Interest Rates are going to soar - what will it mean for us here in Thailand and Worldwide?

[MaaTini]

I get a weekly Newsletter from Mauldin Economics

He is predicting, that Interest Rates will soar sooner or later

just some Words from him:

...Despite Bernanke's promise to keep rates low, the free markets are taking over,

and long-term interest rates are starting to rocket higher.

As a result, sovereign bond prices are plunging.

Hardly surprising. When rates are artificially low as a result of the financial repression

coming from central banks, there is nowhere to go but back up. It's the next phase of the endgame.

Investors around the world are finally realizing that central banks can keep interest rates artificially

depressed for only so Long.

It's a very dangerous phase. Many investors, seeing rates rise on Treasury bonds and notes,

are attracted to the higher yields. They've conveniently forgotten about all the dangers out there,

and many are now plowing money back into Treasury securities - and even worse, into bond funds.

That would be fine in normal times. But we're not in normal times

We're in a new normal, where you have to be extremely careful about every financial decision you make.

Especially when it comes to boosting and securing your investment income.

Buying bonds and Treasury notes right now - even as the yields appear more attractive -

is the worst thing you could do for your portfolio.

You could lose an entire year's worth of income in just a few weeks as bond and note prices fall.

At this stage of the endgame, there's another big mistake many investors make:

they cling to traditional income-paying stocks, most of which are extremely vulnerable

to a rising interest-rate Environment

...just some Words - you can read and recieve all this too - "Google" Mauldin Economics and get his free newsletter

Maybe somebody was reading about the "Big Rotation":

Money is flowing massively out of Bond Investemts and pouring into the Stockmarket

my Questions are:

beside Bonds and dividend paying Stocks - is there any safe alternativ income Investing?

how this rising Interest Rate will affect our Life here in Thailand and back home?

[Pib]

I get a weekly Newsletter from Mauldin Economics

 

He is predicting, that Interest Rates will soar sooner or later

 

...sooner or later?...that pretty much covers any possible future time period...Mauldin is a real visionary.

Sent from my Samsung S4 (GT-I9500)

[billd766]

The bit I can never understand about financial gurus is that they are free with their advice.

To me, IF they were any good they would ALL be billionaires and wouldn't "give" any advice at all.

[NCC1701A]

"The Most Important Number In The Entire U.S. Economy"

http://www.zerohedge.com/news/2013-08-01/most-important-number-entire-us-economy

http://www.zerohedge.com/news/2013-08-18/bearish-trend-has-resumed-dont-show-tweeted-out-bill-gross-chart

Edited August 19, 2013 by NCC1701A

[BuriramRes]

Quote: "how this rising Interest Rate will affect our Life here in Thailand and back home?".

I guess he is regarding "home" to be the great US of A. Thank god that doesn't affect me!

[AnotherOneAmerican]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

Edited August 19, 2013 by AnotherOneAmerican

[Card]

If that is the case, then increased interest rates will mean higher exchange rate for the US dollar and the dollar soars against other currencies, except those tied or shadowing the dollar, like the Thai baht. The Thai baht would rise against western currencies which would be a pig for those like me who live on imported pound sterling..

Edited August 19, 2013 by Card

[ThaiHerbs]

Economist Caution: Prepare For 'Massive Wealth Destruction'

Sunday, 18 Aug 2013 04:45 AM

That’s exactly what many well-respected economists, billionaires, and noted authors are telling you to do — experts such as Marc Faber, Peter Schiff, Donald Trump, and Robert Wiedemer. According to them, we are on the verge of another recession, and this one will be far worse than what we experienced during the last financial crisis.

Marc Faber, the noted Swiss economist and investor, has voiced his concerns for the U.S. economy numerous times during recent media appearances, stating, “I think somewhere down the line we will have a massive wealth destruction. I would say that well-to-do people may lose up to 50 percent of their total wealth.” ...

http://www.moneynews.com/MKTNews/Massive-wealth-destruction-economy/2013/06/20/id/511043

my understanding is that rising interest rates will blow up the derivatives which could (will?) collapse the financial system - the number I keep reading is once interest rates pass 3.5% (I believe referring to the 10yr US Treasuries) we are in the danger zone

Quadrillions In Derivatives Is Ready To Blow Up A Magnitude Bigger Than What Happened To AIG. They Are Rate Sensitive. Every Tick Up Brings Us Closer To A Massive Event!

