 Good day, fellow investors! Welcome to the stock market news channel where we discuss what's going on in the investing world with a long-term fundamental perspective. So, if you are tired of all the short-term mambo jumbo that goes on in financial news outlets and short-term betting and other things, please subscribe to this channel for a long-term perspective The buzzword this week has been negative interest rates. What are we going to do when bond yields go to zero? How are we going to deal with the next recession that is definitely coming? Should we all buy gold? And I might give you, with a lot of economic data, I might give you today a long-term perspective on things how what most people expect doesn't always happen. Let's start with the economic overview, what's going on, how negative interest rates don't really affect markets, don't have to affect them, how they can be short-term, they might be long-term, you never know that and therefore anything that you do by long-term bonds now is betting, is not investing. There is one thing that you can do which is investing, which is the smart thing to think about now and that I'll give you at the end of the video. So, let's start. Let's first start with the short-term versus the long-term environment. The Fed lowered interest rates by just 0.25 percentage points and immediately, not even a week, two weeks, people assume that change in trajectory will be linear, there will be a recession, the Fed lowered it because there will be a recession and investors consequently bet on even lower longer-term interest rates and they are actually happy to lose money on long-term bonds but they are trading, they are betting. The yield on the 30-year treasury is down to 1.9 so below 2% per year you're losing money, if inflation is 2% you will lose money over 30 years but they are betting that interest rates that yields will go even lower and that they are made money in that process. However, look at similar periods in the last five years, 2014 begin 2015, mid 2016 yields were also going down sharply but those that bet on long-term low interest rates lost a lot of money. I think that over the medium term those that did that if they don't move very quickly so if they haven't already sold what they bought a few weeks ago then they will again lose money. There is a big difference between long-term and short-term betting and this channel is about long-term investing. The 30-year and the 3-month bill have inverted the yield so you make more money by investing in short-term bills than long-term bills that's why Warren Buffett has only short-term, T bills, 4-month average but given what the Fed did everybody's expecting a recession even lower interest rates so history says that when the 2-year yield treasury and the 10-year treasury yield invert which means that the 2-year yield is higher than the 10-year year yield then that a recession should be around the corner in the next 1, 2, 3 years. However that is what everybody expects now. I am kind of thinking that what everybody expects might not happen or at least it might not happen in the way everybody expects it. You still have in mind 2009 and 2002 those who have been investing for a longer term how I did since 2002. 2002-2009 we had the SAP 500 crash 50% and people are expecting that in the next recession crash the SAP 500 stocks will crash again 50% or that it will be a terrible recession like 2009. No it might be a recession it might be a mild recession it might be a recession where nothing happens and then if on interest rates we might get negative interest rates we might not get negative interest rates things might change next month as those changed in the last few months and then in Germany you have negative interest rates and the world goes on so also something to keep in mind which is very very important let me discuss it with a little bit more data. So if we look at Germany the German government is being paid to borrow money so they will earn 6 billion this year by selling negative yielding debt so the idiots that are buying that probably with your money pension funds to protect themselves or to put somewhere the money to buy bonds to have bonds exposure you can thank them for your lower long-term retirement so they are buying 10-year bonds with now a yield of a negative 0.7% so that's already a negative yield and when we spoke about recessions we are close to a recession in Germany there was negative economic growth last quarter if in the next quarter there is again negative economic growth then Germany will be in a recession if we look at the stock market nothing strange 20% up no 15-10-15% up since this year like the SAP 500 so even if Germany is in recession things are going on as expected. So the key is that we might see a recession that will be mild and especially when I'm reading through all those reports to the Fed Minutes you see that everybody will put as much stimulus as possible Germany China Europe ECB the Fed Bank of Japan they will print they will push money they will do anything in Trump he needs the stock market to stay up to increase spending to be reelected that's all he's focused on so when you see all those power all those forces pushing assets up then I'm thinking that okay the recession there might be a recession we might be in a stagnation without big crashes because there is so much money in their environment that big crashes big liquidity crunches it was 2009 was a liquidity crunch