Today’s post is a little different because today I went to my first meeting at an organization called Impact 100. Wow, what a rush! Impact 100 is a group of 100 women who come together to donate $1000 each in order to give $100,000 grant to a worthy cause. Today was the organization’s first awards ceremony. After only a little over a year, we have 123 members and are growing rapidly.
The grant today was awarded to an amazing non-profit called Food Connect, which seeks to feed the 1 in 6 people (1 in 4 children) in Colorado who are hungry, with organic foods, grown by local gardens, delivered by teens needing employment. They are decreasing food waste, increasing full bellies, and providing jobs to low-income youth!
On the heels of losing 50,000 people in Florida this week in the biggest mass shooting in US history, it was truly soul healing to be amongst organizations seeking these funds for their worthy causes, and a group of women working to make the world a better place by awarding a grant. I feel lucky to have my small contribution be part of something so big.
Instead of reading another financial article today, take a few moments to do something kind, to propel positive energy forward rather than giving in to the negativity that seems to abound. Tell someone you love them, give a helping hand, say a kind word, buy the guy behind you in line his coffee – whatever it is, nothing is too small.
Here are a handful of things I am going to do with the end of this day:
- Tell as many people as I can about Impact 100 and recruit more members
- Say something encouraging to my son rather than nag him
- Tell someone how much I appreciate him or her
- Meditate on a kinder, gentler world
Nothing earth-altering., just placing a little mindful energy on spreading love instead of hate and fear.
If you are interested in learning more about Impact 100 or if there is one in your community, you can find them at www.impact100metrodenver.org. If you are interested in learning more about the ground breaking work of Food Connect, please visit them here: www.groundworkcolorado.org/2015/06/fresh-food-connect-innovating-for-good.
Have a gratifying day, and purposely spread some peace and love!
It was a wild January as the stock market had a markedly poor start to the year with the major indexes down about 5 to 8%. In times like this, it is very tempting to sell out and move to 100% cash, but of course that would only feel good until we have some big up days and you aren’t participating. In the middle of one of the bad days in January, Jack Bogle, the founder of Vanguard funds was being interviewed on CNBC and was asked what individual investors should do now. His reply; ”Just stay the course. Don’t do something, just stand there. This is speculation that we’re seeing out there, and you can’t respond to it. Nothing has changed.”
So here is the dilemma – on one hand, nothing in the economy is much different than it was a few months ago. But on the other hand, looking forward, investors are concerned that certain issues like Oil, China, or the Fed raising rates too quickly could cause our economy to go into recession.
Right now, the collapse in the price of oil seems to be the biggest concern of the stock market. Remember that in 2014, oil was selling for about $107 per barrel (bbl), so it has been on a steady decline for about a year and a half. Two weeks ago, when oil hit $32/bbl, it was approximately at the lows last hit in 2008. We believed that the lows from the 2008/2009 recession would stand a good chance of holding up and marking the bottom for oil, but just a few days later, that proved to be incorrect. Below is a chart showing oil prices back to the 1980’s:
You can see that oil was last in the $20’s in 2002 and spent the better part of 2 decades in the upper teens to low $20’s.
In late January, there was a rumor about Saudi Arabia & Russia discussing a 5% production cut & that if Russia agreed to the cut, then all of OPEC would participate in a 5% cut as well. This rumor sparked a nice rebound in the price of oil for a few days, but the rumor has not been confirmed so nothing has really changed (other than investors have hope for a deal that could help). The oil market is still dramatically over supplied and producers have not cut back enough to change the imbalance going forward. If a legitimate deal is done to cut production and the OPEC countries follow thru (which is probably a long shot since they have been know to cheat on their deals in the past), then we have probably seen the lows for oil prices.
But if no deal is reached, OPEC is not scheduled to meet again until June so it’s likely that oil will go down further. The supply imbalance will eventually work itself out and the price of oil should work it’s way back up to a price that is more profitable as most producers cannot make money with oil at $30/bbl.
By the way, we hope that you are enjoying the cheap gasoline! One of the positives of the drop in oil prices is that consumers & corporations can enjoy cheap energy prices. So this is a big positive for most of the economy. All of the negativity about cheap energy has to do with concerns about oil companies being forced to lay off employees or the possibility that some oil companies could go bankrupt. What the market would like best is to see cheap energy, but at prices that are high enough to keep the oil companies profitable.
