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Record Low Interest Rates: Is This Thing Getting Out Of Control?

Some New Yorkers may hate me for saying so, but I did not care for Joe Namath. I never liked Mark Gastineau either. I am (and have always been) a devout fan of the New York Giants. And if you love “Big Blue” – if you revere the “New York Football Giants” – there’s a pretty good chance that you detest the New York Jets.

Why do I bring this up? Sometimes, things get out of control.

Thirty years ago in 1986, I went to the Meadowlands with a friend to see the Los Angeles Rams battle the New York Jets. I wore my Phil Simms jersey to show my allegiance to the Giants. Meanwhile, my friend waved a Rams banner enthusiastically. (We were nervy 19-year olds… what did we know?)

What we should have known is that football fanatics on the East Coast rarely appreciate ne’er-do-wells cheering for the opposition. What’s more, stadium attendees tend to drink large amounts of alcohol. Mix in the fact that the Rams had been beating the living daylights out of the Jets, and the stage had been set for disorder.

People started in with “colorful” insults. Then a few miscreants began throwing cans, pretzels and programs. I remember thinking that someone might actually take a swing at me.

At one point, I said to Anthony, “This is getting way out of hand.” That was right before a heavy object smacked him on the bridge of his nose. His blood dribbled down his chin and onto his banner. Within seconds, security guards appeared on the scene, and they quickly provided us with an escort out of the facility so that we would be safe.

What I recall most about the incident is just how rapidly the environment deteriorated. At the start of the event, the jousting between Giant-loving New Yorkers and Jet-loving New Yorkers had been innocuous. On the surface, the environment may even have appeared friendly. By the 4th quarter, however,circumstances had spiraled out of control.

How does my anecdote relate to the world of market-based securities? Compare the percentage of negative-yielding government bonds in June of 2014 against the percentage of negative-yielding government bonds in June of 2016. Two years ago, few experts could even conceive of the concept of a negative bond yield. Today, however, central banks around the globe have printed so much in the way of electronic money – they have acquired such a large quantity of the supply of government obligations – we now see 25% of the world’s sovereign debt with negative interest rates. From 0% to 25% in just two years!

Disclosure: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc., and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset...