We’ve experienced some amazingly low interest rates over the past couple of years. This is particularly interesting given the economic climate and huge government deficits. One of the main reason for our low interest rates has been strong foreign purchasing of U.S. debt, especially China. This trend may now be changing with potentially massive ramifications on the financial markets.
The Washington Post reported this week that:
New data, including Treasury Department figures released Monday, has stoked
debate over whether overseas investors — private individuals, institutions and
government banks — are growing dangerously bearish on the U.S.
I recommend reading this informative article. I’ll be closely watching interest rates over the next few months. This is not the time to go out and purchase long term U.S. government bonds, and I would also think long and hard before taking on any adjustable rate loans.
It looks like Warren Buffett has been preparing himself for this trend by getting out of long term bonds, holding lot’s of cash and purchasing foreign currencies. His portfolio adjustments might start to pay off soon.