Why Interest Rates Are Headed Higher

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Interest rates are headed higher. Says Who? Says Lou Barnes, who makes a convincing case here, and is officially now one of LA Land’s favorite Fed-Watchers.

Highlights of his weekly column at Inman.com:
--’Rates are rising because the global economy is taking off.’
--’Housing is neither at bottom nor causing a recession.’
--This week’s spike in new home sales? ‘A sign of panicked builders trying to stay in business, building and dumping homes at or below cost, undercutting resales.’
--’Why isn’t housing knocking over the economy? The traditional reasons are lost on Wall St.: if you don’t have to sell, don’t sell. Live in it. If your value doubled since 2001, and you’ve lost 5 percent, you still have a 95 percent gain.’
--’How can mortgage rates rise when demand is falling? Get a grip: annual American mortgage demand is a minor element in global markets for IOUs. They are just electrons, after all, traded 24/7 in competition with every other borrower on the planet.’
--After laying out a convincing case for global growth, he warns, ‘As glorious as all this growth is, at this pace it is accident-prone. I have no clue if this phase will end by central-bank catch-up, tripping stock markets as they go by, and shoving property markets from behind; or by central-bank failure, markets running to cliffs. Whichever: rates are going up.’

Have a favorite Fed-Watcher you think LA Land should link to? Let me know. Faithful readers know I also like to showcase Pimco’s Bill Gross here.
Photo Credit: Reuters