In response to this article cautioning against buying long-term municipal bonds, I wanted to outline some reasons that interest rates may rise slowly, or not much at all. Here are some items that also need to be considered when factoring in whether to invest in municipal bonds:

Global interest rates are incredibly low. The market for securities becomes more global every day and investors worldwide have a choice between buying bonds almost anywhere in the world with low transaction costs. So if interest rates in Germany and Japan stay minuscule, it is unlikely that Uncle Sam is going to pay so much more.

Economic growth is likely to remain subdued. Demographics are destiny, and we have an aging workforce and are pretty close to full employment. Economic growth is largely based on two factors – size of the workforce and productivity growth. The workforce can get a little bigger, but if GDP growth was under 3% when unemployment went from 10% to 5%, how is it going to rise above 3% going forward? Also, in a service oriented economy there are limits to how productive we can become. What tools are making us more efficient at our jobs that don’t eliminate workers and reduce the size of the workforce?

An aging population means people need investment income. Ten thousand baby boomers turn 65 every day, and they will need income in retirement beyond what they are receiving from Social Security and pension. Bonds provide a more reliable source of income than stocks, and despite low rates they also offer a higher rate of income.

The stock market is incredibly expensive. Using long-term valuation measures such as Shiller - PE and stock market capitalization to GDP, investors are paying a very high price for stocks. If earnings disappoint, some money will come out of stocks and likely into bonds, keeping a lid on rates.

The budget deficit is going to rise, limiting fiscal stimulus. The Federal Reserve already has a massive balance sheet of bonds and the interest they earn gets paid to the Treasury Department. As those bonds mature the Treasury gets less income, increasing the deficit. Then consider increased Social Security and Medicare benefits, and the impact of rates that have already risen nearly 1%, and the ability of our government to lower taxes or increase spending to stimulate economic growth become severely compromised.

Short-term rates may stay fairly low. The Fed has been extremely cautious in raising rates, largely because they don’t see much inflation or wage growth. Even if they do raise rates 4 times or 1% over the next 2 years, the longer end of the yield curve may not move up nearly as much as short-term rates, as has been the history during periods of Fed tightening.

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Securities offered through Kestra Investment Services, LLC.,(Kestra IS) member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. J Matrik Wealth Management is not affiliated with Kestra IS, Kestra AS, or Five Star Professional.

As a mature and prosperous nation (Trump being a hiccup along the way), higher education has moved from a luxury and the domain of the well-to-do to a career requirement for a larger and larger number of people and jobs. Colleges and Universities have responded to this change and opened their doors enthusiastically to increasing numbers of students in search of necessary and required credentials.

I wish to emphasize here the phrase “opened their doors enthusiastically” because that is what they have done, year after year. And, why not? They are a huge monopoly controlling access to an essential requirement for ever larger numbers of job seekers. What set of institutions would not want ever greater numbers of customers?

With everyone seeking to get in, America’s colleges and universities haven’t needed to change all that much. Flush with ever increasing tuition income as a result of greater and greater demand for entry, the institutions have carried on business as usual without significantly adjusting curricula and operations. Their courses and programs are much as they have always been and the education and even politics of their teachers are largely unchanged as well. Indeed, their entire modus operandi in almost all respects is much the same as decades past.

And, even more important, they have not adjusted their costs to accommodate larger and larger numbers of people begging for entry but without the wherewithal to pay for what had heretofore been a luxury item for the few. The result has been the emergence of ever larger public and private student loan programs requiring huge numbers of students to assume and carry significant debt for years beyond their time in college.

Indeed, higher education institutions have pushed tuition and related charges up with abandon year after years. Costs are now exorbitant and going higher and higher. In only a few more years, cost of higher education at many good private colleges or universities will top $100,000 per year!

These costs are ridiculous and the institutions should be forced to bring them down. Times have changed, clientele have changed, needs have changed. The institutions must change too.

It doesn’t take a genius to see lots of places and ways the institutions can meet their new challenges and provide an important service at the same time as they not only hold the line on increasing expenditures, but bring costs down significantly.

Below is a list of just six ways costs can be markedly and quickly reduced. There are many other equally effective ways as well.

1. Drop such silly, politically correct programs as ethnic studies, interdisciplinary studies, naval gazing studies, and the like.

2. Cease building luxury, expensive dorms and other facilities to create unnecessary atmospherics.

3. Operate on a twelve-month calendar instead of the present eight to nine.

4. Get rid of bloated administrations, filled with vice presidents, deans and vice deans without legitimate portfolios.

5. Drop requirement that all faculty need to or should do research, and by so doing increase teaching responsibilities and greatly reduce the amount of silly and irrelevant output by, at best, mediocre thinkers.

6. Employ technology and high tech approaches to teaching general education courses, and reduce the number of student options in the first years .

Were colleges and universities forced to do many or all of these, costs of higher education could be greatly reduced, loan programs minimized or eliminated, and student debt a thing of the past.

During Watergate and the lengthy process of getting Richard Nixon to resign, political instability weighed all sorts of havoc on the US economy with the S&P 500 falling from a high of 142, when Nixon assumed his second term in January 1974, to a low of 86 just after his August 9, 1974 resignation.

Watergate involved a crime and a tremendous breech of the public’s trust, and a significant erosion of the business climate and market values.

As difficult as Watergate was for the US, it did not involve the election of a President without political experience. It did not involve an assertion that the an adverse power interfered with an election, an assertion of collusion or an assertion of a coverup. It did not involve a Republican Congress so subservient to a President that all checks and balances inherent in the government needed to be quickly reestablished and strengthened, at the public’s insistence, for impeachment proceedings to begin.

The US likely faces a difficult and uncertain next couple of years as the entire process around Trump, and the 2016 election, is sorted out. History shows us that the stock market is unlikely to escape these challenges ahead without real damage.

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