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Nearly everyone is expecting rate cuts, I remember the last time back in 2021 when so many investors did not expect rate hikes, much less steep ones and fast. So by this "measure" this is very much possible, as always, amazing videos, thought-provoking, unique takes.
If the bonds go begging like in scenario #3 i could see financial repression in the US as a likely result because the debt is so high there would be no way to pay the interest. Under an anti tax regime the amount of interest could potentially exceed total receipts. It's already over a trillion in the US.
@@JohnBeeblebroxin response to your comment. I presume your first mortgage was at a time when house prices weren’t as high comparable wages as they are now. For example. If a house is £100,000 and interest rates are 10%, that’s £10,000. But if a £1,000,000 house has 5% interest rates, that’s £50,000. In comparison to wages, property has gone up far more. The low interest rates up to now has somewhat saved the situation. But now with them rising, many will be priced out.
@@1995pearson That's right. But my grandparents had it a bit easier (in terms of affordability) as well. I just saying interest rates have usually been a bit higher than the post 2008 environment.
Ramin Good balanced analysis. On the U.S. side of the pond, I feel thee is one more impoderable which could drive intest rates; namely a debit crisis. One political party does not want to raise taxes, and the other party does want to cut benefits. With the national debt already at the breaking point, it is hard not to imagine a debt crisis somewhere down the line. Regards W.K.
With rising inflation and potential interest rate hikes, I’m starting to get cautious about the stock market, especially after seeing some of my recent investments drop to penny stock levels. The uncertainty, along with rising interest rates, could affect stocks, but I’m considering diversifying with Bitcoin. I’ve seen it rise with some of these shifts, and it might be a good hedge during market volatility. Should I stick to value stocks or start exploring more crypto opportunities?
Great stuff as usual. Has there been any research on why consumer facing inflation is so sticky? Prices went up dramatically during the pandemic but won't budge much now.
Totally agree with option 3, plus the pound is dropping like a stone a t the min, if this continues it will lead to inflation because we import a lot of our essential goods. The BOE will then have no choice but to defend the currency and raise interest rates, bunker down people it could get rough in the next few years
Not to sure about that. In Australia we introduced a GST (increase in indirect taxes like a tariff) and compensated households with a tax cut. The tax cut was inflationary but the GST took money out of the consumers hands so was deflationary although it increased prises in the short term. Tariff inflation is not caused by higher demand, or too much money chasing to few goods , it is driven by tax increases.
"so was deflationary although it increased prises in the short term" Sorry you've lost me there. How can something be both deflationary AND inflationary?
Good analysis as usual Ramin. I just live in hope interest rates don’t go up around the time I need to remortgage (next autumn). Btw I liked the Ian Dury and the block heads reference ’Hit me with your policy stick’ 😂
Same. The irony is the so called expert financial advisor/broker we used dint want to start the obvious at the time we fixed for 2 yrs which was rates are about to plummet. Gutted about that but hey ho. Maybe the landscape will be very different this time next yr 🤞🤞
is the reason uk rates would follow usa rates, is as the boe would look to support a depreciation in the exchange rate? which might otherwise increase the cost of exports and increase import costs?
Today's 2.3% CPI measure for October makes you wonder about last month's 1.7%, considering it was 2.2% in August. Interest rate cuts on hold for 6 months I think.
bit explosive title but such good content & with very unique data-points! ( I remain opposed to this view tho going by Lyn Alden's fiscal-dominance theory making it very very hard for already stretched government debts to be refinanced at even today's rates, why Yellen is resorting to 1-3yr bills issuance over 10yr treasuries, in effect exercising the yield curve control) Any rate hikes will blow the government and corporate debts out of proportion. Also while the US GDP might support FED rates to remain somewhat elevated, the UK and the EU are in precisely opposite precarious situation with UK latest GDP number flying in the face of Reeve's optimism. Therefore while inflation remains a risk the collective will decide in favour of not risking the recession.
