Yesterday I posted an article by Mike Larsen that makes a strong case that inflation and interest rates will begin rising soon.  How soon? –I don’t know. If I had to guess they will start creeping up by the middle of May or early June. But by July/August they should start to accelerate.  If you are not sure this will occur be sure and scroll

So you may want to start taking action now.

Before I get started I want to state clearly that I am not a registered investment advisor and I am just giving you my opinion based on over 35 years of investment experience. So please do your own research before acting on any of my recommendations.  So with that caveat, lets get started.

7 Ways to Protect Yourself From Inflation and Rising Interest Rates:

1. Lock in low interest rates on any debt you have. For example, if you have balances on credit cards, look into replacing that debt with a fixed-rate debt such as a bank loan, Credit Union loan or a fixed-rate second mortgage.
2. If you have a first or second mortgage with a variable interest rate, re-finance to a fixed rate NOW!  As inflation grows, interest rates will climb. The last time this happened during the Carter Administration and the first year of the Regan Administration inflation hit 19% and the prime rate rose to 16%.
3. Sell any interest earning investments such as long-term bonds where the price of the asset falls as interest rates rise. For example, if interest rates on long-term treasury bonds rise, the underlying value of the bond falls.  Should interest rates rise as high as 7 to 8% or more, you can buy the bonds back at that time and lock in those interest rates for the long term. In the meantime, you can keep your money is 90-day T-Bills or Government TIPS bonds that rise with inflation.
4. Take a hard look at investing in Gold and/or Silver.  The huge deficits and continued government borrowing will continue the long-term fall of the US Dollar. Also oil, which is priced in dollars, has already risen from a low of $38 to over $85. I have seen forecasts by reliable research firms that predict that oil will rise to well over $125 by this Fall. Both of those events will cause the dollar to fall and Gold and Silver to rise.  Don’t bet the farm on this. Personally I have kept about 10% of my investment in gold over the past 20 years, but have recently increased it to 15%.

   You can of course buy physical gold and silver. I believe that everyone should have some of that. There are lots of places that advertise on radio and TV that sell Gold, but I prefer to buy from local coin dealers. The prices are the same and since I walk in and pay cash, the transaction is anonymous.  If the government ever decides to outlaw holding gold as happened in the Roosevelt Administration, they can subpoena all of those gold firms for a list of their customers.

   The other way to buy gold and silver is to buy stocks in gold and silver mining companies, but that can be risky as any company can fail and a lot of those mining companies are in unstable countries where they could be taken over like is happening in Venezuela.  So instead you can buy an Exchange Traded Fund that holds stock in a group of gold miners so your investment is diversified.  The most popular ETF for gold miners is symbol GDX.

   There are also ETFs that own physical gold and silver. These are SLV and GLD. Both of those ETFs track the daily price of gold and silver.

5. Another way to play this is to short US Treasury Bonds. The ETF, TBT, is an inverse leveraged ETF. As interest rates rise, the price of bonds fall. As bonds fall, the price of TBT goes up by twice the amount.  Warning this type of ETF can be both volatile and risky.
6. If you have been thinking about putting your money into an annuity, you may want to wait. Typically you can lock in higher returns from annuities when rates are higher.
7. Start storing food. If you have a freezer now is the time to buy meat. And if you have a fruit cellar be sure and can some fruits and beans this year.

   Food prices are going up and should continue to rise throughout the rest of this year.  Take a look at the price chart of Live Cattle. Cattle prices fell during 2009 and began rising last December and have risen 18% so far this year.  Hog and chicken prices are also rising by similar amounts. Grains are still low but are forecast to rise as we get into the summer growing season.
   

So now is the perfect time to start storing meat, flour and grains. If you don’t have a freezer or the room, many communities have meat clubs where you buy meat in bulk and they store it for you.

So there are my 7 tips for protecting yourself in a period of rising inflation and interests rates. Remember to do your own research before taking any action on these, but I urge you to do that research now.

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Interest rates are set to explode. Here is a great article by Mike Larson from Weiss Research.  Tomorrow I will write a post explaining how you can protect yourself from rising rates.

Skip McGrath

Rising Rates Right Around the Corner!   Protect Yourself NOW!

by Mike Larson, Weiss Research

Benjamin Franklin once called death and taxes the only certainties in this world. These days, I’d add rising interest rates!

I believe they’re coming … that the Federal Reserve is powerless to stop the inevitable … and that investors need to take protective action immediately.

Why am I so certain? Take your pick of reasons …

1. The Budget Deficit Is Out of Control! Uncle Sam racked up a $1.4 trillion deficit in fiscal 2009. That was equal to 9.9 percent of gross domestic product, the worst ever in the post-WWII period. President Obama’s budget assumes a 2010 deficit of $1.6 trillion — a whopping 10.6 percent of GDP!

