Some corporate giants are on a borrowing spree raising near record sums of money. Why are they doing this and what does it mean to you?
They're raising money to lock in today's low fixed rates because they think interest rates will be rising.
The reason for the rise is the U.S. government needs money and is soaking up all the funds it can, paying higher rates to get it.
What does this mean to you? If you agree with these corporations, don't lock up your money on long term Certificates of Deposit. You're likely to soon see higher rates. If you want to borrow money, lock in today's long term fixed rates.
If you want to invest, put your money into an honest, top quality hedge fund that is preparing for much higher future interest rates. If you want to buy real estate as an investment, consider what will happen to property values if interest rates spike.
My purpose in publishing this piece is to help keep you aware of what is happening in the financial markets so you can best invest and protect your hard earned money. Please do the same for others by sharing this information with them.
Dick [last updated, 1/8/10]
4 comments:
so are you saying real estate is a bad investment?
That's an excellent question. My wife and I have invested in Los Angeles-Orange County residential real estate since 1976, and for now we are not a buyer.
Prices on the low end of the market are the cheapest since the early 2000's but the market is on life support.
It's being driven by the U.S. government with artificially low interest rates, a tax credit, and with an FHA (government) guarantee, a down payment as low as 3.5%.
Meanwhile, more foreclosed housing is likely to come on the market as rentals, whether investor or lender owned, and that will drive down rents.
Add in a depressed job market and higher mortgage rates to come and you have a formula for more trouble. For now, we are on the sidelines.
Dick
Prices in real estate will go down further if interest rates go up. Simple economics as commercial properties trade on return on investment and residential trade on affordiblity.
The real economy is still in the tank and California will be in a bigger world of hurt if the feds don't throw some cash back.
I agree that borrowing costs will definitely go up!
You were ahead of the game on your prediction:
http:www.ft.com/cms/s/0/6f46f226-fef2-11de-a677-00144feab49a.html?nclick_check=1
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