By Edward Leone Jr. CFP RFC MBA DMD
Contact Information: 303-478-6793 edleonedds@gmail.com
It appears that the Federal Reserve Bank will put a stall on further interest rate increases in the near future due to stresses in the global economy.
It appears that central banks around the world are engaged in efforts to rescue markets and economies by lowering interest rates bellow zero if necessary. We must keep in mind the good and the bad effects of interest rate increases:
Higher borrowing costs,
Dropping bond prices,
Higher returns on customer bank accounts and bond yields,
Better profitability for the banking industry,
Strong indications that the economy is improving.
It will be interesting as this year unfolds to see just where we are with interest rates and the good and bad effects! It seems that the housing industry is a positive for our economy while manufacturing and energy are not so active. Many believe that petroleum consumption globally is an indication of the health of the global economy. Just how would things be different today, if in 2008, weak companies and other organizations had to reprice debt and assets so others could compete and grow and the Fed had not engaged in QE and instead allowed CDOs and other failing debt instruments to fail along with the institutions which were save by government actions. The debts would be off the books and some investors would be hurt along with workers temporarily. What about a serious effort at fiscal policy adjustments? Would economic growth patterns be more substantial at this time?
On the home front, we are seeing many effects as a result of Obama Care on the health care industry and on consumption by individuals:
The legislation is nearly 17,000 pages long and not understood by many of us,
There have been claims that out-of-pocket costs for older folks have increased by $3,000 to $4,000 a year,
Anticipated reductions in premiums has not occurred–according to the Kaiser Family Foundation premiums for family insurance plans are up $4,865,
Legislated mandates and penalties have had negative effects on opportunities for many in the job market.
It is clear that these conditions must be addressed as the future unfolds. Mean while take care of your self and try not to get sick or injured!
Another issue to monitor has to do with default rates on student debt which is at 17% for those beginning the repayment phase. On loans issued more than 5 years ago, default is at 28%.
There are many interesting factors to consider for the aging. It appears that 35% of those above the age of 65 use social media as compared to just 2% in 2005. This is a great way for them to keep up with friends and family. The oldest members of the baby boom generation will turn 70 this year. According to the Center for Disease Control, they will likely celebrate an 85th birthday. Their grand parents had only a 28% chance of such an event. Fidelity estimates that this group of boomers will likely spend $245,000 per couple in out of pocket heath care costs. Let’s hope that they and their families are prepared to help them maintain a good quality of life! We can only be independent to a degree. Family has to be a team!!
For The Record:
DJIA 16,395.19
S&P 500 1,921.17
NASDAQ 4,512.32
Suggested Reading: “Profiting From Monetary Policy” By Tom Aubrey
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