These aren’t cyclical deficits, either. They’re STRUCTURAL. That means they won’t go away when the economy recovers. In fact, long-term predictions assume the deficit will never fall back below the 3 percent-of-GDP level considered fiscally prudent.

2. Treasury Supply Is Exploding! We used to sell $18 billion per month in 2-year Treasury Notes. Now we’re selling $44 billion. We used to sell $13 billion in five-years. Now we’re selling $42 billion. The government was in such good fiscal shape a few years ago that it canned 30-year bond sales. Now we’re back to selling $16 billion a month! Total net issuance is on track to hit $2.5 trillion this year.

3. Sovereign Debt Risk Is Surging! The benchmark 10-year yield in Greece almost tripled recently to 8.7 percent from 3.2 percent. Yields on long-term Portuguese debt increased by almost half. All the so-called “PIIGS” countries are under assault due to surging debts and deficits. I believe a similar crisis will happen here as investors increasingly realize we face many similar financial challenges.

Bernanke is determined to keep interest rates low.

4. Fed Policymakers Are Running Amok! The U.S. Federal Reserve continues to keep short-term interest rates pegged to the floor. And I see no indication that the “zero percent to 0.25 percent” range will change anytime soon.

A key reason: Chairman Ben Bernanke will do absolutely everything in his power to avoid the 1937-1938 scenario. In his view, tighter Fed policy at that time caused a vicious double dip in the economy.

Looser monetary policy now all-but-ensures higher future inflation later — a fact bond traders will price in well in advance. It should also put pressure on the dollar because foreign central bankers aren’t showing the same stubbornness as Bernanke.

Central banks in smaller economies like Norway, Israel, and India have all raised rates, while Australia has done so multiple times — and Canada just put the world on notice last week that it will soon follow suit!

5. Inflation Is Simmering Again! The Fed and most mainstream commentators believe inflation is dead and buried. This despite the fact oil prices have almost tripled to $82 from $32 … copper prices have surged 177 percent … and lumber prices just tagged their highest level in four years.

But the Producer Price Index for March tells a different story. It jumped 0.7 percent from a month earlier, more than the 0.5 percent gain economists were expecting. Wholesale inflation is now running at a whopping 6 percent year-over-year, almost double the average over the past six decades and the most since late 2008.

How High Might Rates Go?

The worst bond bear market in U.S. history struck in the late 1970s-early 1980s. Benchmark 10-year Treasury yields exploded from 6.8 percent in late 1976 to a whopping 15.7 percent five years later. Surging inflation and soaring deficits were largely to blame.

I don’t expect an exact replay, of course. But I believe the risk of rising rates is very real, and I see three possible scenarios playing out …

A simple case of “normalized” rates could lead to a 30-year bond yield of almost 6 percent, compared with around 4.7 percent today.

If a key technical pattern I’m monitoring completes, it would measure to an even higher target — 7.3 percent.

And if inflation really gets out of control, we could get back to the double digits. That’s the least likely scenario, but not completely out of the realm of possibilities.

Bottom line: We’re going to have to pay the piper for our profligacy as a nation, and I believe the bill will come due sooner rather than later.

Folks, I haven’t been this concerned about a major market shift in a long time. I believe we’re on the cusp of a secular trend change, similar to what we saw in housing when the bubble popped in 2005.

So I’ve invested extra time and effort to keep you informed about how to protect yourself from this impending debacle.

I have repeatedly urged you do things like dump your long-term Treasury bonds … lock in long-term borrowing rates while they’re still relatively low … and focus on investing in countries that do NOT have the same massive debt and deficit problems we do.

If you haven’t already taken these steps, don’t wait any longer. Do so now … before it’s too late!

Mike Larsen,
Weiss Research, Inc.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

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A lot of our readers have been ready to downsize or sell their home to move to a better retirement area. They want to sell their homes but think they can’t.  As bad as things look they are much better today than a year ago.

Home builders have not been building homes so the supply of new homes is around 250,000 the lowest it has been since the early 1970s.  And the supply of resale homes is now about 3.5 million –quite high, but a million less than this time a year ago.

Homes are selling. They are not selling as fast and the prices are low –but they are selling.  So here are some tips for selling your home in a tough market.

