.  In the United States we have a buyer-beware marketplace for products that are very often sold to older consumers.  This is insane, according to Michael Finke, professor and director of retirement planning and living in the personal financial planning department at Texas Tech.  Finke believes the market would be better served by having some sort of fiduciary protection.  As it currently stands, stock brokers may call themselves Financial Advisors even though they have a vested interest in selling certain investments to clients.  Registered Investment Advisors, on the other hand, are held to a fiduciary standard which means the client’s interests must come first.  Finke said one of the things that we need to do is protect those who are really least able to monitor those in the financial services industry and decide what is and what is not an appropriate product.  We need to take that burden off their shoulders.

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J. Mark Nickell & Co.

Disclosure – The articles mentioned in This Week with J. Mark Nickell & Co. are for information and educational purposes only. They represent a sample of the numerous articles that the firm reads each week to stay current on financial and economic topics. The articles are linked to websites separate from the J. Mark Nickell & Co. website. The opinions expressed in these articles are the opinions of the author and not J. Mark Nickell & Co. This is not an offer to buy or sell any security.  J. Mark Nickell & Co. is under no obligation to update any of the information in these articles. We cannot attest to the accuracy of the data in the articles.