I’m confused about bonds. On the one hand I hear they are a defined, 100% sure return known in advance (coupon + final value). But then I hear bonds had a massive drop a few years ago. If a bond fund is entirely made up of bonds and each bond has a definite known return, how can a bond fund lose money. Perhaps it is only funds that include corporate bond that are a risk. Are bond funds that only have gov funds risk free ?
Because a bond and its components are only 'guaranteed' when holding it to maturity. No everyone does this, and so the more sellers [and so amount of bonds for sale] the lower the 'secondhand' price has to go to encourage someone to buy [supply/demand]. In this case say the bonds final value was £100, then if it was sold for £90 its yield [extra value] would go up...if you bought it you got £100 of final value for £90 buying price. Further to this, governments [and companies] are continually need in money and so continually selling tranches [sets/packages] of bonds.When inflation increases they need to offer lower prices to attract enough buyers; why risk your money with a government when you could get a similar rate with protection [and easy access] in a Building Society account?...in this case the government [or bond issuing company] are not only competing with the BS, but they are also competing with 'secondhand' bonds from other sellers, and so taking our example above, they may have to offer £100 bond at £80 to get enough buyers to buy their rather than the other £90 bonds available.
08:20 NI change will only push wages up in unionised labour wont it? Certainly not expecting my employer to just pass this onto customers. Expecting us staff to suffer.
Absolutely, having a solid plan is crucial. My portfolio has doubled since early last year. My financial advisor and I are working towards a seven-figure goal, though it might take until Q3 2024.
Great info. The key matters to think about. Few politicians know what they are doing economically but Trump is utterly clueless and that is the wild card.
Its down to circumstances i suppose. My house is paid off and I've enjoyed a 6.2% UK national savings bond, only falling to 5.2% this year. Its above inflation, im happy with those rates. I am exposed to global stocks, but I'm happy to let those ride.
Well done! I'm in similar situation, experienced a difficult time after the housing market crash, nobody cared and the banks made it worse. Debt is a serious form of control that you sleep far better without. My only concern now is getting enough return on investments and protecting them for my children 😊
@voodoomotion5855 absolutely. I love how we can have the privilege of being able to pay to receive our credit score, just so that we can get into more debt. You're right to refer to it as control.
A timely topic for me, having spent most of the day trying to turn two mortgage offers in principle into firm offers. The best available mortgage interest rates seem to be rising marginally. One lender offered to honor a lower interest rate than their current best rates: this lower rate was available when I applied for my mortgage in principle about two weeks ago. The difference in rate isn't huge but over a 5 year it's a siginficant saving.
Normally, I would say that the President interfering with the Fed might be a problem. However with a slow and incompetent Fed, which does not seem to understand and take action on the detailed components of inflation (rather than a rear-view mirror culture of high-level inflation - based on a 12 month trailing snapshot in isolation with no context), it might not be a bad thing if the President did interfere - in as much as making sure there is some real economic and fiscal competence embedded for once.
Just look for opportunities, as an income investor I want 10yr rate over 5% so I can buy corporates at better price. Right now yields are too low to buy.
Racheal Reeves , the economist , has just baked a huge £50 billion debt into the economy. Everyone is also having their pips squeezed . I see interest rates going up like a rocket .
The NI hit to companies, higher wages for the unions, taxes on farmers, etc. are all inflationary. Why no mention of these? Also there are costs coming soon from the ill thought out GB Energy and net zero non sense from Ed Millboob.
Why do you love this?😅Interest rate hikes now would sink your long dated gilts and the EM gov bonds along with them, so unless you will be buying for the longterm and you believe its gonna be better in the long term, you lose from this...
@@MagicNash89 Love his videos you are correct it could sink values but not concerned built a bond ladder for retirement will not be selling only adding if yield goes higher 700k at just over 5% have given me a 30k tax free pension from 56 with a 3% pay rise each year no children dependants so happy with this
To be fair, he's using her as an example of someone who is likely misreading the situation. And rightly so, if wealth destruction was a sport, she'd be an Olympian.
