Using the Economy to our advantage.

Tom-D

Tom-D

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Tom-D
Housing interest may go as low as 3.5%

IF it does, would it be advantageous to draw a cash out on my house and buy toys, or gas futures, etc?

IOW reinvest it in _________?
 
Invest in paying off all of your debt including the mortgage.
 
NC19143 said:
Housing interest may go as low as 3.5%

IF it does, would it be advantageous to draw a cash out on my house and buy toys, or gas futures, etc?

IOW reinvest it in _________?
Click to expand...

GM stock.
 
Tom, in a word...land. Of course deciding your "mission", ie, yield, short- or long-term (user defined)

Find an area, locale, region, and learn it's demographics but with an eye towards future growth.

Or just chuck it all and buy all the rum you can to stock your boat for the Fiji and Beyond trip.
 
Richard said:
Tom, in a word...land. Of course deciding your "mission", ie, yield, short- or long-term (user defined)

Find an area, locale, region, and learn it's demographics but with an eye towards future growth.

Or just chuck it all and buy all the rum you can to stock your boat for the Fiji and Beyond trip.
Click to expand...

we've looked at this a couple times, the price isn't solid. I think the guy is needing help.

Southeast here we come:)

http://www.sailboatlistings.com/cgi...fault&uid=default&view_records=1&ID=7417&mh=1
 
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IF you have a mortgage at a higher interest rate and mortgages go down to 3.5% or so, that might be worth refinancing. Pay off your house a whole lot quicker with the same payment. If it goes that low, I'd probably consider doing that myself.
 
Ted DuPuis said:
IF you have a mortgage at a higher interest rate and mortgages go down to 3.5% or so, that might be worth refinancing. Pay off your house a whole lot quicker with the same payment. If it goes that low, I'd probably consider doing that myself.
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I would too and I refi'd this year. The problem for widespread adoption is the new loans will have to be conforming and 80% or less to CURRENT value.

I don't think we'll see rates like 3.5% but I think we'll miss sub-6% rates A LOT a few years from now.
 
Not related to interest rates but I've been using the economy to my advantage by purchasing and selling option puts. It's been a good month!
 
The Fed is currently working on doing things to put a floor under housing according to the WSJ. The 4.5% mortgage rate target for new home purchases is to get rid of a glut of inventory which should help stabilize housing. There is another program for existing homes still in development. Since the Fed can't lower the Fed funds rate a lot more, it is seeking other methods to stop the decline in housing prices and unclog the credit markets. This is one method.

Leverage is like any other tool; it makes good deal better and bad deals worse. In times of inflation, it can be a great help as real asset prices increase and leverage stays constant: it really boosts equity return. OTOH, in a deflation like we have recently experienced, it magnifies loss as real assets decrease in price and leverage stays the same.

Used prudently, it can be wonderful. Used to excess, it can cause financial collapse. If your job is secure and the payment amounts are reasonable, the next year or two may present an excellent time to purchase a home with a low mortgage rate or to refinance. It seems there will be high inflation after this downturn is behind us as we monetize all this bailout debt. As has been said, mortgage rates this low would then be difficult to find or non-existent.

I use quite a bit of leverage in my business: subdivision development. I paid it down to very low levels before this downturn, but it's still and issue. Think I'll get through it, but it's always a two bladed sword. Many folks have been swept under by over use in this environment.

Just remember that the mortgagor always wants their payments. You need to provide for the cash flow to make those payments through the life of the mortgage or to pay it off. Many folks overleveraged thinking their job was secure or the asset would appreciate and they could refinance. With over two million unemployed now, including investment bankers and attorneys, there are a lot of folks that thought they were fine now out of work. Add to that the dropping value of housing and locked up credit markets are taking a toll on many folks that may have done reasonable planning in the past. Cash flow is most important right now. It's a bad time to need cash to meet obligations and not have it.

Best,

Dave
 
kevin47881 said:
Not related to interest rates but I've been using the economy to my advantage by purchasing and selling option puts. It's been a good month!
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Good for you Kevin. I did the same thing a year ago to hedge my business. The option premiums have gotten very high now; so, it's more difficult to make what I did work and the potential returns are lower.

Last year November I was convinced my business would turn down. I wasn't sure, but didn't want to take the risk it would. I couldn't really hedge my business directly; so, I purchased 200 puts on a homebuilder I thought would reflect market circumstances. Not a perfect hedge, but I did double that money before closing out the positions just over a month ago. The way I looked at it: if the market went down, I couldn't afford not to be hedged. If it went up, I was willing to walk away from what I had paid like paying for an insurance policy.

To me, it was not like speculating even though purchasing and selling option contracts can be speculative.

Best,

Dave
 
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