Publications

- May 1, 2014: Vol. 26, Number 5

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Not by very much: The consensus on inflation is incremental, but the risk might not be

by Geoffrey Dohrmann

During the past few years, almost every real estate investment professional I’ve encountered seems to have a common shared belief. They think that inflation will soon be rearing its ugly head, and that a rise in interest rates won’t be far behind.

“But,” almost everyone is quick to add, “not by very much.”

Now, my opinion certainly carries no greater weight than anyone else’s. But I cannot help feel something in my gut going off when I hear everyone repeating, as if it were some sort of sacred mantra, “But not by very much.”

Almost everyone agrees we’re not very good as a species at predicting the directions of markets and, least of all, the direction and magnitude of shifts in interest rates.

The fact is, interest rates have been at such all-time lows for so very long now, most of us have forgotten about the days when the “norm” for AAA bond yields was closer to 8 percent — which is to say, the 25-year stretch between 1970 and 1

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