Integra Financial Inc. http://integrafinancial.ws Tue, 12 Jan 2016 21:01:52 +0000 en-US hourly 1 http://wordpress.org/?v=3.7.1 2015 Market http://integrafinancial.ws/2015-market/ http://integrafinancial.ws/2015-market/#comments Tue, 12 Jan 2016 21:01:52 +0000 http://integrafinancial.info/?p=884 As we start the New Year it is good to look back and review the past 12 months. It would appear that we are in a global slow growth environment. The 2015 markets were flat for the year with parts (emerging markets) being sharply down. The Morningstar broad index was up .69%, the Russell 2000 was down -4.41%, the DOW […]

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As we start the New Year it is good to look back and review the past 12 months. It would appear that we are in a global slow growth environment. The 2015 markets were flat for the year with parts (emerging markets) being sharply down. The Morningstar broad index was up .69%, the Russell 2000 was down -4.41%, the DOW up .21% and the S & P 500 up 1.38%. After a year like this it is very easy to ask, “Why am I in the market?” Fortunately I have a good answer. I will use the Morningstar index for my example but any of the above indexes will make the same point.

YEAR RETURN
2011 1.58 %
2012 16.27 %
2013 33.13 %
2014 12.85 %

If we look at all the investment options, only owning your own business or investing in rental real estate can you match the returns of a balanced stock and bond portfolio at this point in time. However, I would point out that owning a business or managing real estate rentals is no easy task. So while Bill, Keith and I don’t enjoy flat or down years such as this one we will continue to invest as we always have. We are firm in our belief that over time a diversified portfolio is one of the best places to store and grow your hard earned capital. Remember these are indexes which are 100% invested in stocks so your return will vary from these figures by the % of your funds that are in the bond market, overseas, or in other diversifying areas.

If you have not seen “The Big Short” I would ask you to go see it. It is an eye opener, and if enough people become aware of the things that are going on maybe we can stop it. For the year ahead we will be watching the markets closely as we appear to have a market which is becoming more and more tied to one another. We will do our best to make good decisions for you.

In closing, Integra Financial, Inc. celebrates its 25th year. I hope you had a good Holiday Season and we wish you good health and prosperity in the New Year.

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Integra Financial 4th Quarter 2015 Market Performance & Economic Outlook http://integrafinancial.ws/4q2015-newsletter/ http://integrafinancial.ws/4q2015-newsletter/#comments Wed, 14 Oct 2015 17:25:05 +0000 http://integrafinancial.info/?p=877 The market performance for this last quarter is one I would like to forget. If you have been listening to the business news you have heard two major themes. The markets have been “volatile” and the “Fed may raise interest rates”. The market performance year-to-date has gone negative because of events in August. The Morningstar U.S. Total Market return YTD […]

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The market performance for this last quarter is one I would like to forget. If you have been listening to the business news you have heard two major themes. The markets have been “volatile” and the “Fed may raise interest rates”. The market performance year-to-date has gone negative because of events in August. The Morningstar U.S. Total Market return YTD is -5.3% with Large Caps down -7.75%, Mid Caps -6.54%, and Small Caps -11.11%. What caused this to happen? In a nutshell, China! Beijing decided to devalue its currency on August 11th. The market felt that when the second largest economy is struggling it’s time to overreact. The Chinese economy was growing at a 7% clip and it appears to be slowing to a 3% or 4% rate. I like to point out it’s still growing and much faster than the U.S. So the question on everyone’s mind is how do we react? Should we sell or sit tight? If we do sell, where do we go? We are watching the numbers and events closely. Depending on whom you ask you will get different answers. Considering that the S & P has more than tripled since March of 2009. I am in the camp of “we have been in a multi-year bull market and valuations are getting high and the market needs to pull back and take a break”. As you know the market goes up and the market goes down, it is currently down. Our US economy is still growing lead by Housing and Auto although about 20% of it is flat lining (Oil and Commodities). We are watching the “numbers” to see if the world’s economy is going to stabilize or deteriorate. We will act accordingly. The other question is where can we go and get better returns? Sadly there are very few places. It is important to remember that market fluctuations like this are expected and your long-term goal is the thing to keep in mind. Your portfolios will never go up in a linear fashion but rise and fall with the
latest headline news. We are in the sit tight camp.

