Interest Rates Suddenly Lower
But This Time For The Wrong Reason
NPV (price) of bonds notably higher, and why? Because of fear, due to the issue that we will discuss tomorrow. While we have been noting that risky assets can be supported by lower interest rates, that is not the case if the cause is fear of risky assets themselves.
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I have been comparing the entirety of 2022 as like a baseball game.
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Recently, I have moved us to the top of the 7th, where I stated that we can very likely stay, so that we can observe the ripple effects of higher interest rates. Further, I stated that we haven’t seen some of them quite yet. We got a glimpse, and the Euro went to 1:1 with the US dollar, it was not pretty.
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Tomorrow, I will discuss the effects on my favorite company, Jae’s Rib Shack. You’ll be able to relate.
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Bottom line: you need have an understanding of ‘how it actually works,’ so that you can think about the ups and downs that may result. From there, you can determine whether or not your strategy fits your situation.
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This is not the same as the past because the one at the controls (Federal Reserve) is not inclined to push down r as it has done for 20 years in an almost-unabated fashion.
