In Search of the Perfect Investment

Bernanke gave a speech a few days ago on “Long Term Interest rates,” He concluded:
Let me finish with some thoughts on balancing the risks we face in the current challenging economic environment, at a time when our main policy tool, the federal funds rate, is near its effective lower bound. On the one hand, the Fed’s dual mandate has led us to provide strong support for the recovery, both to promote maximum employment and to keep inflation from falling below our price stability objective. One purpose of this support is to prompt a return to the productive risk-taking that is essential to robust growth and to getting the unemployed back to work. On the other hand, we must be mindful of the possibility that sustained periods of low interest rates and highly accommodative policy could lead to excessive risk-taking in some financial markets. The balance here is not an easy one to strike. While the recent crisis is vivid testament to the costs of ill-judged risk-taking, we must also be aware of constraints posed by the present state of the economy. In light of the moderate pace of the recovery and the continued high level of economic slack, dialing back accommodation with the goal of deterring excessive risk-taking in some areas poses its own risks to growth, price stability, and, ultimately, financial stability. Indeed, as I noted, a premature removal of accommodation could, by slowing the economy, perversely serve to extend the period of low long-term rates.

For these reasons, we are responding to financial stability concerns with the multipronged approach I summarized a moment ago, which relies primarily on monitoring, supervision and regulation, and communication. We will, however, be evaluating these issues carefully and on an ongoing basis; we will be alert for any developments that pose risks to the achievement of the Federal Reserve’s mandated objectives of price stability and maximum employment; and we will, of course, remain prepared to use all of our tools as needed to address any such developments.

He also included a chart showing remarkably similar forecasts:

In other words, interest rates will rise, one day. And today remains a good time to borrow cheaply. Some of my friends have secured 10-year loans of under 4%. Such extraordinarily low rates can make investment real estate a great deal — if you can buy cheap enough and if you (or your investors) can put up, let’s say, 40% of the money.

I have had some money in a bank CD (certificate of deposit) in Australia. Each time I renew it, interest rates have fallen. Now, they’re offering me 4.2%, another fall. Should I take the money and plop some of it into equities? And that’s what I’m researching.

Everyone has been predicting a rise in long-term interest rates for the past five years. So far, it hasn’t happened.

For now. I’m going back to sleep. It’s early here in California, though the weather is snowless, warm and wonderful. Lucky me. I’m playing tennis at 7:00 AM — the only time I could get the pro. He’ll help me fix my backhand. Maybe he has the magic touch?

Harry Newton who figures living off interest and dividends gives boredom a whole new meaning.

The domain www.InSearchOfThePerfectInvestment.com now works.  But at a price. The moral is: Everyone can be done. But “everyone” is often aggravating and pricey. Meantime, the market is acting nicely. And so long as I stay away from Dell, BlackBerry, Apple, and Best Buy, I will live peacefully. Why Michael Dell wants Dell the company is beyond my tiny brain. I thought he was already in charge of it.