Willis Ashby, President and CFP®

Reference material from:

BMO Private Bank
Wall Street Journal
Morningstar
Integra Financial

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3Q15 Greexit and Economic Update http://integrafinancial.ws/3q15-year-date-returns-greexit-economic-update/ http://integrafinancial.ws/3q15-year-date-returns-greexit-economic-update/#comments Fri, 17 Jul 2015 17:31:38 +0000 http://integrafinancial.info/?p=871 The year-to-date returns for the quarter ended are positive, but not by much. The broad US Morningstar Index was up 1.85%, the DOW .03%, and the S & P 1.23%. The Small Cap sector lead the way with a 3.59% return. Volatility is an important factor this year. The returns just a few weeks ago when the DOW was 18,000+ […]

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The year-to-date returns for the quarter ended are positive, but not by much. The broad US Morningstar Index was up 1.85%, the DOW .03%, and the S & P 1.23%. The Small Cap sector lead the way with a 3.59% return. Volatility is an important factor this year. The returns just a few weeks ago when the DOW was 18,000+ were around 5%. So why the drops and rapid recovery’s? There are several reasons people talk about; the true unemployment numbers, market valuations and Greece, often called the “Greexit”, referring to Greece leaving the European Union. I believe it is the latter. Valuations are reasonable given our low interest rate environment. Stock dividend yields were higher than the yields on the 10-year US Treasury until a few months ago. This has not happened since 1957. With unemployment, the real number of people not working vs the government figure is troubling. However, it is getting better. The rest of the economy is continuing its slow improvement. That leaves Greece. Beware of Greeks bearing gifts, so goes the sayings from several sources about the Trojan Horse. Greece has the dubious award of being the first developed country to default on a loan from the IMF (International Monetary Fund). They missed a 1.73 billion payment due last Tuesday. Greece owes a total of 245 billion Euros for its bailout. They have additional payments of 32 billion owed later this year and next. When you consider this is their 3rd bailout in five years you get the picture. Thus all the speculation on will they actually default (they just did) and leave the EU. I think they will default after several “saves” and then leave. Greece is a small country from an economic perspective and the fallout from their default and leaving will cause lots of noise but the pain will mostly land on the Greek population. Detroit and now Greece are good examples of beware of what you vote for because there are consequences. No government can give you anything that you are not willing to eventually pay for.

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April 15, 2015 Newsletter – Market Index and Crowd Funding http://integrafinancial.ws/2q2015-market-index-and-crowd-funding/ http://integrafinancial.ws/2q2015-market-index-and-crowd-funding/#comments Wed, 15 Apr 2015 18:04:57 +0000 http://integrafinancial.info/?p=862 2Q2015 Market Index and Crowd Funding The first quarter ended with the broad Morningstar US Index up 1.77%. The Mid Cap sector leading the way with +4.50% followed by the Small Cap +4.38% with Large Caps up but only by +.78%. A good question to ask is how the total market can be up 1.77% when 2/3’s of the sub-indexes […]

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2Q2015 Market Index and Crowd Funding

The first quarter ended with the broad Morningstar US Index up 1.77%. The Mid Cap sector leading the way with +4.50% followed by the Small Cap +4.38% with Large Caps up but only by +.78%. A good question to ask is how the total market can be up 1.77% when 2/3’s of the sub-indexes were up over 4%? The answer is the large caps (number of shares X price per share) represent a much larger percent of the total, so how they go, so goes the total market. I mentioned this phenomenon in our year-end letter. If you were diversified (like we are) our returns compared to the index lagged last year because of the mid and small exposure. This quarter is an example of where we outperformed the broad index because of the small and mid-cap exposure. We continue to set records on both stock and real estate prices. Never has a recovery been so slow, the total dollars earned by Americans last year finally passed what we earned in 2008. Our wealth has increased but our earnings were lagging. Our earnings are now growing the way we need them to. I believe this will push the markets even higher. It will be a rough ride because of world events; the dollar has risen and risen against other currencies and it may go higher making it harder for US companies to sell overseas, the Federal Reserve raising interest rates, and the Greek situation just to mention a few.

