With Interest Rates Rising,
Where Should You Invest?
By Stash J. Graham
Managing Director
Graham Capital Wealth Management
https://www.grahamcapitalwealth.com
Everybody has an opinion about where the economy is headed, but at least one variable has been pinned down – the Federal Reserve will continue to raise interest rates into the foreseeable future. The Fed recently announced that it is lifting its federal funds' target rate, a benchmark for many consumer and business loans, by a quarter-point to a range of 2 percent to 2.25 percennceGraham t. It also stuck with its previous forecast for three more rate increases in 2019.
This is a game changer for investors. Over the last 12 years, investors grew used to rock-bottom interest rates and cheap money. Those days are fading fast and smart investors are now starting to tailor their investments based upon the new reality of rising interest rates.
Investing in a rising-interest-rate environment is difficult as it acts as a suppressant on all asset prices. So sometimes it is best to play defense and focus on assets less sensitive to rising rates.
Companies have been taking advantage of the historically low-interest-rate environment by issuing long-term bonds at favorable rates while retiring shorter-term bonds. The supply of these long-term bonds has been met by demand from investors starving for an adequate yield. Meanwhile, as the short-term bonds mature, investors will get their capital back and will be able to reinvest in a higher-interest-rate environment.
Financial firms tend to do well during a rising-interest-rate market, especially as the long end of the yield curve outpaces the short-term end of the yield curve and the spread between those two grows.
Supplementally, long-term interest rates typically rise because there is an underlying belief that economic growth is occurring in the near-term future. For the last couple of the years, the spread between the short-term rates and long-term rates has been tight or narrow.
Financial firms like banks make money when they are able to borrow in the short term at lower rates and then lend at the longer, higher rates. They make money on the difference in yields. “Net Interest Income” is one of the primary fundamental metrics that all financial analysts study when reviewing a bank.
Many investors are already scaling back bond holdings. Many retirees/pre-retirees approach retirement by becoming a bit more cautious with their investments so they increase bond holdings. With rate hikes affecting bond portfolios negatively (as rates go up, bond performance falls), this could adversely affect what many thought to be safe returns. Rising interest rates could ensure some loss to many bond portfolios.
The bottom line is that now is the time to meet with your financial planner and discuss how your portfolio should adapt to the new reality of rising interest rates. Remember, there are still plenty of worthwhile investments to be made, but for you to gain the maximum return, they probably won’t be the same investments that have been golden for the last few years.
About Stash J. Graham
Stash J. Graham is Managing Director of the Graham Capital Wealth Management (www.grahamcapitalwealth.com). He is a seasoned financial professional who holds securities industry registrations subject to oversight by the Financial Industry Regulatory Authority, Inc. (“FINRA”), having passed securities examinations which include Series 63 and Series 7. He is a State Registered Investment Advisor Representative in Arizona, Florida and Washington, D.C. He attended La Salle University, Philadelphia, PA (B.A.; M.B.A, Finance) and The Johns Hopkins University, Baltimore, MD (Master of Science, Finance). ========================
AEMA Welcomes New WOTUS Rule
WASHINGTON, DC - Today, the American Exploration & Mining Association (AEMA) released the following statement after the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers (Corps) unveiled a new proposed definition for Waters of the United States (WOTUS):
"Today's release of a new water rule is an encouraging next step in the decades-long push for a WOTUS definition that empowers communities to protect their own water resources while providing regulatory clarity for our members. Today's announcement lays to rest the illegal federal overreach of the Obama-era WOTUS rule," said Executive Director Laura Skaer. "AEMA welcomes this return of balance between state and federal water regulation."
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About AEMA:
Founded 123 years ago, AEMA is headquartered in Spokane, WA. It is a 2,000-member national association representing the minerals industry with members residing in 42 U.S. states, seven Canadian provinces, and 10 other countries.
The End of the NRA? Business magazines tell activists: The strategy is working
by Rivera Sun
556 words
Good news for humanity: the NRA is weakening. The gun-lobbying group is in "deep financial trouble," Fortune Magazine reported, and warns that the NRA may not be able to keep going. "The group says it is under such financial distress because New York Gov. Andrew Cuomo has convinced a number of financial service providers, banks, and insurance providers against doing business with the gun-advocacy group. As a result, the NRA claims that it will be forced to end its magazine publishing and television services, and will be forced to curtail rallies and potentially shutter some of its offices.”
