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PREPARE FOR RISING INTEREST RATES

March 29, 2014

Go to “Core Portfolio” for current holdings.  Hit “+Follow” at top of page to follow this blog.

In looking at the charts and technicals it is becoming increasingly evident that we may be looking at a 5-10% pullback in the stock markets within the next 6 months.  Predicting stock markets is a fools game but we need to be aware of whats possible.

The Fed and Yellen are set on tapering, and we may see rising rates in the future.  I have said here on numerous times that if the Fed tapers, the market will decline.  But…..we have as yet not seen any huge change.

In addition you historically also have pullbacks before midterm elections and we may get it.

So, what do you do?.  Sell everything and go hide in the corner?  Of course not.

Maintain what you have but realize we could see declines.  I would certainly be very selective on what you are buying….but some sectors like business development companies are looking good to purchase.

In dividend investing you hold positions and collect the dividends.  Quality positions will go up and down but unless there is some major change and the company blows up they will hold within a range.  Speaking of blowing up I bought LNCO last year and it continues to drop.  We all make mistakes, but I am holding this dog for the 10% dividends….the company is not going to go bankrupt.

Now, let’s talk interest rates.  A lot of the smart people are expecting higher rates in mid 2015.  But again, let’s talk historical trends.

If the Fed does not begin to raise interest rates until 2015, that does not mean that bond yields cannot further increase in 2014. Yields can rise when the perception of rising interest rates change.  You could see rates rising at the end of this year.

So, again, what do you do?  Buy floating rate bond funds, which I have talked about before.

Another important point:  you should be selling any mid and long term bond funds that you own.  Rising rates are not good for long term bond funds.  We do hold a short term bond fund but that will eventually, most likely, be sold.  Gold is heading down but a year from now you will be glad you owned GGN.

If not so sad, it would be funny:  “Ir is impossible for a US president to be irrelevant, but Obama is testing the proposition.”  NY Post

Link to prior post.

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One comment on “PREPARE FOR RISING INTEREST RATES

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