As investors in property we’re constantly monitoring the state of interest rates.
Heck, we give a full 60-minute presentation on the state of the economy at our Member Events three times a year solely so we can better understand where interest rates are headed.
Yesterday the new chairman of the U.S. Federal Reserve gave her first official public update on the state of economic affairs. And she “slipped” …. she accidentally hinted that rates may rise in the Spring of 2015. (read all about it here).
We found that funny. Like, really funny.
We vividly remember in 2010 when both the Finance Minister and our ex-Bank of Canada Governor warned Canadians that interest rate increases were just around the corner and Canadians should beware!
Now, for people loading up on bad debt and spending too much and crazy stuff like that these warnings are probably valid.
For investors who like to smartly take advantage of low rates while they last these constant threats of increases are down right funny.
And we’re not talking about interest rate increases of .25% or even .5% … we’re taking major moves, like 3%.
We remember back in 1990 when rates when tup 2.9% in 30 days … now that’s a interest rate increase!
And we’re 100% convinced that interest rates are not going any where fast.
Aside: With one caveat … if the unthinkable happens and the market loses confidence in the ability of government’s to repay their bonds then they’ll go up … and go up fast. But the Central Banks will do everything in their power to stop that by printing money quickly.
So how can we be so positive interest rates in Canada are not going anywhere soon?
Well, we’re very dependent, as is the rest of the world, on what the U.S. does with theirs. We follow what they do very closely.
So it makes sense to see what they’re going to do.
And the U.S. is not six (six!) years post their financial melt down in 2008. So you’d think we’re well into an economic recovery with all their “stimulus” right?
Well, let’s let you decide for yourself.
Today we present some charts for you to check out…
For us, none of these charts inspire any sort of confidence in an economic recovery.
Janet Yellen yesterday said that, “Labour market conditions continue to improve.” (Source)
What data is she looking at? Please send it to us 😉
We’re not trying to argue that these charts alone are enough data to make any predictions – but they’re interesting no??
And with no economic recovery happening — despite headlines — how will the U.S. afford increasing rates?
And if the U.S. keeps rates low then Canada will.
So get used to these low rates … and the constant threats of “increasing them soon”.
We’re in an awkward new world.
Until next time … Your Life! Your Terms!