Avoid THESE Stupid Mistakes when Interest Rates go Up.

you got to do whatever you can to avoid

these really simple financial mistakes

when interest rates start going up look

it is the ides of march it is march 15

2022 and tomorrow interest rates are

expected and pretty much will be going

up by 25 basis points in case you don't

know what that means it means a quarter

of one percent we expect interest rates

to go up by 25 basis points quarter of a

percent at least seven times that would

bring us up to about 1.75 from where we

are now at zero

and potentially all the way up to 4.25

percent with 17

consecutive 25 basis point hikes

so what happens when interest rates not

only head in this trajectory but what

happens when they actually end up

arriving to a range of 1.75 to 4.25 what

are the things that could absolutely

blindside us well let's talk about that

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streamyard okay problem number one you

don't want to get blindsided in first of

all if you're in margin debt and you're

really excited because you're only

paying two percent margin at m1 finance

you're paying a low margin rate

somewhere prepare to get rug pulled

because when interest rates start

trending up you should expect your

margin interest to start ticking up

pretty substantially now what's

remarkable is that we are at some of the

highest levels of margin debt in this

country that we have been in since

before the pandemic in fact since before

the pandemic we were sitting around

maybe 550 billion dollars of margin debt

to the fact that now we are up over 60

percent in margin debt there's a good

chance people watching this have at

least some form of margin debt and the

cost of you financing debt to buy stocks

and options or securities is probably

going to go up almost immediately when

we start seeing the federal reserve

increase rates so if you're in margin

and you're holding on to positions that

are maybe going down in value or they're

losing or you're speculating just

realize your debt burden is about to get

more expensive so buckle up get out of

margin if you can number two we gotta

talk real estate when the fed funds rate

starts going up the 10 year treasury

rate starts trending up as well when the

10-year treasury yield yield that's

essentially the rate right starts

trending up oh man it actually just

popped up again right now uh then you

end up seeing real estate mortgage rates

also pop up and there are a few ways you

can track this first

you can look at the 10-year treasury

yield by just popping over to something

like cnbc you can see it here it's

currently up at 2.16 it's worth noting

that it was as low as 1.7 about a week

and a half ago so in a week and a half

it's moved about 0.46

that's 46 basis points it's absolutely

ridiculous and so it's no surprise that

just this year today i want to show you

what mortgage rates have done and worth

noting that every one percent move in

interest rates tends to remove 10

percent buying power from the real

estate market so take a look at this

folks we started the year out at a rate

of 2.8

for the 30-year mortgage it's now at

4.15

i think we're gonna see five percent

pretty dang soon so

buckle up

okay now

look you zoom in on this you see it gets

even worse okay just the last couple

weeks we've seen a little explosion even

in the last couple weeks of about a move

of about 60 basis points or 0.6 percent

that's a lot so pay attention to real

estate real estate prices could come

under pressure certainly the buyers well

some buyers in our market right now

probably going to start getting washed

out

with uh with purchasing power so we're

going to have to keep an eye on buyers i

don't expect a big kind of uh

recessionary like foreclosure boom or

anything wild like that but there will

be some headwinds to real estate prices

nothing like the 2008 financial crisis

knock on wood

okay number three helocs and arms if you

have adjustable rate mortgages on your

real estate you're gonna be paying more

money so set aside some more cash also

helocs which are home equity lines of

credit these are usually variable

interest loans until they get to their

paying off period which is where you

lock in a rate for about 10 years and

then amortize out the rest of

the rest of your loan that you owe

during the first 10 10-year generally

drop period you have a variable rate on

your home equity lines of credit expect

those to go up home equity lines of

credit have had rates of somewhere

around three and a half percent you

usually get something like wall street

prime plus maybe a quarter of a percent

or half percent we're going to see that

wall street prime rate probably move up

and when the wall street prime rate

moves up your heloc's are going to move

up you could just google wall street

prime rate and then you could find out

exactly what that rate is some were

adjusted to libor

or pegged to libor it's another one that

you could use but yeah the wall street

journal prime rate right now is 3.25

percent i expect that to go up a quarter

of a percent

every single meeting that the federal

reserve has now and they have a meeting

about every six weeks so about every six

weeks you could see be seeing these 25

basis point hikes hike hike hike hike

hike it's a problem so something that

i've actually done here is i just

refinanced properties now i started

these refinances about a month ago so i

just completed the refinances but we've

mentioned this before it doesn't matter

so much in my opinion if the rates are

4.25 now or 4.5 now on investment

properties versus say like 3.5 on

investment properties that one percent

difference doesn't matter so terribly

much for me right now but what does

matter more is if i'm locking in those

variable loans that is i'm refinancing

on variables having those sort of

