CNBC's Gary Kaminsky to Moneynews: Investors Must Prepare for Higher Interest Rates

Friday, 22 Mar 2013 07:05 PM

By David Nelson and Dan Weil

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The 32-year rally for bonds will eventually end, and investors must prepare for higher interest rates, says Gary Kaminsky, currently capital markets editor at CNBC and soon to become vice chairman of wealth management at Morgan Stanley.

There is a bubble in bonds, he tells Newsmax TV in an exclusive interview, but it’s impossible to say when it will burst.

“We’ve had more people come on air and tell us about the bond bubble and what was going to happen in the last two years than I can count on multiple hands,” he says.

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“So the fact is nobody really knows about what’s going to happen. . . . I don’t know when interest rates are going to go up, and I don’t think anybody knows.”

But investors must be ready for that eventuality, Kaminsky says.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

“One thing that the last couple of decades has taught us is you have to prepare for that inevitable time, because the one thing that you can be certain of is that a 30-year, one-direction move in interest rates is not going to happen again.”

The 10-year Treasury yield, currently at 1.93 percent, isn’t going to drop to 1 percent and stay there, Kaminsky says. “If the economic recovery is real,” the Fed will stop easing, he says.

“So planning for higher interest rates is the right strategy now, even though we don’t know when it will happen.”

Meanwhile, the Cyprus crisis won’t “kill what is a Fed-driven, liquidity-driven bull [stock] market,” Kaminsky says.

But it may make some investors realize they’ve overdone it on risk assets, he says. “So I don’t think it’s a crisis, [but] a reminder that many of the issues that do potentially create a crisis aren’t gone.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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