We all know it is there lurking around the corner waiting for our young attractive vulnerable actors/actresses....aka country. We all know it is going to be a huge problem in the future. (hence the obscene gains in gold and gold producers over the last year +.) However, we live in a see no evil hear no evil time similar to our scantily clad soon to be victims in the metaphor above.
After all, don't we hear enough doom and gloom with the earnings projections, Greece and Spain's debt woes, and let us not leave out the latest rendering of the classic tune "protest like an Egyptian". With all this going on it is nice to hear manufacturing is improving, production seems to be picking up some steam, and the unemployment rate is falling.(disclaimer: If I remember correctly we added 36K private sector jobs last month, the fact that the unemployment percentage in this country dropped from the 9.4% to 9% between Dec. and Jan. simply tells me that people stopped looking and gave up. How do you add 36K net jobs in the private sector and have that significant of a drop in the unemployment rate without doubling our military personnel or some sort of U.S. genocide that took potential workers off the table.)
I digress from my point....today China raised its rate .25% for the 3rd time since October to combat inflation. As a result, our treasury auction was a disaster as the faux pas "i" word worked its way through the market and investors began anticipating the same thing eventually happening in the US. Now we haven't had nearly the growth that China has seen over the last few years so this isn't an apples to apples comparison. However, it should be noted that our rates rising does numerous things. First, as I said in my last blog, it prices people out of the fragile housing market if it is not a gradual increase. Second, Adjustable rate mortgages that people are treading water with because their house is underwater will now be on the rise. Also, all that debt that the treasury is selling off on a weekly basis to fund QE2....well I think it goes without saying that the higher the yield the more interest the US is going to have to pay back to borrow that money. (I guess it didn't go without saying). Finally, remember all that money that the banks are lending because they are getting it so cheap.....(insert sarcastic grin).....imagine what how brutal lending is going to be when the lending window isn't just throwing money to the banks.
So now that you are panicking wondering what do I do? Here is some free advice: (disclaimer: you get what you pay for)
1. Pick your investments wisely as you will be fighting inflation. I personally would not be bullish on US Treasury Bonds.
2. For the love of all that is good in this world get a fixed rate mortgage. Rates are on the rise but they are still ridiculously low and inflation will cause higher rents....(light bulb) a rental property with a loan at 4.875% when rates jump to 6% and rents increase is going to look pretty swanky.
3. There was always one day a month that my dad would do all the bills and I knew that was not a day to cross, question, or annoy my dad...because it was crunch time to budget and/or make cuts. Let's just say that 'ol lady liberty is going to be having "bill day" for a couple years coming up. We dug ourselves in a giant hole and surprise, surprise, throwing money at it hasn't decreased the pile of money we owe. Be patient....
4. The price of Vodka is going to increase....get those martinis flowing
Until next time....