unpredictable raises over time

especially since there is a chance the

fed's going to have to hike more than

they have in the past because of this

potential for longer term more

persistent inflation so personally i'm

preferring refinancing right now over

home equity lines of credits or variable

styles of loan now in the future i do

expect that interest rates are going to

come back down again that might be in

2024 or 25 something like that when

rates start coming down again then i can

always refinance again and then go back

into like an arm or into helocs or

whatever but right now i don't mind just

lock me in give me that fixed rate

whatever i'm not going to pay points for

it just give me whatever the rate is hey

four and a half percent still a good

deal i'll take it right now lock it in

and then i don't have to worry about it

because i'm going to look and make sure

that a i can afford the payment where it

is or b my payments or my tenants are

making the payment for me so that sort

of covers it either way as long as those

are conditioned i'm good with

refinancing

okay next savings don't expect that

because the federal reserve is raising

rates your savings

yield is actually going to go up why

because banks have way too freaking much

money they've got so much money they're

parking all their excess money over the

reverse repo market to the federal

reserve there is so much extra liquidity

in the market

banks do not need more cash right now so

in my opinion most banks with the

exception of those that are looking to

maybe market and get more clients okay

maybe hopefully sofi actually gets their

act together and gets some more clients

here and we see some growth again right

with the exception of like marketing

plays i don't actually expect savings

rates to go up

yet

once we get to these higher levels

though if we start getting fed funds

rates of somewhere around two three or

four percent to try to pull down

inflation that's when i would not be

surprised to start seeing the return of

high yield savings remember those days

where you could get like and this was

just like a few years ago you get like

two percent on your high yield savings

account yeah those will eventually come

back but in my opinion no time soon so i

wouldn't be prepping for those instead

i'd be taking my savings and i'd be

paying off things like

credit cards and student loans because

once you've got to start making those

student loan payments again if you've

got a variable rate loan on those

those payments are going to go up and

credit cards probably the absolute worst

thing to have the first thing you should

probably ever ever

pay off

is or are credit cards get rid of these

credit cards it wouldn't surprise me at

all to see the average credit card rate

go from about 16 percent back to 20

maybe even 24

pretty dang soon my guess is that for

every about quarter percent hike that we

see at the fed you might see credit card

rates move about one percent that's

pretty wild so we get to one percent on

the fed funds probably gonna be paying

about four percentage points more on

credit cards than you otherwise would be

paying had we stayed at zero not so

ideal and then of course if you're

looking to shop for a car and you're

thinking about buying a car well first

of all this is the worst time in my

opinion to even think about buying a car

because you're paying fat premiums right

now everybody's raising their prices for

cars the car prices have shot up so much

you're paying it's kind of like buying a

stock at the top of the market and like

fomo into a car right now i think now is

the worst time to buy or lease a car but

if you were going to you'd probably want

to do it right before the rates go up

rather than right after because then

you're going to have high prices and

higher rates

so yeah carb rates are expected to go up

as well unfortunately

and so these are some of the core ways

in my opinion that you're going to be

affected by these higher rates now one

of the things that you can do is if you

do think that for example the 10-year

treasury yield is going to keep

skyrocketing one of the things that you

could potentially do is short bonds now

this is i would say a

more of a like a pro move uh

it's honestly relatively generic i don't

want to elevate myself into saying that

this is like definitely a pro book but

it's it's something that it just takes a

little bit more thinking about

i will give you a quick explanation if

you wanted to if you really think the

10-year treasury for example is going to

go up you could short something like tlt

this is what i've done i have shorted

the 20-year treasury bond etf

and basically when interest rates go

up and yields go up

treasury bond values so a bond etf goes

down

and so i'm happy to say i shorted

somewhere around about 139

on the tlt and it's made me some money

so far

but i think this is just the beginning i

expect this short to continue to make

money and you might not believe this but

when i sent this alert out to course

members everybody in my stocks and

psychology money group obviously gets

alerts every time i make a buy or sell a

transaction and uh when i made this

purchase over here

it's probably like here march 3rd or

something like that i don't know it's

somewhere around this this area here

when i made this purchase and i called

up jp morgan said i want to short this

with a million dollars

[Laughter]

you won't believe it

i asked them what's the short borrow

rate how much is it going to cost me to

short this thing and they're like well

right now it's showing negative 0.59

percent and i'm like what you're going

to pay me to short treasuries and

they're like yes sir and i'm like

sign me up

[Laughter]

it's a broken market anyway folks thank

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the next one thanks so much goodbye