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We believe that the current "free money" policies around the world of negative or zero-ish per cent central bank rates have not worked and do not work, and cannot understand why central banks continue to follow this course. The definition of insanity is doing the same thing over and over again and expecting a different result.
But it could be good news for mortgage borrowers.
The mortgage rate was has become a springtime tradition.
We see the preferred share shakeout as a great buying opportunity, particularly among rate-reset preferreds -- especially those that have a rate reset of at least two years into the future -- as their plunge in prices has made their yields attractive and there is significant potential for capital gains if and when Canadian interest rates do begin to rise.
The long-awaited liftoff is here: the U.S. Federal Reserve has announced they are raising the Federal Funds Target Rate to 0.5 per cent. It is the first time in seven years the Fed has increased their trend-setting interest rate, which they cut to 0 per cent on December 16, 2008. Markets had widely anticipated the move, with 81 per cent calling for a hike today. As the U.S. is the largest economy in the world, any change it makes reverberates through the rest of the globe, impacting markets and even the cost of borrowing for other countries.
Today, while regulators struggle with banks to get the derivatives market under control, these gambling instruments are being used just as dangerously as they were leading up to the recession. In fact, the banks and traders are even more aggressive now.
Bubbles occur all the time, along with financial inventions. The most recent, and controversial, launched in 2009: A virtual currency called Bitcoin that enabled holders to trade directly and to hide their assets from governments.