June 28th, 2013

http://investmentwatchblog.com/quadrillions-in-derivatives-is-ready-to-blow-up-a-magnitude-bigger-than-what-happened-to-aig-they-are-rate-sensitive-every-tick-up-brings-us-closer-to-a-massive-event/

Lots of uptodate info at these sources:

http://kingworldnews.com/kingworldnews/King_World_News.html

http://www.zerohedge.com/

http://www.jsmineset.com/

http://www.gold-eagle.com/authors/jim-willie http://news.goldseek.com/GoldenJackass/

I have no idea for (no interest in) income investments, too crazy out there. I prefer to protect what I have with some physical gold/silver kept outside the system. Also, IMO be prepared for major bank collapses in the "western" countries. SE Asia I am not so sure, may have to pick and choose what banks you deal with here.

I'm not so much concerned

about the return on my money

as the return of my money.

- Will Rogers, 1933

http://www.pimco.com/EN/Insights/Pages/Dec%20Gross%20Anything%20but%2001.aspx

It's dangerous out there.

Doug

[NCC1701A]

Quote: "how this rising Interest Rate will affect our Life here in Thailand and back home?".

I guess he is regarding "home" to be the great US of A. Thank god that doesn't affect me!

so you don't live on planet earth?

[Docno]

Would finally like to get some decent rates on those fixed deposits... Bring it on!

[kiniyow]

Buy Gold while it is under 21000 Baht for 15.2 Grams or One Baht weight..

[RAZZELL]

Buy Gold while it is under 21000 Baht for 15.2 Grams or One Baht weight..

Err...it was under 18000 a few weeks ago? Wouldn't it have been better to buy then?

http://www.goldpricethai.com/charts.php?type=1-year

RAZZ

Edited August 19, 2013 by RAZZELL

[Suradit69]

Buy Gold while it is under 21000 Baht for 15.2 Grams or One Baht weight..

Err...it was under 18000 a few weeks ago? Wouldn't it have been better to buy then?

http://www.goldpricethai.com/charts.php?type=1-year

RAZZ

I believe he meant for those of us buying some gold regularly that Baht 21,000 is a reasonable ceiling price.

Although in the longer term (not well defined) it will probably continue a good deal higher, in the short term there's bound to be volatility in the price. I've been adding a little bit most months, including at recent lows, but I agree that as prices move up from 20,000 to 21,000 I may put off adding any more.

If it continues up, that's good for me given what I've already bought. If it drops down again, that's a buying opportunity. Either way it's not money I need for everyday expenses, but hopefully if I don't drop dead too soon, it'll be available as an inflation cushion. And, if I do drop dead soon, my heir will benefit and I should have a better class of funeral.

Edited August 19, 2013 by Suradit69

[pookiki]

I was a trustee for a several Taft-Hartley pension funds for a number of years. To fulfill our fiduciary responsibilities to plan participants we hired investment managers who invested the money. Each investment manager had their own particular investment strategy, etc. In terms of those people who 'predict' the markets, one investment manger said, 'There are investment gurus who know they don't know what they are talking about and their are other investment gurus who don't know that they don't know what they are talking about'. As for derivatives, most astute investment managers avoided them like the plague. To through my two cents into this discussion, I have noted that what is currently happening in the EU and US is a capitalist ponzi scheme. The artificially low interest rates and the printing of money (quantitative easing) is churning money between central banks and large financial institutions that will lead to a repeat of the 2008 financial crisis. The central banks are buying bonds which is giving the big banks money to engage in speculative investments and there is a lot of bad paper floating around, again.

When the financial crisis hit in 2007-2008, I lost over 40% of the money in my IRA. When I recovered the loss and made a little more, I rolled the money over into and IRA cash account at my credit union. If I hadn't pulled my money out, my investment would have been up about 25-30% in the current stock market. But it is still a house of cards. The money being churned is not based on any sound underlying economic activity and productivity gains. It is just creating a false illusion of prosperity. Youth unemployment in the EU is horrendous. The developed countries cannot keep interest rates artificially low forever and they certainly cannot keep printing money, either. Yes, this crash will be worse than the first. It is just a matter of 'when' it will occur.

