Negative interest rates are already in effect in at least eleven countries.
What's more, the total value of negative yielding bonds is expected to keep rising as central banks keep pushing rates lower.
Meanwhile, odds are growing rapidly that America will be the next major economy to institute a negative interest rate policy.
Ultimately, hundreds of millions of investors will be victimized by this dubious practice.
But there's no need for you to be among them...
Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Stocks are sitting at or near record highs, so, naturally, Jerome Powell's Federal Reserve is expected to do its part with another 25-basis-point rate cut this afternoon at 2 p.m.
After all, the stock market is up – the Fed's unofficial, unsanctioned signal to open the cheap-money taps a little wider.
If the Fed moves as markets are "expecting" (read: demanding), this'll be the third reduction in the Fed funds target rate since July, totaling 75 basis points in all, just as it did in 1995 and 1998.
The Fed would be cutting against a backdrop of sky-high stock valuations, decelerating economic growth and job gains, a deepening manufacturing recession, and a political situation that threatens to boil over into full-blown constitutional crisis at any minute.
So this is a really dicey time for investors, but there are some opportunities for savvy folks who understand how to play the Fed against Wall Street – and Wall Street against economic reality.
Let's talk about what to do… Full Story
Let's talk about what to do... Full Story
Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
"There is nothing new under the sun," Ecclesiastes wrote. For the most part, the pseudonymous biblical poet was right on the money.
The credit market, for instance, has existed in one form or another since 3,000 BCE or thereabouts – around 5,000 years.
At the dawn of human civilization, the Mesopotamian economy featured interest rates as high as 20%. And by the time Cyrus II of Persia ("Cyrus the Great" to his friends) conquered Babylon in the sixth century BCE, creditors could often reap a positively mouthwatering 40%.
Ah, the good old days…
Unfortunately (and with apologies to Ecclesiastes), there is something very new and very dangerous under the sun these days.
A frenzy of capital destruction – the end result is functionally no different than gathering up all your money, dousing it with gasoline, and setting it alight.
It's unprecedented; it has never happened before, in all of the five millennia that tribal chieftains, warlords, monarchies, principalities, Westphalian nation-states, and multinational corporations have been buying and selling debt.
I'm talking about negative yield.
If that sounds unnatural… perverse…. even insane… well, that's because it is. And not much good can come out of it.
As dangerous as this situation is, there is a way forward through it. We don't have to take what's coming lying down… Full Story
Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
I'm a trader. That means I like to be covered, defended at all times. That goes for individual trades and of course for all my capital.
My favorite protection? Owning gold.
The problem? There are a lot of ways to own it.
That's a concern I've heard again and again during my time as a trading and investing coach, and throughout my time as Editor of Power Profit Trades.
Start the conversation