Short 3.75 Year Average Laddered Maturities |

FX3 | portfolio is designed to protect our clients against inflation, with a focus on short maturity certain bonds.

Historically interest rates move in 30 year cycles, thus interest rates have been falling for about 30 years until the 4th quarter 2012,  not only did interest rates decline for about 30 years, we beleive they hit almost zero, a artificially very low level. This artificial low level was caused by the Federal Reserve to keep short term interest rates at about zero while at the same time pumping large amounts of new money into the system to stimulate the US economy.

We have learned though history that this kind of activity, repeated over a long period of time, could and will have negative long term effects, for example this man made effect effect often creates a similar duration and magnitude opposite swing.  Just like a clock pendulum, thus is you move a clock pendulum to the left many degrees and then let go it will come close to the same movement past center to the right before it begins to find a equilibrium, in finance this is called Regression to the means.  So if interest rates are artificiality low with a large pumping of new money for now over 5 years, it is our belief at some point this could cause an opposite effect proving a equally overly high level of interest rates, for about the same five year period.  Either way we believe interest rate over the foreseeable future will be tending up and the best way to deal with this is the keep your maturities very short and certain and your bond coupons high.

Short 3.75 Year Average Laddered Maturities for FX1, FX2 and FX3 are similar.

To learn more please read on or contact us below.

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