Personal Finance and Investing

Last edited Thu Nov 24, 2016, 04:53 PM - Edit history (4)

I think the interest rates we have seen in the last several years are at almost unprecedented lows, at least post WWII, and will inevitably return to more average levels, even swinging above average levels at times. Regardless of who is in the White House. Then 2.88% will look real cheap across the longevity spectrum, whether 90 days, 10 years, or 30 years.

Just like I'd lock in a 30 year fixed rate mortgage now, rather than temporarily saving money with a lower interest rate adjustable rate mortgage. But that's just me I guess. Maybe I've lived too long and seen too many swings in inflation and interest rates over many decades.

I remember back in the late 70's and early 80's when everyone thought high interest rates and high inflation was baked into the economy and we'd have to live with that for at least a generation. Now some people think today's ultra-low interest rates and inflation are the new normal from now on. I very much don't think so.

I remember the late 90's when we were told -- and the conventional "wisdom" was -- that there would be no more recessions or at worst only mild ones because the Great Maestro, Alan Greenspan, had found the secret to maintaining a Goldilocks economy. And soon we would have Dow 36,000. And that we were all going to the moon, and we were all going to the stars. Instead we got two monster crashes / recessions in just 8 years.

And then we were told that mortgage-backed securities and derivatives were perfectly safe because they were diversified across different housing types and geographically across the country, and that housing prices have never gone down on a nationwide average basis, though they have occasionally done so in some local markets. Well we all know how that turned out.