The Business Monthly – A Bond Market Bubble in the Making?

Since the Great Recession of 2008, writes Christopher P. Parr, the Federal Reserve reduced, and then held, short-term interest rates at virtually 0% in an attempt to combat a global financial crisis and stimulate the U.S. economy.

The U.S. economy, no longer in crisis mode, has been experiencing steady, consistent low-to-moderate growth. As the economy becomes healthier, it becomes necessary and desired for the Federal Reserve to begin to raise interest rates gradually, toward a more normal, long-term economically “neutral” level of perhaps 3.50%.

Bonds can effectively be used to diversify a portfolio, reduce risk and actually enhance returns under volatile stock market conditions. When interest rates rise, however, the prices of existing, lower-yielding bonds fall because investors can simply purchase newly-issued bonds at higher, current interest rates.

To read the complete article by Chris Parr, Click Here.

– See more at:

The Business Monthly: Watch Out for Three Potential Traps When Searching for Higher Interest Rates

Christopher P. Parr’s article on the potential interest rate traps of seeking higher interest rates, was written in response to the low interest rate environment.  He explains the concept of financial repression and how it punishes savers and forces consumers to take more risk in an attempt to earn inflation-beating returns.  The article was inspired by two actual client situations.  The first trap referred to an unsolicited letter sponsored by AARP promoting a 9% annuity.  The second trap involved the purchase of an expensive, illiquid, and poorly-timed private real estate partnership investment.

This article was published in the June, 2012 Banking & Finance feature section of The Business Monthly.

Please feel free to contact us if you have any questions or comments.