Well, here comes the inflation fear again. A few weeks ago everyone was quite certain that the Fed was all but done raising rates and had beaten inflation… now the Fed Minutes tell us that the governors are not entirely sure, and they’re worried about the lingering inflation pressure and might have to raise rates some more. The 10-year US Treasury Note, which remains the most important interest rate in the world, got over 4.2% this week, for pretty much the first time since before the 2008 crash… that may or may not mean we’re “returning to normal” after a low-rate decade (4%ish back in 2006-2007 was considered so low that it inspired Alan Greenspan’s famous comment that he was worried about “irrational exuberance” at the time), but it sure draws the eye. Just about everything in investing is compared to the “risk free” rate, and most people use the 10-year rate for that.

Rates are continuing to get more “real” in the real world, too, as for the first time mortgage rates are now higher than they were when I bought my first home more than 25 years ago (the average went above 7.5% yesterday per Bankrate, and the FNMA average was over 7.1%)… and savings accounts are even beginning to inch up, some of the more aggressive online banks are offering 5% yields (though the thieves at biggies like Chase and Bank of America, et al, are still offering less than 0.25%, just to make us angry as we contemplate what a pain it is to switch banks).

I don’t know what inflation or prevailing interest rates will be like in a year, but my assumption is that they won’t be a lot higher, as those long-lag effects of the rate hikes have to eventually absorb enough of that excess liquidity from the COVID stimulus programs and the decade of zero interest rates… partly because the economy and the government budget really shouldn’t be able to handle much higher rates without big cracks appearing in the pavement. I wouldn’t bet big on the direction of interest rates either way in any given year, for sure, but I’m happy to hedge with some inflation-protected bonds, some protective puts against the market, and a personal commitment to remind myself, at least once a week, that I should not pretend that I know what the future holds. I’ll quietly congratulate myself ...