Warning signs

As predicted interest rates have begun to climb even after all the pressure from the administration to keep them at bay. Real Estate prices have remained depressed, largely due to the unwillingness of banks to lend except to their strongest clients and often with debt equity ratios of 60/40 or 75/25 at the very best. Most borrowers are being turned away.

Inflation is showing up in virtually every other sector. The prices in the grocery are higher and yet portion sizes of processed foods are far smaller. Fuel, clothing, services etc. are showing significant increases because of the devaluation of the dollar. Anything that comes from overseas will cost more, and there is a lot that fits in this category.

Commercial real estate is selling well below replacement cost and provides a place that you can position cash in a tangible asset. Even if the property is just able to carry itself, that season shouldn't last long. Inflation will soon drive prices up and you will be locked in at today's prices.

Dan Ferris sheds some light on what is happening in an article I have quoted below. He is not alone. In fact there are too many reporting the same or similar things every day.

By Dan Ferris, editor, The 12% Letter
Thursday, December 23, 2010
"Since November 1, long-term U.S. Treasury bonds have fallen 7% in value. That's not supposed to happen. But it's happening.

Since November 1, the municipal bond market has fallen 6%. That, too, isn't supposed to happen. But it's happening.

For most of the last century, the whole world has believed the obligations of the U.S. government – and the obligations of thousands of states, cities, towns, and other municipalities in the U.S. – were the safest investments in the world. These "safe" investments aren't supposed to crash.

The reason U.S. Treasurys and municipal bonds are crashing is by far the most important financial development of 2010.

The crash has affected and will continue to affect the value of every stock, bond, exchange-traded fund… every type of investment there is.

If you've already looked for the reason bonds are crashing, it hasn't been hard to find. This past month, for example, the reason bonds were crashing was on the front page of all the major financial websites. It's been there since November 3, when the Federal Reserve announced it would print $600 billion between now and June 2011 and buy Treasury bonds with it.

On one day last week, the headline at Financial Times' website read, "Fed maintains asset purchase plan." The Wall Street Journal's website read, "Fed Sticks To Bond-Buying Policy." And Bloomberg's site read, "Fed Retains $600 Billion Bond Buying Plan to Boost Economy."

It all means the same thing: The Federal Reserve will keep printing money. The dollar will continue to get weaker. The bond market will continue to fall. Interest rates will continue to rise."

If you are trusting a fund manager to give you personal attention and save you from where we are heading, good luck, you'll need it. Assets like gold and silver, are a good hedge, but commercial real estate can grow in value, pay for itself, and withstand whatever happens to paper.

The time to act is now.