Ferenc Toth is founder of Your Personal Bank TM. He is passionate about helping people gain control of their money, create tax-favored income, and having access to more funds over their lifetime! Ferenc is a voice for common sense. He cuts through the noise to help us understand how current events affect our money.
The Federal Reserve surprised many people with a 0.5% rate cut recently.
Some are touting this as a good thing, especially the current administration and the legacy media.
Every time the Federal Reserve moved interest rates lower by 0.5% or more previously, it was due to a crisis or really bad economic news.
The Federal Reserve does not lower interest rates from the kindness of their heart. They lower interest rates because they are concerned about a bad economy.
Historically, the stock market has dropped significantly the majority of times after rate cuts started.
This is why some are expressing concern about why the Federal Reserve chose such a large rate cut.
Are they concerned about the economy?
Did they panic and overreact?
Was this politically motivated due to being so close to an election?
Nearly every economic indicator is showing the worst numbers since the Great Recession. The trends are headed in the wrong direction. If they continue, we can expect a severe recession.
I believe the Federal Reserve is attempting to prevent this. Their actions show they are clearly worried about employment.
Will they be successful in avoiding a hard recession?
They may be successful this time.
But history shows that when the Federal Reserve increases or decreases interest rates, they have consistently overreacted. They have also consistently been too late.
We will know in time, but the odds are against it.
The good news is this is the best time in 42 years to invest in an annuity or high cash value Your Personal Bank insurance policy. This is a generational opportunity to take advantage of higher returns on insured assets with guarantees.
Dividend rates are clearly on an upward trend due to higher interest rates than the past decade. Even if the Federal Reserve continues to lower rates from their current level, no one expects them to lower to the near zero levels of most of the past decade.
Insurance companies invest heavily in bonds. The bonds they have been purchasing for the last couple of years are far more profitable than the bonds they purchased most of the past decade. This is expected to continue for the next 3-5 years if not longer.
At the same time, borrowing rates are clearly on the decline. If the Federal Reserve lowers interest rates another 2% as they project over the next year or so, positive arbitrage will increase.
Dividend rates are currently about 6% and are expected to increase to about 7% over the next few years.
Borrowing rates using Your Personal Bank policies as collateral are currently about 5-6% and are expected to decrease to about 4-5% in the next year or so.
If you are earning 6-7% dividends on your money, then are charged 4-5% when you borrow, what is your money doing?
You still would gain 2-3% annually on money you accessed to invest in an asset, purchase an item, or pay off an expense.
This is the power of Your Personal Bank!