I think the SEC just created the latest path to the next penny stock like ventures. It is called Crowd Funding. Last year Crowd Funding raised about 2.7 billion and is expected to raise 5 billion this year. The SEC just opened it up to non-accredited investors. Accredited investors must have 1 million net worth excluding their home and $200K of income. Colorado is passing the law as we speak. It will not be long before you will be pitched some new thing which is a no lose and make a lot money investment. Please call us before investing. There will be great
opportunities and a lot of not so good and more than a fair share of “run for the door”. So what is it? Let me start by giving you an example, Pebble Time is one that just raised $20,000,000.00 from 78,000 investors. They are making a watch to compete with the Apple Watch. The idea is to use social networks get you to invest and you can be in on the ground floor as an equity partner. You start with an idea put together a business plan and see how much you can raise. If you invest you will become an equity owner under the new rules. It is a great idea and will allow a few great ideas to go from an idea to a useful product. There will be lots of oops along the way but watch and see where it leads. It should be really interesting.

Willis

Willis Ashby, CFP

References: Morningstar, Diamandis.com, WSJ, Bls.gov

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January 7, 2015 – 4Q2014 Market Review Newsletter http://integrafinancial.ws/4q2014-market-update/ http://integrafinancial.ws/4q2014-market-update/#comments Wed, 07 Jan 2015 21:47:42 +0000 http://integrafinancial.info/?p=854 January 7, 2015 – 4Q2014 Market Review Newsletter I hope you had a safe and pleasant holiday season. Again the markets were kind to us. The S&P 500 index hit 53 all-time high closes during the year. For the year the broad U.S. Market index was up 12.85%, the DOW up 10.04%, the S&P 500 up 13.69%. However, the Russell […]

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January 7, 2015 – 4Q2014 Market Review Newsletter

I hope you had a safe and pleasant holiday season. Again the markets were kind to us. The S&P 500 index hit 53 all-time high closes during the year. For the year the broad U.S. Market index was up 12.85%, the DOW up 10.04%, the S&P 500 up 13.69%. However, the Russell 2000, which is a broader index, was up but only 4.89%. This shows the distortions that can be made when you read articles and listen to people talk about their returns. What I find so interesting is how the popular press rush to show how much money flowed into the S&P index and that most money managers underperformed. The lessons learned from 1968, 1983, 2003 to mention a few, being forgotten. The index from those years had long ten year periods of zero or little return. This last year’s returns were virtually all from the “large value” companies which produced a whopping 17.12% return. If you had money in the usually faster growing small companies you were up, but only 2.46% (as shown by the Russell 2000 Index) and if you were diversified overseas you actually were flat or down on that portion of your portfolio. Most money managers think long-term and usually include the smaller companies. To limit your investments to just the U.S. Market would not be a good strategy. We will continue to think long-term and have portfolio’s that are diversified. We acknowledge that we may miss some of the upswings but with some luck will also miss more of the dead and down years. Remember a 50% loss requires a 100% return to break even.

There are several things we will be watching for this year. I believe that a lot of the run-up in the “Large Caps” can be attributed to the massive buildup of the Federal Balance sheet and our easy money policies. With the recently passed TRILLION dollar budget and total debt of over 17 TRILLION I am reminded of a quote:

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome will become bankrupt. People must learn to work instead of living on public assistance.” Cicero 55, B.C.

Interest rates will rise as the economy gets better and how that will affect our federal balance sheet and the markets is any ones guess. As interest rates rise, both the stock and bond markets will be affected. Oil will be another item to watch. We are all receiving the benefits of lower oil prices (down 50% since mid-year), and the stimulating effect on the economy, however if the price per barrel drops into the low $40.s or even to high $30 the effect could be reversed. I believe we will see the DOW hit 20,000 in the next few years.