1. Be reasonable with your price. This is a buyers market. A lot of people let their ego get in the way when setting the sales price. I know your home was worth $375,000 three or four years ago. It really hurts to put it on the market at $275,000 but that may be what it takes.  Its not so bad though because the home you are going to buy to replace this one is also 30% lower. So when you move you are still trading equal value for equal value.
2. Work with an experienced local agent. Stick with someone who has been selling homes in your community for several years. When I sold my last home I called three real estate agencies and asked them the name of their top salesperson. From that list of three I picked the one with the most experience and local knowledge.
3. Do all the stuff anyone should do when selling a home. Fix up and paint, clear out closets and garages, spruce up the yard and make sure you have good curb appeal.  All of those things really matter. Spending $2000 on improvements in this market could add $5000 to your sales price and reduce your time on market.
4. Get rid of your sentimental mindset.  We all have a lot of memories wrapped up in our homes. But this is a business transaction and you need to approach it as such.  If you price your home too high it may sit on the market a long time –and there is nothing that will reduce your value faster than being on the market too long.
5. Be prepared to bargain. When I sell a home, I price it about ten percent over the market valuation but then I tell the Realtor to put the word out that I am a motivated seller. People always make a lower offer than your asking price so you need some room to move. If they think they can get the house for $20,000 less than the asking price they think they have the bargain.
6. Don’t spend your money or commit to a new house until this one closes. In the old days about 5% of all home deals fell through. Today it is more like 20%.

Now is actually not a bad time to sell if you want to downsize or move to a different area to retire.  The retirement destinations like Arizona, Florida, Southern California and Las Vegas were all hit harder than the rest of the country. Housing prices in those locals fell far more than in the rest of the country, so you will probably be able to actually trade up in dollar-for-dollar value if you shop carefully.

Here is a great article by Amber Dakar from Money & Markets about 5 unconventional ways to cut your daily living expenses and save money.

5 Unconventional Ways to Save

by Amber Dakar

Federal income tax returns are due in eight days. And as you’re scrambling to get yours finished, how you’ve spent your money in 2009 should be fresh on your mind. That’s why this is a great time to start (or revisit) your personal savings plan for the rest of this year.

Now, we all know about the “conventional” ways to save — including opening a traditional savings account, starting a Christmas club account, accumulating debit card rewards or bank points with our everyday purchases, and setting up monthly automatic deposits to savings accounts.

So, today I’d like to explore five unconventional methods for socking away a little extra cash each month …

Savings Strategy #1: Separate your long distance phone carrier

Instead of bundling all your phone services, consider separating them. There are several long distance phone carriers that charge you cheap rates for only the long distance calls you make.

How it works: They charge about 3 cents or 4 cents per minute with six-second billing increments and no minimums or monthly fees.

For instance, if you call someone out of state and talk for an hour or so, your bill can be as low as $5 or $6, including taxes and fees, for the month. And if you don’t talk to anyone in a month, your bill is zero!

Pioneer Telephone is one example of a company that offers this type of service. But there are plenty of others with similar services. Just do a quick Internet search and you’ll find lots of choices.

Savings Strategy #2:   Enroll in your local utility company’s budget plan

By enrolling in a budget plan, participating customers pay about the same amount each month, no matter what the temperature does.

Your utility company’s budget plan might not save you money, but it could make budgeting each month a whole lot easier.

How it works: The utility company looks at your energy usage for the previous 12 months. Then, your monthly budget billing amount will be based on the average of your actual bills during the last 12 months.

While it may not actually save you money, the predictable nature of this payment system makes it much easier for you to budget. And that means it will be far easier for you to find ways to regularly plan and save.

Savings Strategy #3: Switch to a cash-back gas credit card

If you haven’t done so already, consider applying for a gas-company credit card that offers cash-back rebates with your purchases.

For example, BP Plc has the following program for their customers: If they buy Amoco Ultimate gas they will earn a 2 percent rebate on every $1 of net purchases made at BP locations with no limit on the number of rebates they can accumulate in the program.

Then, for every $25 earned in rebates they can receive a $25 BP gift card … receive a check for the amount … or donate the rebate to an environmental charity.

And there are plenty of other gas companies offering similar rebate programs. A simple Internet search will yield plenty of choices.

Savings Strategy #4: Review your auto insurance bill

We’ve all seen the commercials telling us to shop around for a better rate because we may be paying more than necessary with our current carrier. And in some cases it can be true!

You may find you’re being overcharged by a company you’ve been loyal to for years. So, it’s best to at least shop around to see if you’re getting the best rate possible. A couple of phone calls or web searches can really pay off.

It also makes sense to revisit the individual line items on your current bill. You may find overlap with other insurance plans you have — such as the policy from your healthcare insurance provider — or pieces of coverage that no longer apply to your current situation. Cutting a few superfluous options will yield big savings without sacrificing your overall protection.

Savings Strategy #5: Download coupons online

If you’re looking for discounts on your purchases, they’re probably just a mouse click away.

Taking the time to search for online coupons could mean big savings on products you regularly buy.