For those of you that have not seen the movie 'Inside Job' about the 2008 crash, please view it. It is about to happen, again!

Edited August 19, 2013 by pookiki

[Langsuan Man]

Interest Rates are going to soar

Can't come soon enough for me. Since the decline of interest rates my monthly income has taken a real hit. Bonds and savings account all are in the toilet.....as a retiree I don't need to borrow money, just make money on what I have saved in the past...and in this low rate environment it is tough....Can't help but wonder if part of all governments fiscal problems are related to lower tax revenues, due to lower interest paid out ?????

[pookiki]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

Most mortgages have interest rates that are 'locked in' for the life of the loan. Yes, there are variable rate home loans but they are not the norm these days. What happened during the 2008 financial crises was that US housing market was in a bubble and banks were engaged in predatory lending. Predatory in the sense that they knew that the people who they were lending to did not have sufficient funds to pay their mortgage. But people were thinking of turning over the property for a profit not home ownership. When the bubble burst, people were faced with owning a house that was worth a fraction of what they paid for it. As for the banks, they were selling and reselling the mortgage loans around the world. Watch 'Inside Job' an excellent documentary film.

[davidkas]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

Most mortgages have interest rates that are 'locked in' for the life of the loan. Yes, there are variable rate home loans but they are not the norm these days. What happened during the 2008 financial crises was that US housing market was in a bubble and banks were engaged in predatory lending. Predatory in the sense that they knew that the people who they were lending to did not have sufficient funds to pay their mortgage. But people were thinking of turning over the property for a profit not home ownership. When the bubble burst, people were faced with owning a house that was worth a fraction of what they paid for it. As for the banks, they were selling and reselling the mortgage loans around the world. Watch 'Inside Job' an excellent documentary film.

I am not sure where you live, but in the UK the majority of mortgages are usually only locked into an Interest rate for 3-5 years. A lot of people have re-mortgaged in the last couple of years if interest rates go up dramatically over the next couple of years they are going to be in real trouble, especially if house prices fall again (as is predicted by many). So beware of ware you put your money. I to am slowly building up a long term gold reserve. And not leaving cash in my Western bank accounts.

[yoshiwara]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

Most mortgages have interest rates that are 'locked in' for the life of the loan. Yes, there are variable rate home loans but they are not the norm these days. What happened during the 2008 financial crises was that US housing market was in a bubble and banks were engaged in predatory lending. Predatory in the sense that they knew that the people who they were lending to did not have sufficient funds to pay their mortgage. But people were thinking of turning over the property for a profit not home ownership. When the bubble burst, people were faced with owning a house that was worth a fraction of what they paid for it. As for the banks, they were selling and reselling the mortgage loans around the world. Watch 'Inside Job' an excellent documentary film.

I am not sure where you live, but in the UK the majority of mortgages are usually only locked into an Interest rate for 3-5 years. A lot of people have re-mortgaged in the last couple of years if interest rates go up dramatically over the next couple of years they are going to be in real trouble, especially if house prices fall again (as is predicted by many). So beware of ware you put your money. I to am slowly building up a long term gold reserve. And not leaving cash in my Western bank accounts.

What a surprise! Its our old friends the end of the world gold bugs back on display.

[HerbalEd]

Well if he says it then it must be true ... esp. if it's on the internet. You can seldom be wrong when you predict something will happen "sooner or later."

Don't you just love it when you see on MSNBC or Bloomberg or the like where two eminently qualified economic "experts" have totally opposing views and predictions, and yet each swears he's right?

[Suradit69]

Interest Rates are going to soar

Can't come soon enough for me. Since the decline of interest rates my monthly income has taken a real hit. Bonds and savings account all are in the toilet.....as a retiree I don't need to borrow money, just make money on what I have saved in the past...and in this low rate environment it is tough....Can't help but wonder if part of all governments fiscal problems are related to lower tax revenues, due to lower interest paid out ?????

Be careful what you wish for. If you're invested in fixed income and rates rise, you're going to take a hit on prices. Rates up/prices down.

