Steve McDonald: Hi, everybody. I’m Steve McDonald. This is your Market Wake-Up Call. Our guest this week is The Oxford Club’s banking friend Frank Trotter of EverBank. He’s here to talk about what is being called the “new normal” for the Fed and rates, and what to do about it. Welcome, Frank. Frank Trotter: Well, thanks for having me, Steve. Glad to be here. Steve McDonald: It’s always my pleasure. Thank you for coming. Now, is the new normal of super-low rates and no inflation really the future of money, and doesn’t that effectively shut down the Fed as an inflation fighter? Frank Trotter: Well I think it really is, Steve. Yeah, we certainly believe that, for the foreseeable future, rates will remain extremely low and possibly even get into that negative territory. We would never have believed that eight years ago when the Fed undertook its early versions of QE, but at the end of the day, according to all the economic theory, state money can only push so far, and the Fed hasn’t been able to create inflation, which is what it wants because there’s such a small portion of the money supply. We think that new normal is low rates for an extremely long period of time unless some miracle in the economy happens that we don’t foresee. Steve McDonald: Hm. Well, from a banker’s perspective, what alternatives do you see out there for the new normal? Because 1% CDs aren’t going to make it for anybody. Frank Trotter: Right. Ten-year at about 1.54% today is pretty remarkable. It’s a low that goes back to the beginning of this country. I think, as Jim Grant said, it’s only occasionally that we get to have something occur that happens only every 2,000 to 3,000 years - which is negative rates. I think what we see is, you go back to January 21 - the markets were falling. The New York Times said the markets were plummeting. Even high-yield bonds were down about 2.5%, but look at high-yield income. Bank interest rates, our own deposit rates are a little over 1% for a year, but high-yield instruments are pretty interesting. Some of them get double-digit rates. You look at the high-yield index, up over 14% year to date. I think that’s pretty intriguing to do high-yield investing and maybe some dividend investing, depending on your own set of risk parameters. Steve McDonald: Metals. I know you guys do a lot in the metals area, specifically gold – and now as an income source. This seems to be the newest way to generate income. Can you get in on the gold run, and can you talk about that? Frank Trotter: Sure, Steve. Gold’s interesting because traditionally you think about it as a non-interest bearing asset, which of course it is, but a lot of people are beginning to say, well, first of all, it’s not a negative interest rate. It costs some money to store. It costs some money sometimes in our unallocated accounts. Of course you can do that for free, but people are starting to say, “Well I’m going to own gold at a higher proportion of my diversified portfolio because I think over the near term, it’s going to rise and I’m going to get in on that income, that rise in price value, by holding that as a part of my portfolio.” We see more and more hedge fund managers, and we see more and more people - who probably five years ago would have called it the barbarous relic - starting to come back into gold as a portion of their portfolio to generate income. Our clients do this all day, every day, and I think they really appreciate the returns they’ve had over the last several years. Steve McDonald: Interesting. So high-yield bonds. I swear, everybody watching, I did not tell him to say that. I know you know I work in those. Gold as an income source - that’s really interesting. Frank, thanks so much for being with us. Frank Trotter: Great to be here, Steve, and I look forward to talking again. Steve McDonald: I look forward to it, too. For everybody here at the Market Wake-Up Call, I’m Steve McDonald. Thanks for being a part of this. I’ll see you next week. [End of Audio]