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Crystal Ball Investing

Many investors are asking about investing now because of very low interest rates. They are concerned (and delighted) that the government is determined to keep the rates low for the next few years.

Let's take a common-sense approach to evaluate this market. Interest rates drive real estate values. Simple deduction. But does that make low interest rates an investor's best friend? Depends...

We are a country in debt. Big debt. REALLY BIG DEBT. Debt we will never be able to repay. If our country were a company or private citizen, it could declare bankruptcy. But we are not. And if our country defaults on our debts/loans, it will get ugly fast.

The US has already passed the point of no return in being able to ever repay the total debt owed.  This game will continue until other countries realize that the dollar, like any fiat currency, is not worth the paper it's printed on, or even the bytes of electrons it's stored online with.

The idea of 'low interest rates' is itself laughable; if you do the math, we are already in a negative interest rate status.  The only reason money market funds are paying any interest at all is because the major banks and clearing houses have slashed their fees, hoping no one will notice. Just a charade. So we can count on the Fed to NOT raise interest rates in the foreseeable future.

Here's what is shaping up: the Treasury/Fed will continue to print more dollars to monetize our national debt, ie; paying back the debt with dollars that are worth less (worthless?).

Real assets will continue to inflate in price--if you want to call it appreciation, go ahead, but it really isn't--if inflation is taken into account. Prices of everything will increase and real estate will at least keep pace (or outpace) this inflation. In other words, it's a good time to owe fixed interest rate debt, like mortgages. Leverage in times like these is friendly. But when things change, that leverage will work in the opposite direction.

Will there be a crash?  Absolutely!  As soon as we run out of the road to kick the can down.  When will that be?  Unknown.  Stay tuned.  And buckle up.

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