This is nonsensical clickbait for a UK viewer (oh whom most of your viewers are) - you've given plausible reasons (so you have plausible denial), but this title is just to get clicks. And its getting boring
I think you should consider that, since US and UK central banks have cut rates in recent months, interest rates have increased (as bond markets have dropped, & yields increased). Markets don't believe the hype about rate cuts....and the prospect of higher rates for longer is becoming a reality....
Disagree, it's a well argumented alternative opinion. Personally I don't make bets, but I do see the possibility of Powell going against Trump, who openly wants rates down, Powell has already indicated that he is ready for this.
@@MagicNash89 Agree - the Trump / Powell fight is not one I want to see. It'll not do the US any good (or us). Maybe not on the scale of Truss/Bailey short lived fight, but I expect the child-like tantrums of Trump to cause problems for the majority and I've already heard him talking about getting rid of Powell ahead of his scheduled departure date (similar to Yellen?)
@@festerarl6653 Heck, I'd also like to see Powell vs Trump... wouldn't be good for my bond funds/liquidity in short term... but maybe that would be worth it.
Disagree. The title is the question discussed here. Are they set to rise or not? What are the factors and considerations? Ramin, as usual, offers information and paths for you to them make your own decision on what will happen
As a pensioner I am nervous about inflation. But as long as the government maintains the pension triple lock then I am ok with moderate inflation above the government target. However, if the government, any government, scraps the triple lock and introduces means testing (applied to existing pensioners) anytime in the next 30 years, then I will suffer and more so if inflation goes high again. I will vote for whatever party says that the triple lock stays forever and there will be no means testing applied to existing pensioners. If these things do happen, then despite my age I will take up my pitchfork and join the resistance.
Unfortunately a lot of people agree that real inflation is typically double whatever the government says it is. So even with the triple lock they are stealing from you.
The triple lock will be a massive strain on the future budgets (as its an unfunded liability later on). Millennials to Gen Alpha are going to pay the price one way or another as the dependency ratios/age demographics start shifting. Triple lock needs to be scrapped and we need to introduce the Australian system
Triple lock needs to be scrapped asap, it's not fair that one portion of our society benefits while everyone else suffers. How can NHS staff not get a pay rise for 10 years and pensioners complain about missing out on one year. Not to mention most pensioners have lots of wealth with compound interest offsetting any form of inflation.
Become a Premium pensioncraft.com member and you’ll get lots of benefits including access to the tools I show you in this video. You can find out more at www.pensioncraft.com/investor-education/membership/
Nearly everyone is expecting rate cuts, I remember the last time back in 2021 when so many investors did not expect rate hikes, much less steep ones and fast. So by this "measure" this is very much possible, as always, amazing videos, thought-provoking, unique takes.
If the bonds go begging like in scenario #3 i could see financial repression in the US as a likely result because the debt is so high there would be no way to pay the interest. Under an anti tax regime the amount of interest could potentially exceed total receipts. It's already over a trillion in the US.
Rates were extraordinarily low in the UK for a very long time after 2008. 4.75% is still low by historical standards.
Yep. My first morgage was something like 8%
@@JohnBeeblebroxin response to your comment. I presume your first mortgage was at a time when house prices weren’t as high comparable wages as they are now.
For example. If a house is £100,000 and interest rates are 10%, that’s £10,000. But if a £1,000,000 house has 5% interest rates, that’s £50,000.
In comparison to wages, property has gone up far more. The low interest rates up to now has somewhat saved the situation. But now with them rising, many will be priced out.
@@1995pearson That's right. But my grandparents had it a bit easier (in terms of affordability) as well.
I just saying interest rates have usually been a bit higher than the post 2008 environment.
I'll take 5% interest on savings at my age with no risk thank you.
@@Carthagonomads You don't want any risk in your life? How dull.
Ramin
Good balanced analysis.
