A different investment world. Financial Thought Leader, James Grant, Editor of Grant’s Interest Rate Observer declares the 35 year bull market over and sees few opportunities to replace it.
Listen to the audio only version here:
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We have been living in an extraordinary era. And no, I am not referring to Dow 20000, or President Trump’s blunt style of governing.
What I am referring to is the level of interest rates. One of my favorite charts of all time shows the history of short and long term interest rates since 3000 B.C. It illustrates that in the last couple of years we saw the lowest interest rates in five thousand years. You will see this amazing graph on this week’s WEALTHTRACK.
We will also roll out another picture showing what yields on ten-year U.S. Treasuries have done since 1900. It is a much shorter time horizon, but emphasizes how dramatic the fall in rates has been over the last thirty-five years.
This week’s guest believes the era of record low rates is finally over. He is the first to admit that he has been saying this for several years, but today he is even more convinced that the death knell has sounded and that the implications for markets and investors are profound.
He is financial thought leader James Grant, the founder and Editor of Grant’s Interest Rate Observer, a twice monthly analysis of all things credit-related. It casts a wide net including analysis, commentary and history of the bond, stock, real estate, and currency markets and continuously tracks central bank finances and policy. It is a must read for many top professional investors.
James Grant is a financial historian and prolific author. His most recent book is “The Forgotten Depression: 1921: The Crash that Cured Itself.” Grant is a vocal critic of the unprecedented stimulus policies implemented by central banks all over the world, particularly by the Fed and is alarmed by the high levels of debt accumulated by governments, especially since the financial crisis.
In a recent Grant’s, he cited one example of the havoc rising interest rates could create in the U.S. alone:
“The government today pays net interest expense of $240 billion at an average interest rate of 1.8%. At 5%, it would pay $681 billion, $441 billion more than today and $77 billion more than the fiscal 2016 defense budget.”
As the historian Grant notes, 5% is not an abnormal expectation. The average prime rate equivalent in the U.S. since its founding is around 6%. There is reason to worry.
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James Grant from the WEALTHTRACK archives:
James Grant is not only a financial thought leader, with his erudite, insightful and entertaining newsletter, Grant’s Interest Rate Observer, he is also a highly regarded and prolific financial historian who has penned several biographies, John Adams’ and Bernard Baruch’s among them. His latest subject, while less known, was one of the most influential financial and political journalists of the nineteenth century and still holds sway among economists because he authored the doctrine of central bank intervention.