Subscribe
Share
Share
Embed
Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Why would the Fed lower rates? There's two arguments to it. One is the economy is strong enough. Let's lower rates so that the economy can become more strong, so it can grow more exponentially so that the new tax environment, new growth can help pay off debts. Then as debts roll over, that the debts roll over in lower rates.
Mike:Okay, that is a positive outlook and a positive argument to lowering rates. The other argument is and what traditionally has been done is you only lower rates in times of panic. And in that situation, if the Fed starts lowering rates, then something must be wrong. And if something's wrong and you don't know, maybe you start selling. And if you start selling, maybe someone else starts selling and then there's a panic in the market and then there's a sell off.
Mike:Welcome to how to retire on time, a show that answers your retirement questions. We're here to move past the oversimplified advice that you've heard a 100 times. Instead, we get into the nitty gritty because the truth is there's no such thing as a perfect investment, product or strategy. In fact, there's no such thing as a riskless retirement. That's why it's so important to put together a retirement plan that's designed to last longer than you.
Mike:Text your questions to (913) 363-1234, and we'll feature them on the show. Let's jump in.
David:Hey, Mike. What do you expect to happen when interest rates start to go down?
Mike:Let's let's kick the, the hornet's nest today, shall we?
David:Let's do it. So we like to do on this show.
Mike:The problem with this is there's such a political angle to this. I'm not political. I don't care what you think. You can like Trump. You could hate Trump.
Mike:You can like Bessett. You could hate Bessett. You could like Powell. You could hate Powell. If don't you know who these people are, great.
Mike:Fine. Whatever. Might be better off. Know, people know who they are. They're in the news all the time.
Mike:But here's here's the deal. The markets are emotional. Short term, markets are emotional. They're going to overcorrect or over, grow whatever ends up happening.
David:So the markets are emotional because they react to like world events or
Mike:Yeah. I mean, at
David:people saying
Mike:liberation day and how that the markets just plunged. And then like a week later, it was fine. Talk about overreaction to a situation. Now you can validate and rationalize your decisions and whatever, but the markets are emotional in the short term. They're efficient in the long term.
Mike:Okay.
David:Okay.
Mike:So, who's the guy that Republicans hate, that allegedly funds all sorts of chaos? George Soros. Okay. Okay. So George Soros, whether you like him or hate him, if you look at his investment philosophy, he is a brilliant investor.
Mike:Okay. Again, whether you like him or hate, I'm not supporting Soros in any way in saying this, But what he did is he looked for emotional inefficiencies in the market and then capitalized on it. Yeah. It's proof like the markets are emotional. Okay, so why would the Fed lower rates?
Mike:That is the premise of the entire question. Why would the Fed lower rates? There's two arguments to it. One is the economy is strong enough. Let's lower rates so that the economy can be can be more strong so it can grow more exponentially so that the new tax environment, new growth can help pay off debts.
Mike:And then as debts roll over, that the debts roll over in lower rates. Okay. That is a positive outlook and a positive argument to lowering rates. The other argument is and what traditionally has been done is you only lower rates in times of panic. And in that situation, if the Fed starts lowering rates, then something must be wrong.
Mike:And if something's wrong and you don't know, maybe you start selling. And if you start selling, then maybe someone else starts selling and then there's a panic in the market and then there's a selloff.
David:I see.
Mike:So you've got two self fulfilling prophecies and it depends on the interpretation of the masses on which one is actually happening. It's an impossible situation. So if the Fed starts lowering whether it's Powell, maybe Powell's replaced now, maybe he's replaced later. Rumor Janet Yellen might go back in there. Maybe not.
Mike:I mean, whatever is going to happen. If the Fed starts lowering rates, it's not as much in my opinion as a financial argument. I think it's more of a PR battle. Are they lowering rates to help boost the economy because we're growing, but we want to grow faster to help pay off our debt, to help lower the interest rates as they roll over with the new debt and so on and so forth, which, by the way, isn't really an apples to apples conversation because the Treasury bills and the debts that roll over, it's whatever the market believes the debts value. It's not the Fed's rate really affects banks, banks that affect business loans.
Mike:Yeah. Business loans affect the economy. Over here, the national debt and all of that, that's issued by treasuries, not the Fed. And the treasuries as those those assets are issued is based on whatever the market's willing to pay for it. So that's another bit, by the way.
Mike:If you lower interest rates that could devalue the dollar, that devalues the dollar, that could hurt or help. There is so much nuance based on the emotional interpretation of what different people believe would happen.
David:Lots of interconnected dominoes here.
Mike:And so What I'm getting at is don't bank your portfolio and predictions just on interest rates. Build a plan that allows you to be prepared for if things go well or if they don't go well. That's it. Don't believe that you can master this because even the brightest minds on Wall Street. Sure.
Mike:A lot of them are going to get it wrong. A lot of them are going to get it right. And a lot of it goes to speculation and what they think is going to happen, what they think is the interpretation of it. Now you're going to get people to argue with me on this. Oh, well, no, this is always what happens.
Mike:Fine. That's your opinion. That's your philosophy. This is economics. We're dealing in theory.
Mike:At the end of the day, which way is the price gonna move? And it could go either way. So be prepared for both. Build a plan that's designed to last longer than you. Recording.
Mike:That's all the time we've got for today's show. If you enjoyed the show, consider telling a friend, leaving a rating, and most importantly, that you are subscribed to it so that you don't miss a thing. For more resources, including a copy of my book, on demand courses, and so much more, just go to www.retireontime.com. If you want help putting your retirement plan together, go to retireontime.com and click the button that says get started. But seriously, from all of us here at Kedrick Wealth, we wanna thank you for spending your time, your most precious asset with us today.
Mike:We'll see you in the next episode.