On the U.S. side of the pond, I feel thee is one more impoderable which could drive intest rates; namely a debit crisis. One political party does not want to raise taxes, and the other party does want to cut benefits. With the national debt already at the breaking point, it is hard not to imagine a debt crisis somewhere down the line.
Regards
W.K.
It’s a bit worrying
With rising inflation and potential interest rate hikes, I’m starting to get cautious about the stock market, especially after seeing some of my recent investments drop to penny stock levels. The uncertainty, along with rising interest rates, could affect stocks, but I’m considering diversifying with Bitcoin. I’ve seen it rise with some of these shifts, and it might be a good hedge during market volatility. Should I stick to value stocks or start exploring more crypto opportunities?
Great stuff as usual. Has there been any research on why consumer facing inflation is so sticky? Prices went up dramatically during the pandemic but won't budge much now.
Greedy corporations and corporate profits to further line the pockets of the top 10% of course.
@erickillian313 hmmm, I'm actually interested in those services in the CPI basket of consumables that households buy. They're not all corporations
@@jeffocks793 Facts don't matter to ideology driven people.
Totally agree with option 3, plus the pound is dropping like a stone a t the min, if this continues it will lead to inflation because we import a lot of our essential goods. The BOE will then have no choice but to defend the currency and raise interest rates, bunker down people it could get rough in the next few years
Not to sure about that. In Australia we introduced a GST (increase in indirect taxes like a tariff) and compensated households with a tax cut. The tax cut was inflationary but the GST took money out of the consumers hands so was deflationary although it increased prises in the short term. Tariff inflation is not caused by higher demand, or too much money chasing to few goods , it is driven by tax increases.
"so was deflationary although it increased prises in the short term" Sorry you've lost me there. How can something be both deflationary AND inflationary?
Good analysis as usual Ramin. I just live in hope interest rates don’t go up around the time I need to remortgage (next autumn). Btw I liked the Ian Dury and the block heads reference ’Hit me with your policy stick’ 😂
Same. The irony is the so called expert financial advisor/broker we used dint want to start the obvious at the time we fixed for 2 yrs which was rates are about to plummet. Gutted about that but hey ho. Maybe the landscape will be very different this time next yr 🤞🤞
> Looks at my bond funds and cries
Reducing interest rates and then raising them in the same cycle will destroy the BoEs credibility because they cut too early
is the reason uk rates would follow usa rates, is as the boe would look to support a depreciation in the exchange rate? which might otherwise increase the cost of exports and increase import costs?
Today's 2.3% CPI measure for October makes you wonder about last month's 1.7%, considering it was 2.2% in August. Interest rate cuts on hold for 6 months I think.
bit explosive title but such good content & with very unique data-points! ( I remain opposed to this view tho going by Lyn Alden's fiscal-dominance theory making it very very hard for already stretched government debts to be refinanced at even today's rates, why Yellen is resorting to 1-3yr bills issuance over 10yr treasuries, in effect exercising the yield curve control) Any rate hikes will blow the government and corporate debts out of proportion. Also while the US GDP might support FED rates to remain somewhat elevated, the UK and the EU are in precisely opposite precarious situation with UK latest GDP number flying in the face of Reeve's optimism. Therefore while inflation remains a risk the collective will decide in favour of not risking the recession.
I’m confused about bonds. On the one hand I hear they are a defined, 100% sure return known in advance (coupon + final value). But then I hear bonds had a massive drop a few years ago. If a bond fund is entirely made up of bonds and each bond has a definite known return, how can a bond fund lose money. Perhaps it is only funds that include corporate bond that are a risk. Are bond funds that only have gov funds risk free ?
Because a bond and its components are only 'guaranteed' when holding it to maturity. No everyone does this, and so the more sellers [and so amount of bonds for sale] the lower the 'secondhand' price has to go to encourage someone to buy [supply/demand]. In this case say the bonds final value was £100, then if it was sold for £90 its yield [extra value] would go up...if you bought it you got £100 of final value for £90 buying price.