Willis Ashby, CFP®

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October 2014 Market Review Newsletter http://integrafinancial.ws/4th-quarter-news-letter/ http://integrafinancial.ws/4th-quarter-news-letter/#comments Fri, 03 Oct 2014 19:59:20 +0000 http://integrafinancial.info/?p=850 This last quarter has brought many new highs, recent drops in the market, and a lot of other news. The broad market (Morningstar Index) is up 7.33% for the year and up .21% for the quarter ended. We have our first Ebola case in the US, ISIS, Ukraine, Hong Kong protesters, Iranian nuclear enrichment, a White House intruder, the going […]

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This last quarter has brought many new highs, recent drops in the market, and a lot of other news. The broad market (Morningstar Index) is up 7.33% for the year and up .21% for the quarter ended. We have our first Ebola case in the US, ISIS, Ukraine, Hong Kong protesters, Iranian nuclear enrichment, a White House intruder, the going public of Alibaba ( a Chinese Amazon/Google) the collapse of the Venezuelan dollar, and several other world events. With all this going on it is surprising that the news we are most closely watching is the departure of Bill Gross from Pimco Funds to Denver’s Janus Funds. A little background on Pimco and the 70 year old Gross is helpful. Pimco was founded by Gross in 1979 and has grown to be a 2 trillion dollar firm by assets, one of the largest bond managers in the world. Over 10 billion of assets left Pimco in the 3 days since the announcement. Some pundits are predicting up to 500 billion may leave. We are not moving any of our Pimco positions at time. Currently the strategy’s and goals of the funds are still the same as they were. This may change. We are watching the situation closely and will let you know if this changes. I heard Mr. Gross speak at the Morningstar conference in June after Mohamed El -Erian (the heir apparent) left the firm. Pimco has very experienced traders, analysts, and managers. A firm their size cannot rely on only one or two people. My thoughts at the time were that maybe it would be better if Gross left. I believe Janus may not be getting the same man that built Pimco. They replaced Mr. El-Erian with 6 internal managers. As things progress we will move as needed but not with the knee jerk actions a lot of “fast” money is unwisely doing. Our focus will, as always, be on the best bond positions for you. The economy has had a few setbacks but continues to improve. If you have any questions or concerns please contact us.

As usual we thank you for your trust and business.

Willis

Willis Ashby, CFP®

“In general, the art of government consists of taking as much money as possible from one party of citizens to give to the other.” Voltaire (1764)

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July 2014 Market Review Newletter http://integrafinancial.ws/844/ http://integrafinancial.ws/844/#comments Thu, 03 Jul 2014 15:11:13 +0000 http://integrafinancial.info/?p=844 Market Review The Bull moves on and up. NO intended humor. Well maybe. The broad index for the US market is up 7.11% YTD, with Mid Cap Value leading the way with a 9.87% gain; Small Cap Growth being the lowest performer with a positive 1.72%. The debate now being discussed among investment circles is, are the markets too high […]

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Market Review

The Bull moves on and up. NO intended humor. Well maybe. The broad index for the US market is up 7.11% YTD, with Mid Cap Value leading the way with a 9.87% gain; Small Cap Growth being the lowest performer with a positive 1.72%. The debate now being discussed among investment circles is, are the markets too high or is it going to keep going. Having just returned from the Morningstar Investors Conference in Chicago the answer depends on who you talk to. A lot of very smart people arguing both sides. Barring an international shock I lean toward the camp believing it is going to keep its upward motion. There are pockets of value left and inflation is starting to show up here and there; specifically food. The broad food index is up 2.5% for the year but the sub components of meat, poultry, and eggs is up 7.8%. This will be passed on to consumers and, like gasoline, affects everyone. As prices rise, so will the market. Add to this the amount of liquidity the Federal Reserve has pumped into the system and its commitment to keep interest rates low and finally the economy will be getting better. All these things create an environment, which I believe, will cause the market to continue its climb.