One popular website is coupons.com, and all you need to get started is your zip code. The site will tell you which coupons apply to your area. Another website I like is SmartSource.com, the self-described “#1 Website for Printable Grocery Coupons.”

Plus, if you buy items online, it almost always pays to do a quick search for coupons that apply to the particular online store or product you’re looking at.

And if you have an iPhone, an application like Yowza can also help you save money while on the go. The app finds deals and coupons in your geographic area … then, at the cash register, you show the clerk the Yowza deal on your mobile device and they’ll simply scan the barcode on the screen!

One word of warning: When visiting these websites or downloading mobile phone apps, some stores you patronize may not honor online coupons or deals. So before you run out the door with your online coupons in hand, please check with your local store to see if they accept them.

Best wishes,
Amber

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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Here is another great article reprinted with permission from Money & Markets Dividend Superstars editor Nilus Mattive.

Your Choices for Keep-Safe Cash

Every time Easter approaches, I find myself thinking of baskets, eggs and all the other words we investors typically associate with portfolios and diversification.

So I was certainly ready with plenty of holiday-themed metaphors when a friend e-mailed me to say he’d sold his house and wanted advice on what to do with the proceeds.

Of course, the first thing I told him might surprise you: I didn’t say to invest in dividend stocks. Rather, I said his primary goal should be establishing a nice liquid emergency fund.

That begs a good question, of course …

Where the Heck Can You Put Your Keep-Safe Cash These Days?

It’s no secret that interest rates are pitiful. And as I told my friend, you shouldn’t expect much of a return on your emergency funds. Instead, your main goal is having peace of mind and the wherewithal to survive life’s twists and turns.

For that reason, this account should be considered separate from the uninvested cash in a brokerage account. (That money is best left in a money market fund, either Treasury-only or otherwise at this point.)

Certificates of Deposit (CDs) are clearly the old standby, favored by retirees and conservative investors across the country. That’s because they are readily available and generally very safe — until January 1, 2014 your deposits are insured up to $250,000 at each financial institution ($100,000 thereafter).

The two big problems are: Penalties for early withdrawals and paltry rates right now.

In my opinion, the penalties are enough of a reason to look elsewhere for a liquid savings vehicle. But if you think there’s only a slim chance you’ll need the cash over the life of the CD, they might be okay.

If so, you can find the best current CD rates by using a website like www.bankrate.com. Depending on the term and how much you invest, you should be able to get 3 percent or more. Not bad, but remember that the longer you lock your money up, the greater the chance that interest rates will rise and inflation will outpace your return.

Personally, I would trade higher yields for a greater emphasis on shorter maturities right now.

The first and most important part of any nest egg, is a solid chunk of cash.

Traditional savings and checking accounts are another option. They clearly offer the liquidity you want in an emergency account, but your local bank is probably offering a very poor rate of return right now.

So my suggestion is to start looking nationally using websites like www.checkingfinder.com and www.money-rates.com. A number of financial institutions are working hard to attract new capital at very favorable rates with high-yield savings accounts and so-called “reward” checking accounts.

Many of the best current rates are now coming from online-only banks (often subsidiaries of household-name brick and mortar franchises). Examples include OnBank (a division of M&T Bank in NY), FNBO Direct (First National Bank of Omaha) and Ally (formerly known as GMAC Bank).

It’s worth noting that these accounts often carry a litany of restrictions and requirements such as receiving statements electronically, making regular direct deposits, using debit cards for purchases, etc. Moreover, many of the attractive rates are only applicable on a certain level of deposits (often $25,000).

Still, if you’re willing to play the game … and even spread your money around at a few institutions … you can certainly earn a much higher return than you might believe possible.

What about bonds? For liquid savings, they would be my least preferred choice because you will not have FDIC insurance and CAN experience capital losses. And I would absolutely insist that you stick only to very short-term bond mutual funds and ETFs.

That said, there are relatively conservative funds that are paying out a percent or two in annual interest.

For example, in Treasuries, the iShares Barclays 1-3 Year Treasury Bond ETF (SHY) yields 1.1 percent and carries an expense ratio of 0.15 percent. Meanwhile, Vanguard’s Short-Term Investment Grade fund (VFSTX), which invests in high-quality corporate bonds, currently yields about 2.3 percent. You can find comparable investments from plenty of other low-cost fund families, too.

Again, I’m not saying that a yield of 1 percent or 2 percent is much to get excited about. And for the bulk of your investments, especially your retirement funds, I have many ideas that will produce double, triple, and quadruple those numbers.

However, we should all recognize the importance of an ultra-safe, ultra-liquid emergency fund … that is kept in an entirely different basket.

Best wishes,

Nilus

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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit www.moneyandmarkets.com.