Further to this, governments [and companies] are continually need in money and so continually selling tranches [sets/packages] of bonds.When inflation increases they need to offer lower prices to attract enough buyers; why risk your money with a government when you could get a similar rate with protection [and easy access] in a Building Society account?...in this case the government [or bond issuing company] are not only competing with the BS, but they are also competing with 'secondhand' bonds from other sellers, and so taking our example above, they may have to offer £100 bond at £80 to get enough buyers to buy their rather than the other £90 bonds available.
The UK budget is clearly inflationary and therefore rates will rise in the UK
Thanks!
Thank you! @krumw2 that’s very kind of you. All the best Ramin
Informative, as always.
However, as an EUR investor I'd also like to hear opinion on Euro bonds/economy. Thanks.
Great video loved it!
Thanks so much @antomakeria7881
Hot take: we need deflation to wipe out greedflation on some goods like food
08:20 NI change will only push wages up in unionised labour wont it? Certainly not expecting my employer to just pass this onto customers. Expecting us staff to suffer.
Thank you
You're welcome @helenbrooks2273
Absolutely, having a solid plan is crucial. My portfolio has doubled since early last year. My financial advisor and I are working towards a seven-figure goal, though it might take until Q3 2024.
People got bait and switched on their mortgages. Double the interest now basically. Crazy.
Great content
Glad you think so @KhalidPamposh
Thank You.
You're welcome @DPTrainor1
Great info. The key matters to think about.
Few politicians know what they are doing economically but Trump is utterly clueless and that is the wild card.
Amazing content, please get a better microphone
So bond funds are going nowhere but down... great!
Thankfully aI can summarise And tell me that the interest rates might give up and they might go down
Its down to circumstances i suppose. My house is paid off and I've enjoyed a 6.2% UK national savings bond, only falling to 5.2% this year. Its above inflation, im happy with those rates. I am exposed to global stocks, but I'm happy to let those ride.
Well done! I'm in similar situation, experienced a difficult time after the housing market crash, nobody cared and the banks made it worse. Debt is a serious form of control that you sleep far better without. My only concern now is getting enough return on investments and protecting them for my children 😊
@voodoomotion5855 absolutely. I love how we can have the privilege of being able to pay to receive our credit score, just so that we can get into more debt. You're right to refer to it as control.
A timely topic for me, having spent most of the day trying to turn two mortgage offers in principle into firm offers. The best available mortgage interest rates seem to be rising marginally. One lender offered to honor a lower interest rate than their current best rates: this lower rate was available when I applied for my mortgage in principle about two weeks ago. The difference in rate isn't huge but over a 5 year it's a siginficant saving.
Overheating it's only a problem if the ecenomy is unstable
Normally, I would say that the President interfering with the Fed might be a problem. However with a slow and incompetent Fed, which does not seem to understand and take action on the detailed components of inflation (rather than a rear-view mirror culture of high-level inflation - based on a 12 month trailing snapshot in isolation with no context), it might not be a bad thing if the President did interfere - in as much as making sure there is some real economic and fiscal competence embedded for once.
Higher interest rates are increasing inflation as a result of housing mortgage costs
Just look for opportunities, as an income investor I want 10yr rate over 5% so I can buy corporates at better price. Right now yields are too low to buy.
Racheal Reeves , the economist , has just baked a huge £50 billion debt into the economy.
Everyone is also having their pips squeezed .
I see interest rates going up like a rocket .
Conversely George Osbournes austerity made us all better off and significantly improved growth...... not.
@@festerarl6653 If we had not tackled the £180b deficit Labour left in 2010, how much interest do you think we would be paying now?
@@realcodecruiser1588Poland did the opposite to our austerity. Look at their growth since 2010 and compare with ours.
@@festerarl6653 Taking sides won't help. None of them care about the country.
The NI hit to companies, higher wages for the unions, taxes on farmers, etc. are all inflationary. Why no mention of these? Also there are costs coming soon from the ill thought out GB Energy and net zero non sense from Ed Millboob.