Having said that, Davis Funds recently published research following the market vs the predictions of investment professionals and found it not very precise, almost no correlation. As Warren Buffet has said “In the 20th century The United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11497”. Given this history we will have some drops but the long term trend is very clear. We will continue to look for pockets of value for you, which should continue the good risk adjusted returns we have had.

Again I thank you for the trust you place with us.

Yours truly,

Willis

Willis Ashby, CFP®

Research data from Morningstar Advisors Research & TD Economics

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March 31, 2014 Newsletter http://integrafinancial.ws/march-31-2014-newsletter/ http://integrafinancial.ws/march-31-2014-newsletter/#comments Wed, 02 Apr 2014 21:52:11 +0000 http://integrafinancial.info/?p=836 Willis has asked me, Keith Fevurly, to write this quarter’s newsletter and I am most pleased to do so. It has been a rocky first quarter for the calendar year 2014! The international markets have been upset by continued unrest in Turkey, a declining growth rate in China, more uncertainty in European monetary policy, and, of course, the annexation of […]

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Willis has asked me, Keith Fevurly, to write this quarter’s newsletter and I am most pleased to do so.

It has been a rocky first quarter for the calendar year 2014! The international markets have been upset by continued unrest in Turkey, a declining growth rate in China, more uncertainty in European monetary policy, and, of course, the annexation of the Crimean peninsula by Russia, bringing about uneasy relations between Russia and the Western allies. Domestic markets have been roiled by fears that the current stock market is overvalued (some would say “a bubble” has occurred) and that interest rates have nowhere to go but up, thereby further depressing bond prices. So what are you, a knowledgeable and concerned investor, to make of all of this?

First, stay the course and remember you are in good hands. Willis, Bill, and I are “value investors”. This means that we evaluate securities and funds on the basis of their undervalued potential; specifically, we look for securities that are currently underpriced and have room to increase in value. One of the ways that we do this is by evaluating the current price-earnings (P/E) ratio of the fund to the historical market average. As I discuss in my book, The Handbook of Professionally Managed Assets, the historical P/E ratio of the overall stock market is approximately 16, therefore, we attempt to purchase funds that exhibit a P/E ratio below that number. This strategy is in contrast to a strategy focusing on growth of earnings regardless of the current price of the security (or so-called “growth investing’).

Second, continue to monitor Fed pronouncements with respect to interest rates. Earlier this week, the St. Louis Federal Reserve Bank President (and member of the Fed’s Open Market Committee) announced that he saw interest rates beginning to increase in early 2015 with the hope of gradually increasing rates to their historical average of 4-4.5 percent by sometime in 2016. These moves are good for savers but bad for borrowers! The question yet to be answered is whether economic growth will be significantly curtailed by an increase in rates. The general consensus of economists is that domestic GDP growth will fluctuate around 2.5 percent annually (plus or minus 1 percent) for the next five years regardless of interest rate fluctuations. We shall see!!       

Third and finally, a knowledgeable investor invests on the basis of real or after-inflation returns. When taking an account an approximate 2 percent annual inflation rate for the year 2013, the Standard & Poor’s Index of 500 Stocks (S&P 500) achieved a real return last year of approximately 28 percent. Do not look for this to continue! Indeed, to date, the S&P 500 is up only 1 percent on a nominal (or before inflation) basis; this makes the real return essentially zero (or even negative) to date. Nonetheless, the securities markets continue to be the only place where a knowledgeable investor can achieve a positive real return. While none of us are in the “market prediction business”, we can say with confidence that the stock market (and even the bond market, although to a lesser extent) is the primary avenue available to a knowledgeable investor to accumulate real, long-term wealth.

Please let Willis, Bill, and I know how we can be of service to you in the future and we wish you all a Happy Spring!!