Governor Cuomo got a lot of credit for what, in reality, took an entire movement comprising hundreds of organizations. (For many reasons, business magazines tend to downplay the powerful role of social movements in economic shifts.) The reality is clear to those who have been following the Parkland students and movement groups like #NotOneMore and Everytown for Gun Safety: their strategies are working and the governor is a welcome ally.
Symbolic protests work best when they are used to galvanize acts of economic noncooperation like boycotts, divestments, and severing business ties. The strength of such protests lies in their ability to raise the stakes of inaction for power holders. By compelling power holders to rise out of complacency, silence, and avoidance of the issues, movements can pressure power holders to use their leverage for tangible social justice changes. When people like New York Governor Andrew Cuomo throw their clout into getting businesses and organizations to withdraw economic and social support from the NRA, the impact is immediate. By highlighting that the choice is between kids (and others) lives and the greed of the NRA and gun industry, the youth-led protests, marches, speeches, and rallies have led to increasing numbers of people and businesses cutting ties with the NRA.
Many companies have dumped the NRA over the years: the National Teachers Union dumped Wells Fargo over NRA ties. Enterprise, Avis, Budget car rentals, Delta and United airlines, and Wyndham and Best Western hotels have all stopped offering NRA discounts. The NRA claims that losing "perks" will not deter their members from pushing for their constitutional rights and civil liberties. Many people involved in the movement to end gun violence, however, feel it is important that NRA members aren't being rewarded by corporations. In their minds, those who actively block legislation for gun control of automatic assault weapons shouldn't enjoy special privileges while our children are being massacred.
You can find a full list of companies that dumped the NRA in 2018 at Cheatsheet.com.
Gov. Cuomo's efforts go beyond the small perks of NRA membership and target the bigger deals, financial backing, and even the top donor circles of the NRA. This has the gun-lobby behemoth running scared. The take-home for ordinary citizens is to amplify, escalate, and leverage our actions into larger, richer, and more powerful action. The Parkland students have done excellent work in that department—and their efforts have been backed up by hundreds of growing groups that work to end gun violence, virtually all of which have identified the NRA as a barrier to this goal.
Business is responsive - and vulnerable - to the actions of ordinary citizens on the issue of the NRA. Your feedback, emails, phone calls, and boycotts of banks and businesses make a difference. In many cases it's far more effective than calling your senator (hint: do both!). The effects of movement pressures are often felt more swiftly in the business world. Politicians can only be changed every 2-4 years; businesses have to deal with quarterly reports every three months.
Pressuring leaders who want to do the right thing—elected, corporate, or government agency—gives those leaders cover. Pressuring the ones who are indifferent helps them realize they need to take a stand. Pressuring the hardline opponents can drive them to make costly errors leading to their replacement.
Indeed, business magazine articles on the anti-NRA actions reveal that companies listen when we take action. First National Bank in Nebraska - one of the 15 largest credit card issuers in the nation - ended its NRA benefits because of customer feedback. As Time.com reported: "The First National Bank of Omaha tweeted last Thursday that 'customer feedback has caused us to review our relationship with the NRA,' and that it would not be renewing its contract to produce NRA-branded Visa cards."
All of this information gives us a strategic memo: the strategy is working. The question of whether to support human life, particularly kids, or a powerful lobby group is shifting in favor of the kids. And the NRA is weakening. There's no need to wait for the next mass shooting or for an organization to tell you to take action: find a company, write an email, and ask your friends to join you in pressuring them to drop the NRA. You can find a full list of companies that give NRA benefits and discounts on ThinkProgress.
The Fortune Magazine report on the NRA's financial crisis also tells us another important message: keep going. Instead of waiting for the next tragedy to galvanize a fresh burst of action, use this moment to continue to drive support away from the NRA. They'll be rallying to rebuild; our task is to continue to call companies to walk their talk, stand up for our kids, and dump the NRA.
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Rivera Sun, syndicated by PeaceVoice, is the author of The Dandelion Insurrection, The Roots of Resistance, and other books, including a study guide to making change with nonviolent action. She is the cohost of Love (and Revolution) Radio, and a trainer in strategy for nonviolent movements.