As for China, we believe that China should be getting close to the bottom of their decline as well. Below is a chart of the Shanghai Stock Market:
This chart shows the Shanghai market in Red & their numbers on the left side. Their market was at about 3,000 in January 2015 and jumped up to about 5,000 by May 2015 before starting it’s big decline over the past 8 months or so. It now trades at about 2,700 so it has erased that big gain of early 2015…that big gain, incidentally, was likely the result of a Nov 2014 decision to allow foreign investors to buy stocks on the Shanghai exchange. Now, after the big decline, the Shanghai market trades at a much more reasonable P/E ratio (close to 12) so one would think that they should be close to bottoming out. We are also expecting that the Chinese will announce stimulus in some form or another – an interest rate cut (their discount rate is at 4.35%), reduction in their banking reserve requirements or more infrastructure spending.
For those of you that are having trouble dealing with this downturn, we should discuss some other investing options. For example, utilizing a variable annuity with a guaranteed income feature or a fixed annuity might be a good fit.
The variable annuity would be a way to lock in a guaranteed income payment while still having your money invested in the stock market so you can benefit from any upside movement in the stock market. Several companies offer these and they will typically guarantee 5% per year as a lifetime income payout.
As a quick example, if someone were to deposit $500k into one of these plans, the 5% income would start out at $25,000 per year ($2,083/mo). If the account goes up to $600k (on a future anniversary), you can then take 5% of the $600k, or $30k/yr ($2,500/mo). On the other hand, if the account then drops for several years and the market losses & withdrawals cause the investment to go to $0, the insurance company would continue to pay the $30k per year for the life of the owner. These plans do have a cost but for some people are a good fit.
A fixed annuity or an indexed annuity might be another good option for some people. A fixed annuity would pay a fixed interest rate (like a CD) and would be guaranteed to not lose money. Currently fixed annuities pay about 2.5 to 3%. An indexed annuity is another type of fixed annuity. It will also be guaranteed to not lose money but the interest rate is tied to the stock market (usually the S&P 500). The interest rate will typically pay whatever the stock market does up to a cap (but never less than 0 in years when the market goes down).
Call us at 303-463-0436 if you would like to discuss any of these ideas further.
Oh to see this Colorado snowy day the way these dogs do! They don’t care that it is a snow day and the kids aren’t going to school so the parents can’t work. They don’t care that the stock market was down almost 300 points yesterday. They are entirely in the present.
And, if you read the article below by Matthew Frankel and The Montley Fool, perhaps this is the best way to approach this difficult market. Frankel makes a case for why you should not worry about the market in 2016 citing that whether the market is up or down for 2016, for the long term, in the end, you will be a winner. As we discussed in our last article, emotion plays a huge role in investing and that is exactly what is happening now as investors panic and sell their positions.
If you are able to take the emotion out of investing you will be much better off. High emotions cause people to sell when their stocks are low and buy when stocks are high. Frankel reiterates what Warren Buffet has to say when it comes to buying stocks. He encourages people to buy companies they believe in, to buy stock because you want to own the business – don’t worry so much about the day to day stock prices.
When you are invested in companies you want to own, you are comfortable with their balance sheets and financials, it makes these types of fluctuations much more tolerable. Does it ever feel good when your stock prices take a dive? Of course not. However, if you can step back and refrain from having an emotional reaction, realize that the company is still the company you believe in, it will make these turbulent times far more tolerable.
Read this great article below. We believe it might enable you to enjoy even the shoveling.
Social Security rules are extremely confusing, even for advisors. Rules are constantly changing and very difficult to comprehend. This article delineates 10 tips on how to decide what you should do in your situation.
One upcoming change discussed in this article is the new rule you will no longer be able to file and suspend their benefits in the coming year. To explain this rule and if you might want to take advantage of it before it goes away, let’s use an example.
Donna and her husband Frank are both 66. They don’t want to start their benefits because if they wait until they are 70, they will get more money each month. However, currently there is a way to still get a little something in the meantime. Donna files to take her social security but she suspends, meaning she doesn’t actually take the money yet. Since Donna filed for social security, Frank, as her spouse, is able to take half of her benefit.
