tag:blogger.com,1999:blog-6616959642391988608.post5284677729069524511..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: Household deleveraging is a very healthy indicatorScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-6616959642391988608.post-65552224171536636802010-03-22T20:24:07.358-07:002010-03-22T20:24:07.358-07:00rg32: I can't really answer your question, bec...rg32: I can't really answer your question, because the degree of risk you assume is a highly personal matter. I can only say that to me the odds favor the use of leverage. I would also note that since the interest on mortgage debt is deductible, the government is effectively subsidizing (reducing) your interest expense. A wise friend once told me that you can never refuse to accept a Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-34269330151038539492010-03-22T11:25:03.783-07:002010-03-22T11:25:03.783-07:00Dear Scott, I really appreciate your comments on t...Dear Scott, I really appreciate your comments on this subject. I completed a refi on my home in Jan 09 with the intent of taking out cash to pay off my small office building (the original idea was to lower my overall interest rate by about 2%). I ended up unable to take out enough to pay off the office, so I just took out 183k and invested it in late January 2009. That 183k is now 292k. I have rg32https://www.blogger.com/profile/00022293175559710842noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-57081179092655931652010-03-22T09:11:17.532-07:002010-03-22T09:11:17.532-07:00Rodrigo: I have two important points to make in re...Rodrigo: I have two important points to make in response. One, the Federal Reserve is trying very hard to discourage people from deleveraging. They would be very happy to have inflation rise, rather than seeing any sign of deflation. The Fed is the most powerful institution on earth, and they are unique in that they can always get what they want. <br /><br />Two, even if deleveraging continues asScott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-22070343620316068082010-03-21T20:21:12.962-07:002010-03-21T20:21:12.962-07:00Scott:
I think you are underestimating how much d...Scott:<br /><br />I think you are underestimating how much deleveraging will happen. While we are back to levels that prevailed in the 80s, those were the highest levels at the time, before we embarked on a very large credit binge. <br /><br />I believe in mean reverting and thus we should see debt/income percentage well below the current levels. <br /><br />It's taken 2-3 yrs to get back UFormulahttps://www.blogger.com/profile/04465435765969271043noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-26899426112029729012010-03-21T16:30:42.601-07:002010-03-21T16:30:42.601-07:00sgt: It was not my intention to say that holding c...sgt: It was not my intention to say that holding cash is a sin. If you are holding cash in anticipation of buying something, that makes a lot of sense, since opportunities are likely to crop up at times like these. The improvement in your personal finances is quite similar to what the economy as a whole is experiencing, and it's good to hear. <br /><br />Leverage only makes sense for those Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-70311958570714511092010-03-21T15:25:06.781-07:002010-03-21T15:25:06.781-07:00We have "deleveraged" as we have paid do...We have "deleveraged" as we have paid down several mortgages since the 2007 peak depicted in your chart. In addition, most of the loans are adjustable and 3.25 percent interest rate or less. Cash flow is up. Liquid net worth exceeds high of 2007 Q3 Q4 by March 2010, with total net worth hitting a new high several 1-2 quarters ago, due to principal reduction.<br /><br />Cash 'sgt.red.blue.redhttps://www.blogger.com/profile/08132657702786638326noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-83408987891450226572010-03-21T14:14:48.922-07:002010-03-21T14:14:48.922-07:00John: I am indeed recommending the use of leverage...John: I am indeed recommending the use of leverage. Many ways to do this, of course. Buy stocks on margin. Buy homes with a mortgage. Use futures or forwards instead of buying outright.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-23604354281743862672010-03-21T12:59:11.162-07:002010-03-21T12:59:11.162-07:00Scott may correct me here if I am misinterpreting ...Scott may correct me here if I am misinterpreting his suggestion but I assume he is referring to borrowing perhaps on a securities margin account to purchase stocks or bonds with favorable prospects. This obviously involves some risk but his point that the investing public is so risk averse now and the cost of money so low relative to past levels that it may make sense for some investors. <br /><Johnhttps://www.blogger.com/profile/11652253509768573561noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-5380393001144719212010-03-21T11:44:11.980-07:002010-03-21T11:44:11.980-07:00Looks like we are on slow mend.
I like the refere...Looks like we are on slow mend.<br /><br />I like the reference to yourself as "an objective observer." <br /><br />Oh, to see others as they see us. <br /><br />Interesting advice to leverage up-who is lending?<br /><br />Let us hope the next Long-Term Capital Management computer whiz-kid team does not take that advice!!!Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-8405020017559124632010-03-21T06:48:05.246-07:002010-03-21T06:48:05.246-07:00Scott,
Has anyone ever calculated what percentage...Scott,<br /><br />Has anyone ever calculated what percentage of household spending comes directly or indirectly from government payments?<br /><br />Basically, isn't government now borrowing $2 trillion dollars simply to pay workers and generate hundreds of billions of tax receipts simply a fraud and any talk of recovery simply fantasy?alstryhttps://www.blogger.com/profile/16025398896639165994noreply@blogger.com