Record Low Interest Will Come to an End
The US is enjoying the lowest interest rates ever (for those that can qualify for a loan) and banks are even enjoying it more. It still boggles my mind with these type of interest rates, we are still seeing rather flat (slightly increasing) home prices. In most time periods, available financing of this type would send prices sky high, as people raced to lock in rates. However, being the complex market we are in right now, we are seeing the home price market flat.
The fact is, eventually these rates need to come up. This is how the economy works. Bill Grossman thought this would have happened last year. He was wrong. It is impossible to speculate the When, but be sure, when inflation begins to show its head, the Fed will be quick to respond. At that point, watch out for real estate. I do not want to see how a housing market responds in this economy with 6-9% interest rates.
I think it is safe to assume that neither Republicans or Democrats are evil enough to let this thing happen, so I am sure we see a resolve before the deadline. In the end, the republicans will most likely budge and forfeit tax hikes for higher wage incomes. Either way, we are heading toward an era of higher taxes, which in turn will directly effect businesses. Commodities, utilities, and gold have to look good to me, as any tax hikes will be sure to slow industry and tighten credit.
Sometimes it seems like it's never ending. Between Iran, Israel, Palestine, and the European debt crisis, there is much to be cautious of when looking globally. Any jolt to either economic or act of war is sure to make markets uneasy. Right now, it seems as though investors are comfortable with the uneasy conditions, but this could change over night with an unforeseen event.
It is a dangerous time to be in the market right now. We will see a lot of changes in 2013, both in policy and in economy. As for now, and I remaining very conservative in my investments, at least until the forecasting fog settles a bit.