In the meantime, he doesn’t file for his own social security as the longer he waits, the more he will get as well. Frank takes half of Donna’s benefit until they are age 70. At this point, Frank turns off the money he is getting from Donna’s social security and they both take their full benefit. In this scenario, they have maximized their social security benefits.
Of course this rule is not the only to consideration when deciding how to take your benefit. Your personal factors come into play, how much income you need right now, how long you guestimate you will live, etc. But, if this scenario sounds like it might fit your situation, you will want to take advantage of this rule before it goes away.
Our firm specializes in taking a holistic view to your retirement. We manage your money with an eye toward your tax consequences as well as helping you take advantage of all the resources available to you.
Click on the link below to hear more about the 10 tips for social security or call us at 303-463-0436 to set up a consultation to discuss your retirement needs!
This well-written article discusses the very pertinent question of how to invest in retirement. The author reviews two styles of investing. The first is putting your money in the market with the goal of obtaining a higher return and maintaining liquidity, while the second is to use guaranteed investments that keep your principal safe. The author gives some definitions and reviews the pros and cons of each method.
This is a valuable discussion and one that every investor approaching retirement should explore. From our standpoint, we agree with the author that usually by the time retirement hits, a mix of these approaches is the best fit for most people. However, depending on individual variables, someone may choose one over the other or switch from one strategy to the other as they age.
When helping clients decide how much and of which strategy to use, we do a detailed income analysis to determine the “probable” outcome of investing in the market, based on their asset level and expenses. In addition, it’s important to identify an investor’s tolerance for losses and the impact both financially and emotionally by conducting a risk analysis. Striking the right balance makes all the difference in creating a peaceful retirement.
One of the questions we’ve been asked about quite often in recent weeks is “What about Greece” and how will Greece affect the stock market. We have said all along that we believe that Greece will not have a huge effect on the US stock market in the long run, but in the short run it can definitely cause some volatility. The volatility has certainly been hitting the market over the past couple of months and that has been partly due to the issues in Greece heating up.
To briefly recap the story of Greece, they have had trouble making payments on their debt in recent years and many people fear that Greece will default on their bonds. This worry is well-founded as the European Union has had to put together several bailout packages for Greece in order to help them make payments on their bonds. To make matters worse, interest rates in Greece are high due to the default concerns. Currently the Greek 10 year treasury is yielding close to 12% while the rest of the European countries are paying closer to 1 to 2% on their 10 year bonds.
Just Wednesday of this week, the Greek parliament approved the most recent round of bailout money from European creditors. This will give them additional funds spread out over the next 3 years, but will also put Greece further in debt and tighten the noose with more austerity (more tax increases & spending cuts for Greece). It’s difficult to see how Greece will emerge from this without defaulting on some bonds, which could lead to them exiting the European
But keep in mind that Greece is a small economy with an annual GDP of about $240 billion, which is equivalent to the GDP of a state like Connecticut (24th out of the 50 US states). So while their problems are serious, it’s not likely that any problems in Greece will be disastrous to the US or the European Union (EU). In fact, one could make the argument that if Greece drops out of the EU, the EU will be better off and their currency will get stronger. This is obviously not true if you are a holder of Greek bonds, but from our perspective, I don’t see any major long-term problems resulting from this.
Interest Rates & REITs:
Another issue that has been affecting markets in recent months has been worries over interest rates. The economy in the US has been improving over the past few years and many feel that it is time for the Fed to start increasing interest rates. This is good news in the sense that it means that the Fed feels our economy is strong enough to handle higher rates. However, it is potentially bad news because higher interest rates could have the effect of slowing the economy down and could end up causing another recession. The Fed has hinted that they might raise rates later this year in September or in December, depending on how the economic data looks over the coming months.
What does this mean for stocks & REITs? We have talked about this in previous updates, but historically, stocks (including dividend stocks & RIETs) have done pretty well during periods of rising rates. The bigger concern is if rates increase too quickly, which could happen if inflation were to go up too quickly. In periods when interest rates are moving up quickly, most stocks do not do well.
Think of interest rates as competition for stocks. Right now, the US 10 year Treasury yields about 2.4%, while the S&P 500 dividend yield is about 2% and dividend stocks & REITs are around 3 to 5%. So if rates moved up quickly and the 10 year treasury was suddenly yielding 4%, then the dividend rates on stocks & REITs would not look as attractive, and many investors would be tempted to move some of their money out of stocks & into bonds. On the other hand, if rates were to move up gradually over the next 3 to 5 years then corporations would have more time to adjust to the new rates and the improving economy should help increase the revenues & earnings of corporations and their stocks should do well.
