Lowell Tuttle
David. So all these banks and financials which have holdings in bonds (for safety, lol) with lower interest rates and who have (in banks cases) over loaned out assets and are now having their deposits put under pressure. And the insurance companies who have positions in bonds which have been devalued significantly...they are under pressure due to rising claims costs in the inflationary environment. (We are seeing insurance company downgrading in the financial ratings.)
It appears to me the strategy these companies are using is hold on to those bonds until they mature, and in the meantime get rescued, either by the government or privately.
As the bonds are paid off, they have to re invest...and I am assuming like me, when I go to the bank to buy a CD, the returns are much better on the short term stuff rather than the long term stuff.
What does this portend for long term safe investing. I guess there is not any for now. Everything invested in fixed investments will be transferred to shorter term treasuries, CD's, and the like.
I wonder what this does for economic growth. I would guess eventually, long term demands like mortgages and commercial lending will eventually have to raise their interest rates more to attract the paid off bond and other money, thus causing further interest rate hikes...and another cycle start viciously...
I mean, USAA has lost some 25 billion in assets over the last 18 months. Progressive, has had to raise rates three or four times and institute some fairly strict underwriting rules to slow their new business growth...Homeowners insurance rates are going thru the roof. I am seeing 20-30-40-50% increases on customers who have no losses for five six seven years...
The knee jerk reaction we are seeing in P & C rates will cause a lot of market problems...especially in weather affected areas like Texas...(Florida, La, Miss, Ala, SC, NC...)
But then, the rates will have to bounce back down from that knee jerk hike the market has taken, as the profits will be too high to maintain those rates.
Just ranting...
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