Wealthy Thoughts – 2

A collections of thoughts and ideas about various things…..

“The US has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan… enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself…,” the New York Times reported on June 13.

These mineral deposits are so big that Afghanistan could eventually be transformed into one of the most important mining centers in the world, according to an internal Pentagon memo. It states that Afghanistan could become “the Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and cell phones. The article states that Afghanistan’s current gross domestic product is only $12 billion.

A Federal Reserve research paper released Monday by the Federal Reserve Bank of San Francisco indicates that the Federal Reserve is likely to wait until 2012 before it starts to raise interest rates. This paper does not represent the official position of the Federal Reserve, but it is notable. The author based his research on the relationship between consumer price inflation and unemployment statistics over the past 20 years.

The authors stated that given these historical relationships, the Fed in theory should have lowered short-term interest rates by another 5% in 2009. That was already impossible, as the short-term interest rates that the Federal Reserve controls were already near zero.

We do not view this research as a direct indication of what the Federal Reserve will actually do. Although we do not make investment decisions based on predictions of when or by how much interest rates will change in the future, this certainly gives credence to the concept that interest rates in general may remain very low, on a historical basis, for the next year or two.

Mortgage rates again near all-time lows
For the week ended June 11, Freddie Mac reported that interest rates on 15 and 30 year mortgages fell to their lowest level of 2010 and were just barely above their all-time lows.

The average for a 30 year fixed mortgage was 4.72% and 15 year mortgages averaged 4.17%, the lowest since this began to be reported in 1991. (per LAtimes.com, 6/11/10)

Sources:
The New York Times, US Identifies Vast Mineral Riches in Afghanistan, June 13, 2010
The New York Times, Fed Study Suggests Rates Will Stay at Record Lows until ’12, June 14, 2010

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