Short-term interest rates will have to move higher.
Why? Short-term interest rates are too low. As in 2002-2004 when commodities were booming and the Fed lowered them to 1%.
Commodities and commodity sensitive stocks are soaring and the dollar is sinking. This is the classic picture associated with low interest rates.
I hope to be wrong. So far I have been right. I am deeply worried about the weakness of the dollar (and the strength of commodities).
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
2 comments:
I am hearing some say that the economy is slowing down? Is that just wrong?
Therer is plenty of work at the company I work for - we have just been bought out by a foriegn smaller loss making competitor thanks to a debt laden private equity deal and are now merging with them (they are 1/3rd our size).
If interest rates go high enough to stop this 'free' money from the fed being piled into corporate bonds, debt will actually cost, and I can see a lot of myriad projects will be cancelled as interest costs bite.
I expect this will end up in a weak period for jobs, the stock market and the currency. It's gotta happen soon as wages are rising strongly here.
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