You would think that the consequences of raising rates ¼ of 1 percent are dire. Huh? Maybe it is just a signal that the era of cheap money is coming to an end?

However, we are a long way from expensive money.

More likely the signal puts pressure on strategies spawned during this zero rate environment. Some strategies have stretched to use lower rated fixed income instruments that may not be credit worthy over the long-term. Some strategies involve leveraging, others are some form of carry trade borrowing in cheap currencies like the dollar and buying higher paying instruments in other currencies.

All of these strategies have one thing in common; they come undone by higher rates here. The leverage no longer works or changes in relative currency values blow-up carry trades. Low rates for too long encourage activities and strategies that are speculative and stretch good sense. As these crumble, there will be pain. However, sooner is better than later. Higher rates are inevitable, so squash some of the nonsensical uses of money before they become so pervasive as to cause systemic damage.

Riverplace Capital uses none of these strategies and holds investments that are robust.

We will get through this period. We just need to start; hopefully soon.

Stay steady my friends.

The Lonely Bull