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The highly anticipated Federal Reserve decision today to not raise interest rates has been debated countless times. The argument can be made both ways whether it’s good or bad, but here are 5 reasons the Fed decision is harming the U.S.

Money is too easy to get hold of.

In leaving rates on hold, The Fed left the cost of borrowing money low. It has been historically low for almost a decade, thanks to the Fed. Investors of all stripes respond by taking more risk and The Fed’s ON HOLD decision reinforces that behavior. Some investors assume these conditions will last forever and borrow more money (because they are paying low interest) than their investments will one day return. When you hear people warn about a “bubble”, this kind of easy money cycle is the #1 reason cited.

Delusion.

All the businesses that look like they are working beautifully may only be working because of current lending conditions.
The Fed has held rates at ZERO since 2008; tech start-ups including Uber, Snapchat, Pinterest and many more have never been tested in times when prices fluctuated. These are the companies that are hiring thousands of people, are considered growth engines and are paying very attractive salaries. If business leaders think their models work in all kinds of environments, even in more disciplined monetary ones, and they are wrong, a lot of people will be laid off and a lot of confidence in these new wunderkind companies will be lost.

Savers punished.

If you have money in a savings account, you know that the bank is not paying you any interest for being allowed to hold and use your money. In some cases, through fees, you may actually be paying a bank to hold your money. The Fed ON HOLD means this situation stays exactly the same. You have no monetary incentive to save money through traditional means.

An increased perception of global risk.

The Fed staying on HOLD due to risks in the global economy shows you that the Fed is worried about China’s economic slowdown. China has a $17 Trillion economy, second only to the US. It is big. The fact that The Fed is concerned lets most investors know that some of the greatest economic minds are uncertain about the future health of the global economy.

Employment conditions.

In its statement, the Fed says it sees “continued slack in the labor market.” This underscores the point that those who watch the Labor Market understand: the Labor Market Participation Rate is at the lowest rate since the late 1970s. It means that lots of people have just given up looking for work. There is a skills gap in the US; more than 4 million jobs go UNFILLED every month because Americans do not have the science or math or engineering skills necessary for the jobs that are on offer. The Fed notices and is concerned about that.

Deirdre Bolton joined FOX Business Network (FBN) as an anchor in February 2014 and is the host of Risk and Reward with Deirdre Bolton (weekdays 5-6PM/ET).

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FOX Business Network Deirdre Bolton has a show called Risk&Reward at 1PM/ET, which is all about alternative investments. Today’s the 1 year anniversary of the show.

Most people think of investing as in stocks and bonds. However, investing in the housing market, art, wine, etc are all alternative assets and could be great investments. Below are 5 reasons to consider alternatives investments.

1. Savers are being punished in this low rate environment; make your money work for you!

These days, with bonds yielding almost nothing and stocks looking fully valued or close to fully valued, investors need more choices… and they’re out there.

2. Ability to get a steady stream of income with relatively low risk.

There are numerous tools such as MLPs (master limited partnerships) which are used to invest in energy infrastructure, you can “loan” money and get a substantially higher income than investment grade bonds. Almost every point along the timeline needs investment capital. As one successful investor reminds me: MLPs are exposed to interest rate risk like every other yielding product, so when The Fed raises rates, some investors may want a rate hedge, treasuries, swap payers, etc.

3. Diversification!

After the credit crisis of 2008, most investors were reminded that it is good to have a variety of assets, in numerous industries in lots of different countries, so all eggs are not in 1 basket. Translation: if one part of the market gets wiped out, you will still hold on to the value of parts of your portfolio.

4. More Access to Professional Strategies.

Big institutional investors have used “Alternatives” for decades and the products are finally available to mainstream, smaller investors. Hedge fund strategies run by pros are now “wrapped” in mutual funds are widely available. Any brokerage that sells mutual funds has these hedge fund-like strategies available. They are often referred to as “40 Acts” (an SEC classification). Average investors get access to top managers, in the strategies they want for their portfolio, without needing to put millions of dollars away for years. The investor can also retrieve the money on any given day, if need be, just as in any other mutual fund.

5. Take advantage of an area of your personal expertise.

Most collectible asset classes — memorabilia, jewelry, cars — can be looked at as hobbies with an upside. Fine Art Collecting stands out even more. If you look at Sotheby’s and Christie’s, you will see three record sales years in a row. Art collecting has been recognized as a store of value for centuries in almost every civilization. There are even several high quality funds that specialize in the space (and one that lends out art to its investors at the same time). If you are interested but lack true expertise, invest with someone who is an experienced, trusted fiduciary.

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