Bonds in a 40 year cycle since 2022, going back to normal times.
Love this have a lot of long dated gilts, EM gov ETF`s now and money market funds food for thought 👍
Why do you love this?😅Interest rate hikes now would sink your long dated gilts and the EM gov bonds along with them, so unless you will be buying for the longterm and you believe its gonna be better in the long term, you lose from this...
@@MagicNash89 Love his videos you are correct it could sink values but not concerned built a bond ladder for retirement will not be selling only adding if yield goes higher 700k at just over 5% have given me a 30k tax free pension from 56 with a 3% pay rise each year no children dependants so happy with this
Jerome Powell is going to be leader of resistance until 2026. Can’t see how trump can avoid inflation.
As soon as you talk about what Cathie Wood says, I give you a thumbs down and move on.
It is surprising how so called “experts” are still using her comments as worth repetition.
Next will be Graham Stephan or Andrei Jikh
Or the guy rambling from a crate in Hyde Park. Actually that guy has more credibility than Cathie Wood.
To be fair, he's using her as an example of someone who is likely misreading the situation. And rightly so, if wealth destruction was a sport, she'd be an Olympian.
That's not cool.
People need to get used to rates being around 4-5%. These are not "high" rates at all.
Why the hell would you listen to Cathy Wood?
Listen clearly what he is saying!
This is nonsensical clickbait for a UK viewer (oh whom most of your viewers are) - you've given plausible reasons (so you have plausible denial), but this title is just to get clicks. And its getting boring
I think you should consider that, since US and UK central banks have cut rates in recent months, interest rates have increased (as bond markets have dropped, & yields increased). Markets don't believe the hype about rate cuts....and the prospect of higher rates for longer is becoming a reality....
Disagree, it's a well argumented alternative opinion. Personally I don't make bets, but I do see the possibility of Powell going against Trump, who openly wants rates down, Powell has already indicated that he is ready for this.
@@MagicNash89 Agree - the Trump / Powell fight is not one I want to see. It'll not do the US any good (or us). Maybe not on the scale of Truss/Bailey short lived fight, but I expect the child-like tantrums of Trump to cause problems for the majority and I've already heard him talking about getting rid of Powell ahead of his scheduled departure date (similar to Yellen?)
@@festerarl6653 Heck, I'd also like to see Powell vs Trump... wouldn't be good for my bond funds/liquidity in short term... but maybe that would be worth it.
Disagree. The title is the question discussed here. Are they set to rise or not? What are the factors and considerations? Ramin, as usual, offers information and paths for you to them make your own decision on what will happen
As a pensioner I am nervous about inflation. But as long as the government maintains the pension triple lock then I am ok with moderate inflation above the government target. However, if the government, any government, scraps the triple lock and introduces means testing (applied to existing pensioners) anytime in the next 30 years, then I will suffer and more so if inflation goes high again. I will vote for whatever party says that the triple lock stays forever and there will be no means testing applied to existing pensioners. If these things do happen, then despite my age I will take up my pitchfork and join the resistance.
Triple lock is slowly bankrupting the company. The pension age needs to go to 70 and the pension should be linked to wage growth only.
Glad to see such altruism. There's hope for the younger generation yet
Unfortunately a lot of people agree that real inflation is typically double whatever the government says it is. So even with the triple lock they are stealing from you.
The triple lock will be a massive strain on the future budgets (as its an unfunded liability later on). Millennials to Gen Alpha are going to pay the price one way or another as the dependency ratios/age demographics start shifting. Triple lock needs to be scrapped and we need to introduce the Australian system
Triple lock needs to be scrapped asap, it's not fair that one portion of our society benefits while everyone else suffers. How can NHS staff not get a pay rise for 10 years and pensioners complain about missing out on one year. Not to mention most pensioners have lots of wealth with compound interest offsetting any form of inflation.
Thanks!
Thank you! Much appreciated. Ramin