 Good day, fellow investors. This week has been all about the Fed power and how the Fed is turning from hawkish to dovish. And in this video, I want to really explain what's going on and why I think that the biggest risk for long-term investors is that the Fed will eventually lose control. It happened always in history. The Fed governments eventually lose control because what they are doing now is against nature. Nature works in cycles. We humans work in cycles. The economy works in cycles. And you can, yes, postpone, but eventually it will all be back to cycles. A recession will come inevitably. We don't know when, we don't know the magnitude of the recession, but it's simply inevitable. However, we have to see now as investors how to position ourselves, how to protect ourselves, how to invest in the environment that we are currently in. Let's discuss the environment and then conclude this news with what we can do as investors to position ourselves in relation to what's going on. This is my favorite chart about interest rates. It's not about the 0.25% hike tomorrow or lower rates next month or whatever. This is the chart that really matters. It's a chart that shows interest rates since the 1950s. You can see interest rates going up until 1981 and then going down since then to today. And we have seen thus 45, 46 years of declining interest rates. And the problem is that now just this small hike from what's 0 to 2.5% has had effects on the economy that the Fed is already thinking, OK, that the new neutral rate is below what they thought it would be and they thought it would be 2.53% and it's lower than that. It's around 2%, perhaps even lower. The thing is that the environment has been constantly seeing lower interest rates, which means that companies have been constantly taking more and more and more debt because it's cheap. And thus we have an extremely indebted environment from households, from governments, from businesses. If you look at government debt levels exploded over the last 45 years, company debt levels exploded over the last 45 years because of the cheap money and cheap debt. And now, therefore, as everybody has debt, every increase, even small increase in interest rates has a big effect on consumption, on investments, on the economy, because it's all about interest rates eventually. And we see, if we look back at the chart of interest rates, we see that the 1960s low interest rates, but eventually those interest rates have to go up or turn into a recession. Or turn into inflation. So eventually the Fed will lose control and we as investors have to be ready for that. If we read what they say from the minutes nearly all participants had revised down their assessment of the appropriate path for the federal funds rate. Many judge the additional monetary policy accommodation would be warranted in the near term. So more accommodation with unemployment at record lows, with the economy not seeing a recession for what, 10 years. They are going for a monetary policy of accommodation, thus helping the economy. Participants stated a variety of reasons that would call for a lower path of the federal funds rate. A near term cut in the target range for the federal funds rate could help cushion the effects of possible future adverse shocks to the economy. And plus, inflation expectations had already moved below levels consistent with the committee's symmetric 2% objective. The point is that at some point you can't go lower than this and then the question is, okay, what's the next step? The next step is money printing and what happens when the next step comes in, then you simply have to see inflation. And inflation will actually be an excellent thing because it will allow all those that have debts to easily pay their debt. Governments, households, companies, especially if they have fixed rate debt, which means that inflation will have higher revenues, higher tax income in case if you are the government and the debt stays equally. Unfortunately, the US government has just five years average maturity of their treasuries, which is I would call shorter term. They should do like Argentina and borrow money for 50-100 years like Italy did a few years ago and that would be very, very wise. However, the question is here, what will happen next? And next we have discussed modern monetary policy or monetary policy free, where there will be more money printing. This means that currencies will be sacrificed. So if you're an investor, the message is simple, be careful when it comes to currencies. Okay, holding cash is right, but be ready to deploy that cash when you find a good business to invest in. You can also have good debt, which means 30 years fixed mortgage, 20 years fixed mortgage. When the money is invested in something that covers for the interest rate for the cost. So when you find such a scheme, perhaps the return on investment now will be 1, 2, 5, 4, 5%. But you are hedged and you have certainty, which is low risk, high reward in the long term, especially if we have inflation. Nobody knows what will happen, nobody knows when it will happen and we only know that the Fed, ECB, Bank of Japan will do Bank of China. We'll do everything that it takes to keep the economy going strong to avoid recessions, which means they will print more money. Which means we can not worry that much about shorter term things because they will deploy all their tools to help. But as we see 2 years ago, a year ago, it was very hawkish, now we are very dovish and next year it will be again hawkish or inflation. Or there will be something completely different bothering the Fed and therefore they always look into the rear view mirror when making decisions. And they are making mistakes, they will continue to make mistakes and we have just seen all things from a common sense investing perspective. Find good businesses and what's the risk? If we look at the corporate debt levels, those are extremely high. So if you want to invest in low risk, higher return, you have to avoid those companies that have a big debt burden that will be very difficult to manage when a crisis comes or higher interest rates come. Just an example of how I think this is a great thing to take advantage of, reposition your portfolio into good businesses. Berkshire has great credit rating, so that's a company that will perhaps even take advantage of any future changes in their environment. 0% or 2% interest rates is not good for Berkshire. Inflation would help it and long term of course, not that much for insurance depending on the level of inflation but it's still Berkshire. It's much safer than other companies junk debt and you see a lot of those companies owning junk debt and the yield that Berkshire offers with the price earnings ratio of 20 is 5%. And those junk companies, companies with junk debt also offer 5%, 6%. So you want to position yourself in companies like Berkshire that whatever happens, they will do well, they will win, they will give you higher reward with lower risk. If you go for the same reward at higher risk, that's something I would say avoid over the long term always and also now that we know what the Fed is planning and that they will sacrifice currencies. Even Trump has been saying that the dollar is too strong, everybody is sacrificing, everybody is ready to sacrifice currencies over the next 10, 20 years. Thank you for watching. If you want to know more about how to find good businesses, how to invest, how to invest with lower risk and higher returns depending on what's going on in the environment, please subscribe to this channel and you can also check my website to see more about what I do, more of the details and also articles and research for professional investors. Thank you and I'll see you in the next video.