I have been getting off the subject of investments with this site, and have been talking about technology and the Internet quite a bit. Now, I'm going to write an investment article and you will start seeing more of these in the future.

Interest rates have been going up for about the past year now. As a result, we have seen many different sectors and industries go down in value. Industries that are sensitive to interest rates are especially susceptible to this. Many of these companies may have alot of debt built up in the company structure and will be effected when the Federal Reserve Board raises interest rates. Others companies may be effected not because they have alot of debt, but because their suppliers or partners have alot of debt in their structures.

Debt is refered to as leverage. Leverage is like a seesaw. When you add more weight to the one side, the other goes up. When times are good, and interest rates are favorable, leverage can make your company very profitable, when its bad, it can make your company do bad.

What we should start seeing now is a slowdown in the economy due to interest rate increases. These increases may take 6months or more from the time they are raised before the increases make their way through the economy and effect it.

Companies and industries with lots of debt in them should be effected, and the stock prices should go down (in theory). So, as the economy starts to slow and these stocks get lower, investors can find these companies and start buying shares in the good ones.

Then, when the economy and interest rates change, these companies should reverse on the seesaw and we should see big increases in value. Many other lower debt companies and consumer staple companies we may not see as big of an increase in value because the fundamentals of the business won't change as rapidly as a leveraged company or industry.

The tricky part to this strategy is the identification of the "inflection point." The inflection point is simply a point of time when things change. You may consider it a "crossroads" or whatever you want. The point is, if you get in too early in something like this, you may watch the value go down, or see the companies value stay the same for a long period of time. Getting in close to the point where things are starting to change should be a good thing. So, you may want to look at economic data, or industrial economic data for the industry to see things are starting to change before purchasing.

The inflection point can be applied to other investment methods as well. The identification of an inflection point may be good news in the company such as the appointment of a new CEO, new product introduction, etc.

Some companies may not need the inflection points to do well, but many of these companies have stock values that are too high for most rational investors. So, as you get money coming in and need to invest, these inflection point companies may be a good opportunity to invest in.

These topics are covered in more detail in my book "Seeing Through the Fog," which is available on this site for reading.

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