Hello, everybody. It's Sam from Financial Samurai. And I just realized something that could be the most bullish data point I've heard all year, all 2022. And that is the Treasury Department announced the Series I savings bond interest rate is going to be 6.89% issued from November 1st, 2022 to April 30th, 2023.

Now, the average person might think, oh, OK, 6.89%. Not bad. OK, maybe it's below the rate of stated inflation at the moment. But 6.8% pretty good. It's like the third highest rate ever. And so the average person goes to TreasuryDirect.gov and buys up to $10,000 per account. Pretty simple stuff.

However, as a financial samurai, you think in derivatives. And as a listener of the Financial Samurai podcast and the website, you also see that I think in derivatives. So what does this mean? 6.89% is not bad, but that's down from the 9.62% rate offered since May 2022. A 2.73% decline is massive.

Well, I'll tell you what it means. It means the government believes or knows inflation has peaked and is heading down. This is the most obvious sign I have ever seen that the government knows inflation has peaked. Given one of the goals of the government is to maximize revenue, right?

Think about all the tax dollars and the 70,000 pages tax rules that we've got to go through to figure it out. They want their money and they should probably operate a balanced budget. So the government isn't willing to pay a higher interest rate than it has to. So the government is paying this interest rate.

It's debt from the government's perspective as they borrow money from us. So the government has shown us its cards. As a result, we can make higher expected value bets. Imagine if you're playing poker and you knew everybody's whole cards. You would bet more aggressively preflop on the turn and on the river if you knew what everybody had.

Well, we know from the series I bond rate offer what the government believes about inflation. We can now assume the inflation figures coming out on November 10th, 2022, December 13th, 2022, January 12th, 2023, February 14th, 2023, March 14th, 2023, April 12th, and May 10th, 2023 will either be below inflation expectations or have a blended overall inflation rate below expectations.

And if that is the case, if inflation comes down quicker than estimated, we should see an increase in risk appetite for stocks, real estate, and other risk assets. Now, of course, nobody knows how well risk assets will perform in the future. However, the series I bond new interest rate makes me more confident the worst is over.

On October 17, 2022, the S&P 500 declined to 3577. It closed that day at that level. That's probably the bottom of this latest bear market. Because if inflation comes down, interest rates are coming down, the net present value of future cash flows goes up, and the value of companies go up.

So tech companies that have gotten crushed, and other companies that have high debt levels will probably do better because they're going to save on their debt interest payments. So how do we make money in the future? Well, the first thing we should do is not sell our risk assets because again, the worst is over.

The second thing we should do is probably set up parameters as to where we're willing to buy. Now I'm willing to buy if the S&P 500 gets below 3600 all day long, because I think 3577 is the bottom. So if we're closer to the bottom, then I'll be buying because long term, the S&P 500 goes up and to the right.

But now that I have this new news, I think buying below S&P 500 3800 is probably going to be a decent bet over the long term. In terms of real estate, my favorite asset class to build wealth, you want to strategically try and make low ball real estate offers for 10 to 20% off right now.

Right now, over the next three months, I would say winter is my favorite time to buy real estate because most people who list during the winter are generally more motivated than those who can just wait until spring when the weather is better, people are back and people are more motivated to move.

And after people have gotten paid their bonuses and have gotten promoted. So strategically try to make low ball real estate offers during this winter before mortgage rates start coming down by two to 3% by April 2023. That's right, folks, the series I bought interest rate offer is literally telling us mortgage rates will start heading south by April 2023 as well.

Because again, the latest offer is 2.73% lower than the last offer of 9.62%. And as a reader and listener of Financial Samurai, you know that everything is related to the risk free rate of return. All asset prices are priced off the risk free rate of return. And you can consider series I bonds as a risk free rate of return.

But unfortunately, you can only invest so much right there's a limit, but it is another indicator. And if the interest rate is going to decline by 2.73%, then mortgage rates will also decline by probably two to 3%. So in other words, the average 30 year fixed rate mortgage is about 7%.

Right now, we could see the average 30 year fixed rate mortgage go down to four to 5% by April 2023. And you know what the fun thing about writing on Financial Samurai and doing this podcast is we will find out whether my thesis is right in six months, and we will all rationally invest accordingly.

So if you're thinking about selling real estate now, I wouldn't do it. I think you're going to encounter people who are going to try to low ball you smartly they will try to get 10 to 20% off because in six months when inflation interest rates go down, the demand for real estate is going to pick right back up.

And the same thing for stocks, I would just hold on to what you have, please review your net worth asset allocation, look at your stock asset allocation, real estate asset allocation, alternatives, all that stuff. And mentally, I want you all to feel better that the worst is probably behind us.

Because I know this year has been a grind financially. I've been writing and talking about ways to how to better enjoy our lives as it's harder to make money and risk assets. But we should feel good knowing that we're not going to revert back to the terrible times of the global financial crisis in 2008 2009 and a little bit of 2010.

And I do think the worst is behind us. So I'd love to hear your thoughts through a comment and email, whether you believe inflation has peaked and the worst is behind us. I'm also really curious to see if other financial pundits, journalists, other just other people can connect the dots to make this correlation.

Because this is one of the things that I was forced to think about when I worked in finance, how to connect the dots to make better investment decisions. And this dot connecting seems to be the most obvious one. But maybe something that's obvious to me is not obvious to everybody else.

And maybe this will become actually more obvious to more people as time goes on, which in turn would create more appetite for risk assets. So if you think I'm totally delusional, or I'm missing something, please also let me know. Having investing in blind spots is just kind of the way of life, but it's also very dangerous.

So it's good for all of us to learn together and to share our thoughts and opinions and argue why we believe the way we do. If you enjoyed this podcast, I'd love a positive review. If you'd like to support my work, my free podcast, my free writing, pick up a hard copy of Buy This, Not That at financialsamurai.com/btnt.

The book has now over 200 five star reviews. So thank you very much for your support. It really means a lot. And if you're looking for life insurance, check out Policy Genius at financialsamurai.com/pg. During this holiday season, I hope everyone stays safe. I hope everyone bolsters their finances, reviews their finances, talks to their loved ones and their family about their finances.

Right now is truly the best time of the year. My family had a wonderful time trick or treating in Noe Valley. It was so great to see the kids just dress up and just be so happy and excited. I remember when I was working, November and December were the best times because business was slow.

There were a lot of holidays. People were merry. There were holiday parties. Oh, I'm so envious of folks who have holiday parties because that's one thing I don't have as an unemployed person or as a solopreneur. So let's take this slow time to appreciate more of what we have.

And I hope to see everyone around the comment section. Take care.