Posts Tagged ‘Funds Rate’

Fed Warns of Rate Hikes

The picture that was painted in the 1930’s returns.

With the rate hike(s) that are being put forward by the US Fed and FDIC showing that they are out of money the prospects of a quick recovery or even a silo recovery are rapidly slipping away.

As Bloomberg reports :
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2l2G2C_QmCk

and Karl Denninger supports from his article:
http://seekingalpha.com/article/181488-here-it-comes-consider-yourself-warned

There are clear signs that this will have an impact on the financial sector and following that everybody else.

Consider the impact on your industry or sector of the economy of an increase in the cost of borrowing money … that is if you could even find a bank willing to lend since the financial institutions could make more money buying T-Bills on the 0% rate FED money they got and earn loads of profits virtually risk free for these past many months.

For small business this will mean a continuation of a tightening of credit = secure your terms NOW.

For Real Estate, the commercial sector will start to really feel the pinch, any survivors from the S&L mess of the 1980’s can already hear the rhyming notes in this new song. Expect a lot of commercial real estate to start going on FIRE SALE soon, with the potential for great deals coming ~ watch for the critical factor = your own leverage position and keep the yield high with CAP rates in the double digits only. Many owners of Commercial properties financed in the heydays of the mid ‘naughts’ and have property that they cannot refinance already ~ with the next round of tightening coming they will likely look to dump non-performing assets first.

Likewise with Equities, the weak performers will be dumped first. When examining the equities better time can be used in the “discovery” space ~ especially Bio Med, Bio Tech, Commodities (such as copper and uranium) and the many start-ups that will come from the wreckage of so many of the ‘dinosaurs’ which face extinction due to their inability to restructure so much debt that is moving in the world system right now.

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