The Cost of War?
If the Federal Reserve’s signal to raise interest rates and sop up excess liquidity in the financial system were not enough, we have to deal with rogue nations threatening to invade their global neighbors!
It’s not simply a former Soviet parcel kicking back at Mother Russia, but a seminal test of the Biden Administration’s mettle and resolve… China is weighing every single national government reaction concerning Russia’s invasion of Ukraine, as Taiwan could be the main course, after the Hong Kong/Macao hors-d’oeuvres.
War is so very anti-productive! It is laborious to fabricate devices which are designed to disintegrate themselves and the unfortunate collateral near their epicenters.
Armed conflicts misdirect resources which could have more productive applications, reducing real Gross Domestic Product – while driving inflation and interest rates higher.
Beyond inflation, loss of life is the biggest waste of productive resources, forever scarring family survivors grieving such unwarranted deprivation.
The easiest issue to address is where one should put their investment dollars to harvest the normally ill-effects of inflation and rising interest rates. Following are a few “buys and sells” which the wise may want to implement.
Interest Rate Sensitive Certificates of Annuity; and, eventually,
Bank Certificates of Deposit.
Consider Selling … Corporate, Municipal, High Yield and US Government Bonds; Stocks of High Flying Unprofitable Companies; and,
Preferred Stocks with a Fixed Dividend.
The world has benefited from a decline in interest rates since 1981. This favorable cycle is officially over, providing a formidable headwind resisting a rise in asset prices for the next four decades.