there was no money available nobody wanted to lend money so it was difficult to do business because of high asset prices but if there is no liquidity crunch and it's unlikely that there will be a liquidity crunch because all the stimulus that has been coming in and will continue to come in from the 1 billion deficits 1 trillion deficits in the US difficult to imagine 1 trillion deficits to the ECB keeping interest rates at zero etc so it's hard to imagine a hard landing perhaps it would be a soft landing a little bit lower interest rates and then you never know when will things change and turn into an inflation it's likely somewhere around the road there will be inflation because of the high debt that governments have because we are at the late stages of the short term and the long term debt cycles because of political issues the wealth gap it's likely that there might be a shift that what people expect will happen based on the past 10 years might change in the future let's dig a little bit deeper if we look at interest rates those have hit rock bottom over the last decade now they're a little bit higher but if you change it now it takes a long time to put things into motion so it's actually we can say that the power monetary policy has to lower interest rates is very limited especially globally a little bit with the Fed but it doesn't change much as interest rates didn't change much on mortgages on things like that so that's one secondly printing money and buying financial assets monetary policy too it's inadequate because then you are pushing those yields zero below zero like we have seen for Germany lower 40 year yields on the US treasury so that doesn't create really credit to support the economy and then the third thing is that okay you see these yields invert if there is a recession you have to pay that debt and the governments will stimulate stimulate stimulate and then push everything into i think inflation which is the same likelihood as negative interest rates so you have to be ready for everything because to pay down to service this debt not to pay down it will never be paid down you need inflation because then government revenues are higher but the debt stays the same and those bond holders get screwed so it is very likely that over the long term we have inflation higher inflation and now on the move that you can start thinking about i'll start summarizing charlie's almanac and there is one saying that really struck me is that when it comes to investing you just need to make a few very very smart investment moves in your lifetime when those are you of course you need to cover everything look know what's going on but you need to make a few smart moves and that will change the financial outcome of your life extremely for example if we look at mortgage rates 30 year fixed fixed mortgage rates those are again down to 2013 2016 and now you can see a correlation between the 30 year bond now if you take 30 year mortgage now to find nice piece of property of course you have been looking at real estate for the last few years i think this is a really really smart bet investment not bet because the downside is limited now you might say okay son what if interest rates go even lower if interest rates go even lower and you took a mortgage now and bought a property and interest rates go to zero that property value might double in price so you win if interest rates go up you have borrowed money at a low interest rate cheap in the future then you are again a winner if there is inflation and you don't need a lot of inflation let me show you we might be in a period like the 1930s and just okay we had the world war then but just look at 1946 18% inflation 1947 8% inflation and then deflation 49 3% 48 okay nothing but then two years with 5.9 and 6% inflation so if you take a loan of 40 years and there are just two years of five six percent inflation let's say 2021 and 2022 you're already a great winner so i think we are living now in a reactive economy where central bankers politicians will do everything they can do to help the situation to prevent hard landings to prevent the negative recession to keep employment up from infrastructure projects from putting money wherever they want looks like a lot like communism because it isn't based more on competitiveness it's just based on who can get more money to finance whatever doesn't even mean it isn't even important to be profitable so that's the world we are living in and we have to adapt to that if the governments are borrowers it means that they will protect themselves and borrowers if you are a borrower you will be protected then there are a lot of things and we'll discuss in the next video on sunday michael borris strategy that there is a passive income bubble and how small caps are undervalued and we'll discuss that how then you can find those companies with higher yields more on sunday if you wish to find immediately those companies with higher yields higher business yields good businesses margins of safety please check my stock market research platform it's just it's less than one dollar per day so i work full time for you for less than one dollar a day find those investments that are under the radar but that might change your long-term perspective and long-term wealth significantly thank you for watching looking forward to a comments on this topic i'm sure there will be a lot of you that disagree so thank you and i'll see you in the next video