Traditional investments work 99% of the time, and when they work, they do quite well. Throughout history, of course, you would have been best to invest in equities, solidifying your portfolio with partial ownership of the productive capacity of growing businesses.
Today, traditional investments are worn out. They’re priced at higher earnings ratios than ever, and yet still haven’t reached their peak. Cheap cash has made owning a slice of world commerce less expensive, and ultimately it has been equities that have risen to bridge the gap between risk, reward, and profit.
There is no better time, despite soaring prices, to buy into silver as a life-long investment. Whereas low rates have made stocks expensive, they have also made silver expensive. But what will happen when interest rates finally rise? The cost of borrowing, which has allowed for rapid expansion of price-to-earnings multiples, will be inverted, and what was once the benefit of equities will be their downfall.
At the opposite end, rising interest rates will give way to even greater concerns about debt loads, lead to higher costs of borrowing, and ultimately new contagion fears that transcend finance and global business, and penetrate deep into government pocketbooks. Consider, just for a moment, what a minor rise in interest rates will do to the trillions of dollars in fixed-income assets that are currently priced at a 4-6% rate of return?
Let’s look at mortgage-backed securities issued 5-years ago at a 7 percent interest rate. These securities, compounding monthly, would sell for a bond price of just under $1300 with accrued interest of $350, and coupon rates of 7% per year with a current yield of 5%.
| Our basic needs are: Air, Water and Food. |
| Recent Articles By Arya : - |
No comments:
Post a Comment