So the big concern right now with interest rates is not that they might go up some, but how high will they go and how quickly. This concern has lead to a poor start to the year for dividend paying stocks & REITS (both down 3 to 6% or so), after a solid year for them last year, while the S&P 500 is closer to 0% thru June. Our research shows that REITs have actually performed better than the S&P 500 during periods of rising rates so we would expect to see REITs perform better during the second half of this year and during the coming years. Remember, rising rates usually means an improving economy, which is good for REITs as they can increase their rents, fill up their buildings and gradually raise their dividends.
I follow several economists to aid in decision making, but one of the better ones I believe is Jeremy Siegel. Siegel is a professor of Finance at the Wharton School of Business in Pennsylvania. He writes a weekly newsletter and is frequently a guest speaker on financial news channels like CNBC & Bloomberg. He is usually an optimistic person and has been accused of being too bullish, but I remember that he was bearish in late 2008 and was one of the reasons that I decided to move all client assets to cash in October of 2008. I remember in early 2012 when the Dow Jones Average was at about 12,500, Siegel was predicting that the Dow could hit 17,000 by the end of 2013 and that he thought it would at least get to 15,000 in 2013.
At that time in 2012, most economists were very cautious and most were predicting a flat or down market for the next couple of years. Many commentators were snickering at his prediction and I can’t think of anyone that was as bullish as Siegel at the time. And by the end of 2013, the Dow nearly hit the high end of his range of finishing at 16,576. I can think of many predictions he has made over the years and he is usually pretty accurate.
Most recently, Siegel has predicted that interest rates will remain low over the next decade or so – not that the Fed won’t raise rates, but that the Fed won’t be able to raise them too much before they have to stop or start lowering them again. This is consistent with our thinking, as we have mentioned in previous updates. We believe that the phenomenon of the Baby Boomers ageing & retiring will have a softening effect on the economy & on interest rates. This ageing population is taking place not just in the USA, but also in many European Countries, in China & in Japan – we will talk about this more in future updates and in future meetings if you are interested.
Another prediction recently made by Jeremy Siegel is that the Dow Jones Industrial Average will hit 20,000 by the end of this year. Right now the Dow is around 18,000 (up about 1% for the year), so that would mean potentially a gain of around 10 to 12% for the year if he is correct.
Happy Labor Day! It’s hard to believe the summer is coming to an end. We hope you enjoyed yours as much as we did ours.
Other than some exciting liquidations of some of our purchases, the secondary REIT market has not produced very attractive prices to buy more this summer, so that side of our business has been relatively quiet. By contrast, the stock market has been turbulent and has consumed much of the research time. The good news to a down season is always potential buying opportunities, and we continue to look into those. However, it can be concerning to see current investments losing ground, so we will focus this newsletter on the over all market volatility as it relates to our investment strategy.
Looking Back at Periods of Rising Interest Rates
One of the biggest issues affecting the stock market over the past couple of months has been the spike in interest rates. When interest rates go up sharply, dividend-paying investments (our current preferred strategy), tend to suffer. The 10-year US Treasury bond for example, has moved from around 1.75% to around 2.8% in just the last 60 days or so. Below is a historical chart of the 10-year treasury yields going back to 1960:
You can see that the recent spike in the interest rates (on the far right of the chart) is pretty significant. But if you were to draw a line connecting the peaks of the chart you would also see that the recent spike in rates has just brought the rates back up to the top of the trend line.
What does this mean for our investments? We touched on this a little in our last update as it related to the traded REIT’s specifically. We sited a study (from Cohen & Steers) which showed that REITs have performed well in previous periods when we had rising interest rates…here is an excerpt:
“In reviewing the 6 periods of rising rates with the first one beginning in 1979, they found that there were a total of 135 months when the 10-year US Treasury yields were rising and 95 months when the Federal Funds Rate (one of the rates directly controlled by the Fed) was rising. During the 135 months when the 10-year Treasury yields were rising, RIETs were up 56.5%, Stocks were up 38.3% and bonds were up 4.2%. And during the 95 months while the Federal Funds Rate was rising, REITs were up 31.2%, stocks were up 11.7% and bonds were up 3.3%.“
When looking at this study, you must also consider that they were looking at the numbers over the entire timeframe of when the 10-year Treasury yields were rising. So in the study they had 135 months of rising rates over 6 different periods of time, meaning that the average period of rising interest rates was about 22 months. In our current period of rising rates we are only about 4 months into the uptrend.
