Interest Rates

Interest rates represent the cost of capital or what you pay to borrow money. A detailed definition of interest rates is beyond the scope of this glossary. What is important to remember is that interest rates are critical components of virtually every financial product you consume. This is especially true with annuities because, in general, insurance companies manufacture annuity products through a combination of bonds and derivatives. As a result, interest rates are the raw material of all annuity types.

Why Fixed Annuities Could Prove Toxic in an Era of Financial Repression

In a recent and highly recommended Bloomberg op-ed, Carmen Reinhart discusses the options available to governments and central banks when attempting to deal with the burden of enormous amounts of public and private debt.

Reinhart suggests that the preferred policy option for many governments--including the United States--is a form of stealth taxation that amounts to...

Yield-Starved and Losing Patience

It seemed obvious several years ago that retirees would shoulder much of the burden of the financial crisis and its residual effects.

While events have generally played-out in line with this projection, the backlash from seniors has been surprisingly subdued.  The lack of pitchforks seems odd given the fact that the number of retirement age voters is increasing by 10,000 each day in the United States.

That said, the capital versus retirees story has been trending-up lately. This may have something to do with the...

Short-Term Focus has Adverse Impact on Retirement Income Product Development

Warren Buffett’s most recent shareholder letter focuses on the merits of productive assets such as equities in light of the current low interest rate environment and the potential for future inflation.

Buffett’s view is that although productive assets are variable and volatile, they are more likely to preserve future purchasing power than the fixed or currency-based alternatives.

Buffett’s advice would seem to provide a...

Why Retirees Should Listen Closely to Bill Gross

As the manager of the largest bond fund in the world and a founder of PIMCO, Bill Gross is a leading authority on all things related to yield.

Since retirement finances are fundamentally about generating...

Pimco’s Gross Describes a New Age of Risk

Pacific Investment Management Company (Pimco) founder and co-chief investment officer Bill Gross offered a revised view of the global investing landscape in a letter published on the company’s website. 

As the manager of the Pimco Total Return Fund, Gross’s 2011 investment decisions were driven in part by the “new normal” thesis. 

The new normal view...

Pages