Whip Inflation When?

[OnPoint]

Dumb questions from a non-financial person:

Any thoughts on ETA for the inflation many expect? Does the Carter era serve as a guide to what may happen? Or were the fundamental issues different?

I’ve been wondering about refinancing a chunk of cash out, carry it til inflation hits, then put it in a CD or something safe-ish. Made up numbers, but let’s say it costs me 6% fixed to carry, and CD pays…? 10%? 15%? Didn’t Carter era deliver 20%+?

Is this a dumb idea? What am I missing? There is carrying cost while waiting for inflation to pick up. But if it doesn’t work out, just pay the chunk back to principal and recast the loan.

Or, assuming the chunk is ~100K, better to buy a little rental now & collect rent? Main risk I see there is rising unemployment leading to lower rents. And the illiquidity of the property.

Your guidance appreciated…

[veees]

http://www.nctimes.com/articles/2009/05/20/business/z804a1f3cccab3e22882575bd000310b1.txt

/quote

Top it with best-in-decades interest rates below 5 percent that could be squashed by growing concerns of hyperinflation (see: $2.9 trillion in bailouts), and buying now is very attractive, even if prices drop 20 percent from today, probably the worst-case scenario. Interest rates would need to increase only to 7 percent —- normal, even good, by historical standards —- to negate a 20 percent savings on the price.

end /

Does the above make sense?

[veees]

http://www.nctimes.com/articles/2009/05/20/business/z804a1f3cccab3e22882575bd000310b1.txt

/quote

Top it with best-in-decades interest rates below 5 percent that could be squashed by growing concerns of hyperinflation (see: $2.9 trillion in bailouts), and buying now is very attractive, even if prices drop 20 percent from today, probably the worst-case scenario. Interest rates would need to increase only to 7 percent —- normal, even good, by historical standards —- to negate a 20 percent savings on the price.

end /

Does the above make sense?

[veees]

http://www.nctimes.com/articles/2009/05/20/business/z804a1f3cccab3e22882575bd000310b1.txt

/quote

Top it with best-in-decades interest rates below 5 percent that could be squashed by growing concerns of hyperinflation (see: $2.9 trillion in bailouts), and buying now is very attractive, even if prices drop 20 percent from today, probably the worst-case scenario. Interest rates would need to increase only to 7 percent —- normal, even good, by historical standards —- to negate a 20 percent savings on the price.

end /

Does the above make sense?

[veees]

http://www.nctimes.com/articles/2009/05/20/business/z804a1f3cccab3e22882575bd000310b1.txt

/quote

Top it with best-in-decades interest rates below 5 percent that could be squashed by growing concerns of hyperinflation (see: $2.9 trillion in bailouts), and buying now is very attractive, even if prices drop 20 percent from today, probably the worst-case scenario. Interest rates would need to increase only to 7 percent —- normal, even good, by historical standards —- to negate a 20 percent savings on the price.

end /

Does the above make sense?

[veees]

http://www.nctimes.com/articles/2009/05/20/business/z804a1f3cccab3e22882575bd000310b1.txt

/quote

Top it with best-in-decades interest rates below 5 percent that could be squashed by growing concerns of hyperinflation (see: $2.9 trillion in bailouts), and buying now is very attractive, even if prices drop 20 percent from today, probably the worst-case scenario. Interest rates would need to increase only to 7 percent —- normal, even good, by historical standards —- to negate a 20 percent savings on the price.

end /

Does the above make sense?

[CA renter]

Yes. It’s the old high price/low rate vs. low price/high rate argument.

This is why in the last interest rate/price thread, I said that someone who was putting very little down would probably want to buy now because of the very low rates and fairly low prices in the more affordable/low-income neighborhoods. Not because prices won’t come down, but because their **monthly payment** would probably be at or near its lowest point right now.

For those who are putting 50-100% down, it’s probably best to wait, as we might (hopefully) see higher rates and lower prices, which is what you want if you are putting more down. There will be fewer competing buyers, and cash buyers are looking to get the most bang for their buck. They are much less interested in monthly payments.

[CA renter]

Yes. It’s the old high price/low rate vs. low price/high rate argument.

This is why in the last interest rate/price thread, I said that someone who was putting very little down would probably want to buy now because of the very low rates and fairly low prices in the more affordable/low-income neighborhoods. Not because prices won’t come down, but because their **monthly payment** would probably be at or near its lowest point right now.

For those who are putting 50-100% down, it’s probably best to wait, as we might (hopefully) see higher rates and lower prices, which is what you want if you are putting more down. There will be fewer competing buyers, and cash buyers are looking to get the most bang for their buck. They are much less interested in monthly payments.

[CA renter]

Yes. It’s the old high price/low rate vs. low price/high rate argument.

