As Cote already reported, Matt Kinman has started a weblog. Oh yeah, and in another sign that the world is coming to an end, Zane has fixed his permalinks. Well, that's two signs of the Apocalypse in one day. We just need Arley to tattoo '666' into his forehead and we'll be almost halfway there.

1:38:01 PM  #  

Firebird Rebranded...Again. Mozilla Firebird 0.8 is out, and oh, it's got a new name, again. The new name is Mozilla Firefox. via [Blogzilla - a blog about Mozilla]
1:10:47 PM  #  

Apparently, U.S. Consumers are struggling under a mountain of debt. Who knew? I believe this is the primary reason that the Fed has been so hesitant to raise interest rates. If you haven't noticed, most of those 0% interest plays in the auto, and high-end retail sector move to an APR style agreement after about a year. If the interest rates rise (which they will) then American consumers could be in a world of hurt.

That's my reasoning for taking fixed rates (which are slightly higher) on everything. Of course I could be wrong and end up looking like a sucker in 5 years. The good news is that I already look like one since I'm paying higher rates today so it won't be too much of a change. I'm willing to look stupid for the sake of safety.

The problem that I see coming is that the low rates encourage more borrowing, not resolution of the debt issues.  So right now we're just digging ourselves deeper and hoping for a bailout from somewhere.  Many people point to the rise in equity prices as a solution.  If the market is growing at a 15% clip and we're paying 12% on credit cards, then we're okay.  This fails to resolve for two primary reasons.

1. The market is like the lotto, "you gotta be in it to win it."  Every dollar spent servicing debt or consuming goods is another dollar that can't go into equity investments. So the issue becomes what percentage is invested vs. servicing debt and for most Americans the math won't work out in their favor.  American consumers have the highest worldwide debt level per capita of any nation.  This is money that is not flowing into the markets to take advantage of any gains.  Also, all this consumer debt is driving earnings at companies.  If interest rates rise people will curtail spending, and begin servicing debt which will drive earnings down, which will dampen market returns. 
   
2. Inflation drives down market returns.  Inflation basically means that cash is weakening relative to other assets.  You can buy less with the same amount of cash.  The value of a stock is simply a determination of what the market thinks the present value of a companies future cash flow is.  In a world of rising inflation, future cash flows mean less than they did the day before.  As this happens people place less and less value on the size of future cash, driving prices down.  In short as inflation goes up, market returns go down in an absolute sense.  If your interest rate on your debt level is rising in step with inflation then the spread between market returns and the debt interest narrows at an alarming rate and will most likely invert at some point.
   

10:12:11 AM  #