13.6.13

Saturn In Scorpio & Interest Rates

Saturn In Scorpio & Interest Rates Several...
Theodore White


Several years ago on Global Astrology, I forecasted that interest were going to begin to go up when Saturn transited Scorpio.

And, since October 2012, Saturn has been in Scorpio, where it will transit until September 2015.

Over the last week, there's been a lot of talk about just that: interest rates going up. The game this summer will be all those mutual and hedge fund managers trying to guess when interest rates rise.

Rates have been near zero for years, but the problem is that low interest rates can also lead to inflation.

For instance, if society's demands for a certain good exceeds supply, then a product's prices goes up. When inflation increases, then economic growth slows down.

When the price of product increases, then demand for the product slows and with less demand that means less production, and eventually of course, more unemployment.

So, to offset the fears of inflation, the Federal Reserve has to raise interest rates.

And since low interest rates generally indicate a weak dollar, the increase of interest rates can eventually strengthen the dollar.

High interest rates also attracts foreign investors who search for high-yield returns on their investments and this causes more demand for the dollar, which increases its value.

Eventually, the increased value of the U.S. dollar ultimately slows foreign investment, because it takes more foreign currency to purchase that dollar.

However, since February 2013, there's been some quiet talk around the Federal Reserve about the implications of the Fed ending their Quantitative Easing (QE) rounds; of which we have had at least 3 to 4 rounds.

This has given the illusion that the 'recovery' took place. Meanwhile, it also allowed yet another bubble to continue on the stock market.

But consider this:

Back in 1981, the three-month Treasury bill rate was 17.01% and the Dow Industrials was just under 1,000 points.

Today, 3-month rates are under 0.12% and the Dow Jones is headed south from 14,000.

The Federal Reserve is responsible for the last five years of the bond rally as it added more than $2 trillion dollar to its balance sheet through QE.

But Fed officials, and this includes Fed Chairman Ben Bernanke, have been making noise that the Fed may begin to taper off QE this year. They say, in the "next several months."

This, as the Fed continues to buy $85 billion of Treasuries, along with all those bad mortgage-backed securities - each and every month - to add to that $2 trillion dollar balance sheet.

All the QEs have done is to prop up a post-bubble economy and gave all the baby boomers time to wait for the supposed 'return of the economy,' which has not happened.

So, what should interest rates be?

Well, in January 2012, the Consumer Price Index (CPI) rose 1.6% year-over-year. Now, in a normal economy with a normal Fed, the short-term rates should be 2%-3%.

When things begin to unwind, well, it's going to be rather bumpy. You see, the entire U.S. bond market is over $30 trillion dollars, so any sudden increase with interest rates means that present holdings will be worth less and gold is already down over 15% from October 2012, when Saturn made ingress into Scorpio.

Because Bernanke allowed the banks to recapitalize, despite all the toxic mortgage debt they hold, both the Fed and the U.S. Treasury Secretary Timothy allowed that debt to remain on their balance sheets and we've had nearly four years of sub-0.2% interest rates.

The Fed has been saying, since 2009, that they intend to continue their QEs until the economy improves, but the economy will not grow until all those baby boomers leave the world of work.

The unemployment rates for all those under the age of 53 to 16 have been in double figures for years, as the boomer generation continued to try to save money after losing a lot of value in their holdings, real estate, land and savings.

Moreover, a $600 billion deficit does not allow for the Fed spending $85 billion a month to purchase junk mortgage paper and bonds.

But with Saturn in Scorpio, and with Jupiter crossing over into the 90-degree range into tropical Cancer, these two Business planets show that something is up. By June 26, Jupiter will have moved into the opposite Sign where it was in 2008, that's in Capricorn.

Rates for home sellers and buyers have been at historic lows. But, last month, in May 2013, there was a large sell-off in mortgage-backed securities, which then fell in value as long-term interest rates rose, however the markets continued to price in the Federal Reserve tapering (that's intervention by QE.)

Interest rates for a 30-year fixed loan went up in May. According to a Freddie Mac Weekly Survey released on May 23, the rates for a 30-year fixed mortgage went up from 3.42% on May 9th to 3.51% on May 16, and continued to climb to 4.0%.

This, as the average rate for a 15-year loan jumped to 2.77% in May.

Then, on Tuesday, June 11, 2013, the 10-year Treasury yield hit a 14-month high of 2.29 percent. This caused some to say that the end of the 32-year bull market for bonds is near.

Interest rate fluctuations have a huge impact on home buyers. Many older Americans are still so heavily indebted that even a small rise in mortgage rates surely is going to strike the housing market and in an age where affordability is still a major problem.

For governments around the world, a rise of interest rates will eventually push up borrowing costs at a time when many nations still struggle with their fiscal deficits.

However, there's been a jarring wave of selling that hit bond markets in Latin America and Europe which pushed up borrowing costs for those governments. Pluto's transit in tropical Capricorn, under pressure from Uranus in Aries continues to cause those troubles.

And the recent market moves this spring have also been an unpleasant jolt for baby boomers who came to see bonds as a stable anchor for their retirement accounts.

For instance, the Vanguard total bond market mutual fund fell 2.7 percent in May 2013, this, after returning a steady 5.4 percent a year since the economic crisis year of 2008. And, those funds that hold junk bonds - one of the hottest investments in recent years - have suffered even more.

My call is that the generational bull market in bonds is coming to an end with the transits I see. And when rates have to rise, since they have nowhere to go but up, that means volatility in the bond market. That's something many bondholders, including the too-big-to-fail banks get really nervous about.

Something is in the wind with these world transits. Saturn's peregrine transit in Scorpio, along with the transit of the Lunar Nodes in the financial signs of Taurus/Scorpio, show that there's trouble ahead.

“I think you all should be ready, because rates are going to go up,” says Jamie Dimon, the chief executive of JP Morgan Chase. Dimon said that at a financial industry conference at the Waldorf-Astoria Hotel in Manhattan on Tuesday, June 11, 2013.

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