Do Interest Rates Have To Rise…Part II

In May of 2013 (and ever since) it has been a fait accompli that interest rates MUST rise. I wrote in “Do Interest Rates Have To Rise Soon” on May 6th, 2013 the following:

I’ve listened to the prognosticators predict higher rates now for almost four years…and rates instead went lower. Are interest rates going to turn around and go up anytime soon? I doubt it.

Turns out that rates did in fact rise soon after I penned this.

Yahoo Finance
Yahoo Finance

My statement wasn’t meant to be a prediction of where rates were going to go, simply an acknowledgment that there was nothing requiring higher rates and in fact there was precedent for lower rates for longer. The ten year sat at about 1.80% when I wrote that post and by then end of 2013 it had risen to just a tad over 3%, quite a big rise in a short period (though not unheard of). Since that time rates have steadily come back down and the ten year now sits about where was back in May 2013. While rates might rise again and the Fed may even raise short-term rates in the near future, there is nothing keeping rates from staying essentially flat or within a small trading range for the foreseeable future. I’m not saying they will or making bets that rates will stay the same or fall, simply repeating my statement from nearly two years ago that there is precedent for these low rates for a longer period then we might expect and saying that “rates must rise” is not supported by history.

Rates might rise, they also might fall – I certainly don’t know where they are going (nor evidently do economists who get paid to make such predictions), but I do know that basing my client’s investment strategy on the “fact” that rates must rise is ignoring the facts.


Howard Marks: Russia

As always, great insight from Howard Marks:

I’d say we should start getting interested in the asset class. Declines are not a reason to get worried. Declines are a reason to get excited. The investing public like things better at high prices than at low prices. The professionals like things better at low prices than at high prices.


Insurance Secrets: What’s Driving Those Annuity Recommendations?

Ever wonder why that “financial planner” is recommending the product they are recommending? It could be the compensation or the extra bonuses that are offered to incentive them to sell a certain company’s product.Given these incentive plans, is the product being sold really in your best interest? I’ll let you decide. Here is a recent advert that showed up in my e-mail:


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Wondering which insurance company must be sold to secure that $1,000 Visa card (and trip qualification to Italy)? Here is the small print…enlarged:

*Available only on all Allianz Life Pro+® and Allianz Life Pro+ SurvivorSM Fixed Index Universal Life Insurance Policy Applications. Offer ends 12/31/14. Exclusions may apply; contact your Annuity Store Marketer at 800-825-6094 for complete details.

Policy #P54350 & #P61843 are issued by Allianz Life Insurance Company of North America.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

Product availability and features may vary by state. New York production is not included.

Registered representative participation is subject to Broker/Dealer approval.

The Annuity Store reserves the right to alter or discontinue this promotion at any time. Agent must be in good standing. All federal, state and other tax liabilities arising from the award are the sole responsibility of the agent. VISA is not a participant in, or sponsor of, this promotion.

TAS226-38610 For financial professional use only – not for use with the public.

Notice that the marketing company doesn’t want you to know about this – marking the e-mail “For Financial professional use only – not for use with the public.” It seems to me the public SHOULD know about the incentives driving the product recommendations being made.

This practice should not be allowed.

Scott Dauenhauer, CFP, MPAS, AIF


An Independent Fiduciary

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