This is why in the last interest rate/price thread, I said that someone who was putting very little down would probably want to buy now because of the very low rates and fairly low prices in the more affordable/low-income neighborhoods. Not because prices won’t come down, but because their **monthly payment** would probably be at or near its lowest point right now.

For those who are putting 50-100% down, it’s probably best to wait, as we might (hopefully) see higher rates and lower prices, which is what you want if you are putting more down. There will be fewer competing buyers, and cash buyers are looking to get the most bang for their buck. They are much less interested in monthly payments.

[CA renter]

Yes. It’s the old high price/low rate vs. low price/high rate argument.

This is why in the last interest rate/price thread, I said that someone who was putting very little down would probably want to buy now because of the very low rates and fairly low prices in the more affordable/low-income neighborhoods. Not because prices won’t come down, but because their **monthly payment** would probably be at or near its lowest point right now.

For those who are putting 50-100% down, it’s probably best to wait, as we might (hopefully) see higher rates and lower prices, which is what you want if you are putting more down. There will be fewer competing buyers, and cash buyers are looking to get the most bang for their buck. They are much less interested in monthly payments.

[CA renter]

Yes. It’s the old high price/low rate vs. low price/high rate argument.

This is why in the last interest rate/price thread, I said that someone who was putting very little down would probably want to buy now because of the very low rates and fairly low prices in the more affordable/low-income neighborhoods. Not because prices won’t come down, but because their **monthly payment** would probably be at or near its lowest point right now.

For those who are putting 50-100% down, it’s probably best to wait, as we might (hopefully) see higher rates and lower prices, which is what you want if you are putting more down. There will be fewer competing buyers, and cash buyers are looking to get the most bang for their buck. They are much less interested in monthly payments.

[XBoxBoy]

Your plan makes sense, IF and only IF, we do end up getting inflation and high interest rates in the near future. That if is by no means a certainty.

I have no idea who will be right in this inflation/deflation debate, but be aware that both sides have good sounding arguments. (Although obviously one side is wrong)

If you look at Japan over the course of the last decade and a half, you see low interest rates and stagnant economy with bouts of deflation. There are lots of reasons to think we will experience a similar fate. If that comes to pass, your plan will be a loser, and you will have to cough up money to pay off the loan and interest, or go into bankruptcy.

But maybe the deflationista’s are wrong, and you’ll be able to re-lend the money into high paying CDs or some such.

Just be aware that your plan clearly falls under the category of speculation and comes with risks.

XBoxBoy

[XBoxBoy]

Your plan makes sense, IF and only IF, we do end up getting inflation and high interest rates in the near future. That if is by no means a certainty.

I have no idea who will be right in this inflation/deflation debate, but be aware that both sides have good sounding arguments. (Although obviously one side is wrong)

If you look at Japan over the course of the last decade and a half, you see low interest rates and stagnant economy with bouts of deflation. There are lots of reasons to think we will experience a similar fate. If that comes to pass, your plan will be a loser, and you will have to cough up money to pay off the loan and interest, or go into bankruptcy.

But maybe the deflationista’s are wrong, and you’ll be able to re-lend the money into high paying CDs or some such.

Just be aware that your plan clearly falls under the category of speculation and comes with risks.

XBoxBoy

[XBoxBoy]

Your plan makes sense, IF and only IF, we do end up getting inflation and high interest rates in the near future. That if is by no means a certainty.

I have no idea who will be right in this inflation/deflation debate, but be aware that both sides have good sounding arguments. (Although obviously one side is wrong)

If you look at Japan over the course of the last decade and a half, you see low interest rates and stagnant economy with bouts of deflation. There are lots of reasons to think we will experience a similar fate. If that comes to pass, your plan will be a loser, and you will have to cough up money to pay off the loan and interest, or go into bankruptcy.

But maybe the deflationista’s are wrong, and you’ll be able to re-lend the money into high paying CDs or some such.

Just be aware that your plan clearly falls under the category of speculation and comes with risks.

XBoxBoy

[XBoxBoy]

Your plan makes sense, IF and only IF, we do end up getting inflation and high interest rates in the near future. That if is by no means a certainty.

I have no idea who will be right in this inflation/deflation debate, but be aware that both sides have good sounding arguments. (Although obviously one side is wrong)

If you look at Japan over the course of the last decade and a half, you see low interest rates and stagnant economy with bouts of deflation. There are lots of reasons to think we will experience a similar fate. If that comes to pass, your plan will be a loser, and you will have to cough up money to pay off the loan and interest, or go into bankruptcy.

But maybe the deflationista’s are wrong, and you’ll be able to re-lend the money into high paying CDs or some such.

Just be aware that your plan clearly falls under the category of speculation and comes with risks.

XBoxBoy

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