Current Rate Spike and Future Question Marks
Since the study shows REITs doing OK during periods of rising interest rates, then why have REITs and other dividend paying investments done poorly over the past few months? We think the answer is just the fact that rates have gone up so quickly that investors are worried about how high they will ultimately go. When you see the 10 year yield go from 1.75% to 2.8% in a couple of months, you worry that it might be at 4% in a couple more months and then who knows from there. In other words, the higher rates go, the less attractive your dividend paying investment looks relative to other interest paying investments (like bonds & CDs). So right now, what investors in dividend investments want to see is either some stability in rates or decreasing rates.
Predicting future interest rates is a difficult task with lots of factors to consider. Much like predicting where the stock market will be at a future date, it is virtually impossible to get it exactly right. Fortunately we don’t need to get it exactly right, we just want to feel confident that rates will not be dramatically higher in the near future. The study we have discussed above and others like it show, that dividend paying investments can handle periods of increasing rates. But we also know that dividend paying investments and really stocks in general, do not do well when interest rates are rising quickly. We believe that the recent period of quickly rising rates will end soon.
PIMCO is the largest manager of bonds in the mutual fund universe and we follow their weekly newsletters. In their most recent newsletter, they say that their belief is that the 10-year treasury yield should be around 2.2% based on supply, demand and the many other factors that they consider. It is currently around 2.8%, so they deduce it will likely go down over the coming months. One of the longer-term factors that they site is the aging of our work force. PIMCO’s research shows that the growth of the working age population will be 1% lower than it has been over the past 40 years (due to the aging of the baby boomers). The net result of that means a 1% slower growth potential of the GDP (Gross Domestic Product) in the US. And slower growth means low interest rates.
Economic Growth, The Fed, and Interest Rates
On the subject of slow growth, I think we also need to keep in mind what Congress is doing now and what they can do going forward. We all know that Congress has authorized government “over-spending” for decades, which has resulted in a huge national debt. This has sparked lots of debate over how to reduce the debt or at least slow it down. That is not a recipe for a fast growing economy. Certainly, the economy can grow without the government over spending, but over the past 30+ years, the spending has boosted our economy.
Going forward, there will continue to be lots of pressure for the government to reduce the amount that they spend, which should mean that we grow slower than we have over the past roughly 30 years. In this time period, GDP growth in the US has generally been in the 3% to 5% range, with a few short periods where it went above and below that range. Going forward, we expect that GDP growth in the US will be generally in the 1% to 3% range, due primarily to the anticipated slower government spending and the aging of our workforce. While this is not good news, it is more reason to believe that dividend paying stocks may fair okay as the Fed is likely to keep rates low for a long period of time, in order to help boost GDP growth.
We hope this has clarified what some of the recent volatility has been about. In addition, while there will be periods when prices go down on our stock purchases, one of the reasons we are in this strategy is because we are collecting nice dividends despite the turbulence of the stock price itself.
With the summer months behind us, we will be gearing up for fall reviews, so please be in touch if you don’t hear from us first. Also, we would love to hear your feedback and suggestions for future newsletters. Please feel free to let us know any topics in particular about which you would like to hear us spout off, as well as any other thoughts you have to help us serve you better.
We hope you are enjoying your summer! Ours has been going along quite well with the exception of the inevitable pullback the market has finally decided to put us all through. While this was not unexpected, it was/is impossible to predict when and how hard stocks will be hit. Here we will address some of the factors precipitating the recent ugly days and our interpretation of them.
On Wednesday (June 19th), the Federal Reserve Bank or “the Fed” held their board of governors meeting and announced that there would be no change to their monetary policies. However in a press conference following the meeting, the Fed chairman, Ben Bernanke, said that if economic data continues to improve then the Fed might gradually scale back their bond purchases later this year.
