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Why All The Fuss About A Return Toward Normalcy?

Ronald Surz profile picture
Ronald Surz


  • Interest on 10-year government bonds has increased a little, but concerns have increased a lot.
  • There are costs and benefits to rising interest rates.
  • Central banks are running a dangerous experiment that could end badly.

Something really is different this time. Interest rates have never been lower, but that’s beginning to change, and it’s causing a fuss, as exemplified by this recent Lance Roberts article. So, what’s the fuss? You’d think investors would be relieved by a return to a more normal situation but be careful what you wish for.

The costs of rising interest rates

A low interest rate is one of the 15 explanations for the incredible inflating of our stock market bubble because investment analysts discount future earnings at a low rate. Consequently, an increase in interest rates reduces the present value of future earnings, so stocks are worth less.

The second cost of rising interest rates is increased cost of servicing our country’s $23 trillion debt. We can barely afford to service the debt now under ZIRP (zero interest rate policy). Consequently, the government will need to take money from other programs like Social Security and Medicare, and it will likely print more money.

COVID bursts stock market bubble: Baby Boomerr Investing ShowThe problem with printing more money is that we’ve just now authorized another $5 trillion in COVID relief in addition to the $4 trillion in Quantitative easing (QE), so $9 trillion in new money, plus President Biden supports another $2 trillion in infrastructure spending. Our GDP (gross domestic product) is $21 trillion, so $11 trillion is incredible, and will likely cause inflation, the third cost of rising interest rates.

The benefits of rising interest rates

I can think of two benefits to rising interest rates but suspect you can think of more: (1) it’s not nice to fool Mother Nature and (2) investors who would like to invest safely can get paid something for their money.

The US bond market has been manipulated now for a decade, especially the short maturity end of the market. Markets work best when

This article was written by

Ronald Surz profile picture
I'm president of  Target Date Solutions, developer of the patented Safe Landing Glide Path , Soteria personalized target date accounts, and Age Sage do-it-yourself investing. I;m also co-host of the Baby Boomer Investing Show.   My passion is helping his fellow baby boomers at this critical time in their lives when they are relying on their lifetime savings to support a retirement with dignity, so he wrote a book Baby Boomer Investing in the Perilous 2020s and he provides a financial educational curriculum I'm author of 3 books: Baby Boomer investing in the Perilous Decade of the 2020s, & 2 books on target date funds I’m smart with 2 Masters degrees and 55 years in financial consulting. I’m semi-retired, and prefer helping my fellow baby boomers rather than playing golf. I’m worried that our country, & most others, is playing with fire in its money printing. I’m here to help – that’s my legacy space.I help investors deal with life’s investment challenges, with the objective of enjoying a comfortable long retirement. I’m passionate about questioning and improving upon entrenched stale practices like jamming everyone into cookie cutter model portfolios. That's why I produce the Baby Boomer Investing Show live on Youtube and Facebook every other Tuesday at 10:00 PST. Watch live or replay by searching for "Age Sage Robo" on Facebook or Youtube. Please watch and support our Boomer Investing Show on Patreon ( https://www.patreon.com/user?u=35204315&fan_landing=true ) and visit our SA Blog at https://seekingalpha.com/account/authorboard/instablog . As president of Age Sage Robo (please Google), and CEO of GlidePath Wealth Management, I’m responsible for model development using my patented process . I have more than 50 years of financial service experience and hold a U.S. Patent for a time-tested glide path investment process that helps investors navigate the complicated financial decisions they face as they accumulate and preserve assets for their retirement years. Age Sage & GlidePath use this process to build Target Date, Special Purpose, and Life Span Portfolios that are tailored to the specific requirements of clients. My extensive financial career began at A.G. Becker Pension Consultants where I advised on the investment policies of several trillion dollars of retirement plan assets. After Becker I started my own consulting firms that developed innovative services for investors and the financial advisors who serve them. I’ve earned a BS and MS in Applied Mathematics from the University of Illinois and an MBA in Finance from the University of Chicago. I am author of the book "The Remarkable Metamorphosis of Target Date Funds" and co-author of "The Fiduciary Handbook for Understanding and Selecting Target Date Funds"Please visit https://babyboomerinvesting.show

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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