Sincerely,

Keith

Keith Fevurly, LLM, JD, CFP®

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January 2014 Market Update http://integrafinancial.ws/january-2014-market-update/ http://integrafinancial.ws/january-2014-market-update/#comments Thu, 16 Jan 2014 17:59:27 +0000 http://integrafinancial.info/?p=832 I hope you had a wonderful Holiday Season.  2013 was a wonderful year for the U.S. market and you will see some nice dividends and capital gains hitting your accounts in December and January. After the markets ran up during the first quarter the news pundits were saying the markets were overvalued, the next quarter predicted the Fed would “taper […]

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I hope you had a wonderful Holiday Season.  2013 was a wonderful year for the U.S. market and you will see some nice dividends and capital gains hitting your accounts in December and January. After the markets ran up during the first quarter the news pundits were saying the markets were overvalued, the next quarter predicted the Fed would “taper QE” and the markets would take an enormous hit, the third predicted the bad effects of the government shutdown, and this last quarter felt the effects of the Volker Rule, Dodd Frank, and Obamacare. All predictions were wrong and stunningly so. You cannot predict which way the market will go and certainly not why until after the fact. According to Morningstar’s broad U.S. index the market for the year was up a whopping 33.13% and the five year average annualized return was up 18.73%. It was the best year since 1997. The economy is ever so slowly getting better. I think this market will continue upward barring some external shock.

I am grateful to all of you and wish you a prosperous year with good health, thank you for the trust you place in us.

 

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October 3, 2013 http://integrafinancial.ws/october-3-2013/ http://integrafinancial.ws/october-3-2013/#comments Thu, 03 Oct 2013 17:01:44 +0000 http://www.integraco.net/?p=536 Greetings! As the quarter ends the equity investment market has been kind to us. We are now almost five years from the recession. For those of us who did not sell at the bottom we have been rewarded with a five year return in the broad stock market of 7.73% annualized return. I know of few places where your capital […]

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Greetings! As the quarter ends the equity investment market has been kind to us. We are now almost five years from the recession. For those of us who did not sell at the bottom we have been rewarded with a five year return in the broad stock market of 7.73% annualized return. I know of few places where your capital could have grown at that rate without a lot of hands on work. The year to date number is a whopping 16.73%. Bill Patton in our office often says to buy good companies and add time. These returns reinforce my belief that equities are a very good place to store and increase your capital. Too many people miss interpret volatility for risk. It would be like digging up your front yard to install a new sidewalk and devaluing the house because of the current mess in your front yard, it looks bad now but the house is still the same house. The economy continues to grow albeit at a painfully slow pace and as long as it does the market should rise. There are so many items to discuss. Obama Care, the Government shutdown, the debt ceiling, chemical weapons, the 1% rise in interest rates, or the soon to be released IPCC climate report. For brevity I will only discuss the two which currently affect us and our investments.

The debt ceiling is a big one, pun intended; $16,738,183,526,697.32 is a big number. If you divide by the 350 million people in the US it is more than $45,000.00 per person, knock the 350 million down to the number actually working and it gets larger, then consider that almost half of us working are not paying income taxes. It seems to me that this is not going to go on forever. A lot of people say not to worry because when you look at the size of the entire economy it’s not a problem. I will let the market be the judge of that and you need to consider the mechanics of how it will actually be paid. This leads nicely to the second item, the rapid rise in interest rates. Mortgage interest rates just jumped 1% in a very short time.

To illustrate its effect let’s look at a $150,000.00; 30 year mortgage at 3.5% interest, your payment is $674.00 a month. If we assume that you can only afford the $674.00 (most people buy to their payment ability) the effect of the 1% interest rise is a reduction of the amount of house you can purchase. The new loan amount is only $133,000.00, a 12.8% reduction. If you still borrow the $150,000.00 your payment rises to $760.00. Ok, very interesting but so what? If we have another rapid rise in interest rates several thing happen. First, the amount of the payment on the Federal debt (mentioned above) goes thru the roof, and at the same time, housing one of the biggest drivers of the economy, slows down or stops. This helps explain why we are having QE to infinity. We need to keep the interest rates as low as possible for as long as possible.

Willis Ashby, CFP®

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