If it's in managed bond funds and if they've moved out of long-dated debt into short term instruments, then as shorter term investments are replaced with new investments with higher rates, that will eventually reach you in the form of higher income.

The other problem is that a lot of people have moved into high dividend stocks. As rates go up those will take a hit to prices too ... MLPs and utilities, etc ... and since many of the higher dividend payers rely on debt themselves, the increased borrowing costs will reduce income available for dividends.

Basically, whatever happens, there are so many ways investors can be screwed but the people screwing you always seem to make more and more.

On average, securities industry employees took home cash bonuses of $121,900 in 2012, up 9% from the prior year, according to a report released earlier this year by the New York State Comptroller.

Read more: http://www.minyanville.com/business-news/editors-pick/articles/Wall-Street-Bonuses-to-Get-Another/8/14/2013/id/51298#ixzz2cR0pDRWM

Edited August 19, 2013 by Suradit69

[Torrens54]

They'll rise "sooner or later."

Quite a profound comment. Why are we all taking the trouble to comment? YAWN!!!!

[Torrens54]

They'll rise "sooner or later."

Quite a profound comment. Why are we all taking the trouble to comment? YAWN!!!!

[Ulic]

Blah Blah Blah. I call bullshit. If interest rates on mortgages go from 3-6 percent mortgage payments double.

If that happens how many people do you know that can afford to double there payments. Most people are

stretched. Everyone would default, banks would all crash etc etc. The US government will just print as much

money as it needs to to keep interest down. With all the printing that has gone on we still see little to no inflation

in relation to what is being printed. Just to be clear I am a simpleton but I just can't see it happening.

[Ulic]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

Most mortgages have interest rates that are 'locked in' for the life of the loan. Yes, there are variable rate home loans but they are not the norm these days. What happened during the 2008 financial crises was that US housing market was in a bubble and banks were engaged in predatory lending. Predatory in the sense that they knew that the people who they were lending to did not have sufficient funds to pay their mortgage. But people were thinking of turning over the property for a profit not home ownership. When the bubble burst, people were faced with owning a house that was worth a fraction of what they paid for it. As for the banks, they were selling and reselling the mortgage loans around the world. Watch 'Inside Job' an excellent documentary film.

This may be true in the US but in many industrialized countries the mortgages are rates are amortized over 20-30 years but can only be locked in

for a maximum of 5 years. So when these mortgages come due everyone would default. Most families simply can't double there payments.

If interest rates sored on mortgages in the US the housing market would collapse again, the value of the US dollar would soar as other countries rates

would remain flat and the US exports would plummet. I am no expert but I can see the status quo being the path the US government will take.

[USNret]

For all these free newsletters, each prediction of rising rates will be offset by someone else's prediction of falling rates. I stopped paying attention to free opinions years ago; they are worth exactly what they cost.

That said, I think it is undeniable that interest rates are at historic lows and they are bound to increase eventually. No one knows when, and central banks keep tight-lipped about their plans to avoid upsetting the markets. I think the best answer to your question is "diversification". Don't invest all in U.S. stocks, or Asian stocks, or govt bonds, real estate or gold. A good mix of all these would serve you well.

My long-term investment is the U.S. stock market. I follow the Motley Fool Stock Advisor newsletter (paid subscription) and they have guided me well over the past 8 years. I rode the market down during the Big Drop, and rode it up much further in recent years. Those are long-term investments that I hope never to sell, unless/until I need the money for living expenses (still many years off) or if/when I lose faith in the underlying companies.

I think the U.S. housing market is about to embark on a multi-year climb, as it tends to do in 10-year cycles. I'm shopping for a home now in Hawaii; it will be my principal residence for now and likely be a rental property later. I look forward to the appreciation & tax breaks it will give me.

My most dynamic investment is in stock options, something I discovered last year. Each options contract lasts from 3-18 months, generally with a predictable ROI. These are earning me about 15% returns annually. Options take a bit of work to manage, but I find it an enjoyable & profitable hobby. I subscribe to Motley Fool Options newsletter, which is fairly expensive but I earned back my 3-year subscription fee in about 2 months, so I'm happy.