As a quick review, the Fed’s “bond buying” program refers to their current Quantitative Easing program, whereby the Fed creates money to purchase bonds (mostly treasury bonds and mortgage bonds). The idea is that when the Fed buys these bonds from the bond market they are both putting downward pressure on interest rates and making more money available to be invested elsewhere. In their current program, the Fed is buying $85 billion in bonds each month, meaning that $85 billion of investor assets that would have gone to buying those bonds are now available to be used elsewhere. Most likely a lot of this money ends up going into stocks and other investment assets, though no one can say for sure where it all ends up.
On the surface, it would seem that nothing in the Fed’s policy changed. Their bond- buying program was set up as a temporary program, which would continue until unemployment got down to around 6.5% (it is now 7.6%) or until inflation hit about 2% (Core CPI was 0.2% last month). In other words, the bond-buying program was set up to help improve economic conditions and once the data shows improvement then the Fed will end the program. On Wednesday, Bernanke essentially restated that objective and said that conditions are improving somewhat and if they continue to get better, then the bond program could start scaling back late in the year. This would seem to be either no news or good news, since he said things are improving.
Uncertainty And the Market
So why did the stock market react so poorly over the past couple of days? In a word, uncertainty – one thing the stock market always hates is uncertainty. The market has enjoyed the Fed’s bond program and Bernanke’s comments indicate that the end of that program may be closer than we thought a couple of months ago. In addition, Bernanke’s term will expire in early 2014 and he will probably not seek another term, so who will be the new Fed chairman and how will his or her policies affect us?
After Bernanke’s comments, it now appears that the Fed might begin taking a tighter stance to their monetary policy towards the end of this year. The “tightening” actions the Fed might take, could include not just ending the bond-buying program but could also mean the Fed will start increasing interest rates. And once they begin to tighten, they can potentially cause economic activity to slow down and lead us into a recession. No problem you might say, because all they would have to do is reverse their actions if things slow down, right? In theory that is true but if things slow down too quickly, reversing the Fed’s actions might not be enough to prevent a recession. And, with the added uncertainty of a new Fed chairman, who knows how that situation might be dealt with.
In our view, given that the Fed likely won’t do anything different until the end of the year, and maybe nothing different at all this year, all of this panicking seems a little premature. Our view continues to be that the US economy will experience slow growth. Many people are concerned about dramatically higher interest rates, but higher than average rates usually come with higher than average growth, which we don’t see. So in our opinion, this recent volatility is just part of a normal correction process and is not likely to become a bear market (20%+) type of correction.
Impact on REIT’s
Given that interest rates are so low it is almost certain that they will go up to more historically “normal” levels at some point. Whether that happens over the next couple of months or years, or if it takes much longer, no one can say for sure. Regardless, it’s a good time to look at how REITs have performed in previous periods of rising interest rates.
In researching this topic, we came across a study that was put together by a company called Cohen & Steers using data from Bloomberg (see full article at http://www.havermannfinancial.com/type_of_newsletter/financial-articles-of-interest/). The study looked at data from the mid 1970’s thru 2012 (keep in mind that data on REITs does not go back any further than the ‘70s). The study found that there were 6 periods of time since the ‘70s that we had rising interest rates. It measured returns over those periods for Stocks (S&P 500 Index), Bonds (Barclays US Aggregate bond index) and REITs (NAREIT Equity REIT index).
In reviewing the 6 periods of rising rates with the first one beginning in 1979, they found that there were a total of 135 months when the 10-year US Treasury yields were rising and 95 months when the Federal Funds Rate (One of the rates directly controlled by the Fed) was rising. During the 135 months when the 10-year Treasury yields were rising, RIETs were up 56.5%, Stocks were up 38.3% and bonds were up 4.2%. And during the 95 months while the Federal Funds Rate was rising, REITs were up 31.2%, stocks were up 11.7% and bonds were up 3.3%.
When looking at this study, one must also keep in mind that they are looking at total return over the given period. So if you look at the returns over the 135 months that the 10-year treasury yields were rising, those returns are spread out over about 11.25 years. In the case of REITs, they went up 56.5% over 11.25 years, which amounts to about 5% per year. And since the dividends of the REITs likely averaged more than 5%, their stocks were essentially flat, if not down a bit – not great but the 5% is still better that the S&P 500 or bonds over that same time period.
We of course do not care if the return comes from dividends or growth and are more concerned about total return and return relative to our other options. By those measures, the performance of REITs in an increasing interest rate environment looks pretty good.