There is no right answer for everybody on this. A lot depends on your tolerance for risk, your investment timeframe, your bullish/bearish nature, and how involved you want to be in managing investments. The portfolio I describe works great for me, but probably not for many of you.

[USNret]

Blah Blah Blah. I call bullshit. If interest rates on mortgages go from 3-6 percent mortgage payments double.

If that happens how many people do you know that can afford to double there payments. Most people are

stretched. Everyone would default, banks would all crash etc etc. The US government will just print as much

money as it needs to to keep interest down. With all the printing that has gone on we still see little to no inflation

in relation to what is being printed. Just to be clear I am a simpleton but I just can't see it happening.

Wow, you seriously need to do your homework on the nature of amortization. P&I for a $320,000 home, amortized for 30 years at 3% is $1349. At 6%, it is $1919. Far from double.

[rakman]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

When interest rates go up, if you were smart and have a fixed rate mortgage, you still sleep well at night because your payment doesn't change. And your savings gets a higher interest rate.

If you bought into an adjustable mortgage, that is and will continue to be a problem as the mortgage payment rises.

For each one percent increase, the payment on the US National Debt goes up 220 Billion dollars per year, and more as the debt keeps increasing.

If you're even smarter, you have no debt to pay off.

[rakman]

Blah Blah Blah. I call bullshit. If interest rates on mortgages go from 3-6 percent mortgage payments double.

If that happens how many people do you know that can afford to double there payments. Most people are

stretched. Everyone would default, banks would all crash etc etc. The US government will just print as much

money as it needs to to keep interest down. With all the printing that has gone on we still see little to no inflation

in relation to what is being printed. Just to be clear I am a simpleton but I just can't see it happening.

Wow, you seriously need to do your homework on the nature of amortization. P&I for a $320,000 home, amortized for 30 years at 3% is $1349. At 6%, it is $1919. Far from double.

But the total amount of interest paid goes from $165,688 at 3% to $370,682 at 6% more than double.

Compounding is a bitch when you're paying off a loan. Lock in fixed now before the rates get out of hand, or pay cash.

[callaway]

All these finance gurus. Why arent they living in the Carribean rather than a third world country with their millions of dollars from investment. The saying "Empty barrels make the most noise" springs to mind.

[pookiki]

This I call logic!

Much of the western economy is driven by home ownership.

Home ownership is mainly based on home loans.

Now if they gave out lots of home loans at 3%, what happens if interest rates soar?

How many home repossessions can the western banking system cope with?

Answer, interest rates will not soar.

Most mortgages have interest rates that are 'locked in' for the life of the loan. Yes, there are variable rate home loans but they are not the norm these days. What happened during the 2008 financial crises was that US housing market was in a bubble and banks were engaged in predatory lending. Predatory in the sense that they knew that the people who they were lending to did not have sufficient funds to pay their mortgage. But people were thinking of turning over the property for a profit not home ownership. When the bubble burst, people were faced with owning a house that was worth a fraction of what they paid for it. As for the banks, they were selling and reselling the mortgage loans around the world. Watch 'Inside Job' an excellent documentary film.

This may be true in the US but in many industrialized countries the mortgages are rates are amortized over 20-30 years but can only be locked in

for a maximum of 5 years. So when these mortgages come due everyone would default. Most families simply can't double there payments.

If interest rates sored on mortgages in the US the housing market would collapse again, the value of the US dollar would soar as other countries rates

would remain flat and the US exports would plummet. I am no expert but I can see the status quo being the path the US government will take.

The 'main' problem that caused the crash in 2008 was that financial institutions in the US were 'bundling' their mortgages and selling them as derivative investments all over the world. These derivatives were being insured by such companies as AIG. Many large investors actually made money when these investments crashed because they were insured. But the companies who provided the insurance crashed along with many banks. The problem that caused the crash wasn't interest rates but greed. So much of what happens on Wall Street is based on 'smoke and mirrors'. If you get in the 'game' be prepared to lose. In Vegas, at least you know your odds. On Wall Street, the little guy is at the mercy of too many factors and variables. Whether a person is an investment guru or a learned economist, you might as well rely on my advice as theirs. Those who attempt to treat economics as a science are only fooling themselves. Too many variables and unknowns. As WC Fields said, "A sucker is born every minute and two to take him!"