This topic has been brought up in previous threads, but I thought we should revisit it again.
Many of us are waiting to purchase homes based on anticipated declines in the housing market, and each of us may or may not purchase based on whatever market parameters and/or personal issues we care about. Some of us have a fair amount of cash to park somewhere waiting for the right time to use some or all of it for a home purchase. The question is, where should one put all this cash, based on today's conditions?
Stocks, mutual funds and that general asset class have had very good returns over the past several years, but the stock market appears to be possibly sputtering of late. Hard commodities like oil, gold and other precious metals are good if you are a doomsayer and expect geopolitical turmoil. However, oil has done quite the flop lately, maybe having something to do with elections coming up, maybe not. There are always bonds and treasuries, but is the bond market in a bearish mood right now? A lot of this depends on what the Fed may or may not do with interest rates in the future. And, there's always cash. CD rates have held up, but where could they be headed - up or down?
Finally, how liquid do you need to keep your cash? Are you going to decide you need it for a down payment within a month or two, making some of these options (longer term bonds, for example) less attractive?
What is the best strategy for you?
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I'm slightly bullish on the dollar for the next 2-3 years. Keep half in usd demoninated securities with a major portion of that in short term cash. Diversify the heck out of the remaining half. After 3 years, if our national deficits haven't improved, make sure you learn to speak at least one foreign language fluently.
FollowBefriend1 threads3,248 comments
oops, you are right, I just looked it up on BBC news
OK, let me try to back pedal and rephrase, I think hyperinflation is hard to repeat for more politically stable developed countries like UK, Germany, and the US. At least we have enough gun power to go around to rob whatever we want, if necessary. ;-)
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EURBED contact be offline if you want a recomendation regarding advice from a Financial Adviser
And just how am I supposed to do that? How about you contact me? email@example.com
Why do I have a bad feeling about this?
FollowBefriend2 threads2,944 comments Different Sean's website
it's 'hoard'... oh stinge just got in ahead of me at post 47 ;)
great news about casey :?
Completely agree with Neil. Ben needs to temper the speed of the printing press with keeping the dollar attractive to our foreign financers. If he increases his helicopter trips, he'll have to raise interest rates.
hyperinflation erodes mortgages very quickly ;)
more from the casey front (somehow he keeps jumping sharks):
"I have always been entrepreneurial and had a dream to retire young and use my money/time to do good works. But I didn’t know what I didn’t know. Reading Robert Kiyosaki’s books and playing the CASHFLOW Board Game cleared things up and showed me the way to get there. I just picked up the latest one he wrote with that other guy… It’s awesome!"
so he read the books (as per the picture of his 'library') and failed to understand anything. Notice how he has an instinct for gladhanding and viral marketing tho... who woulda thought a little boy from uzbekistan would pick up american "values" so quickly?
"Upon consideration I am struck with the hopelessness of your situation, despite today’s revelation of your audience with R. Kiyosaki. Here you are, gamely holding out hope under circumstances that would have given the Light Brigade or the drunken gunslingers of the Alamo pause, while disaster veers ever closer in the form of an unholy stew of foreclosure notices, bills, tax assesments etc. all of which was built on a foundation of loan applications of a somewhat, shall we say, unsavoury, nature, and in the back of which loom a few burly young men with badges, truncheons and handcuffs and *no* I am not referring the rather vulgar works of Tom of Finland (look it up, out of sight of children.) Yesterday I took solace in the zaniness of you clinging to the thin reed of somehow finding a ‘creative’ solution (word to the wise: strictly speaking ‘creative’ is a word most properly reserved for God, if you believe in the angry old goat, or in a stretch Beethoven, Mozart etc. etc. - it does *not* apply to finagling mortgages.) Today I am struck with the realization that soon, I fear, it may be necessary to turn out the lights on this whole enterprise. You don’t need Kiyosaki, you need divine intervention, or at least a note of support from the papacy."
FollowBefriend (5)44 threads4,602 comments Los Altos, CAPremium
Hyperinflation is 1% per day. That's an order of magnitude per year. That means you can measure it by the minute.
I'm taking bets. Anyone here really worried about USD hyperinflation can deposit their funds with me for a fixed term. I'll agree to secure those funds in a deposit account. At the end of the term, if we have crossed the real definition of hyperinflation during that period, then I'll agree to return to you the full real value of your deposit.
If we don't, then I get to keep the interest I've earned on your deposits. You can choose the index, so long as it's an independently verifiable and reviewed index. Any takers?
And DS, by the way, if there ever were hyperinflation, then fixed rate mortgage debt would be among the most valuable instruments one could hold. Remember that inflation increases the value to fixed rate debt holders and punishes savers.
FollowBefriend1 threads6,749 comments Premium
I've noticed in several posts a general sense of unease with the current state of affairs in US markets. That's o.k ( I have a fair amount of skepticism my damn self). Previous market highs were built on speculative excess and cooked books that are still being re-stated. What's different about 12K in 2006 and 12K in 2000 is that when we really look at it, the industry has been completely revamped!
Many of the abuses and issues have been addressed. While it did take several years (and industry that fought kicking and screaming) insider trading, late trading market timing and numerous accounting issues have been confronted. While by no means perfect, all of us should be able to invest with a higher degree of confidence in "the system". The obvious exceptions to this are of course Fannie and Freddie (both REIC related btw).
When the REIC Cartel (TM) has been through a similar re-tooling we can feel more confident that we will be treated fairly in our real estate transactions. Until such time I have NO objections to any of the above startegies (with the exception of the poor chap @ 2.5% yield).
While I am licensed to conduct "fee based" business, I'm not a fan of it. It totally takes the "profit motive" out of the equation. Once they have you "on contract" you're basically just indexing and at that point it's more about going on to the next referral and gathering more assets to put "on contract".
Many of these "converted CPA firms" got tired of living off of referral stipends and decided they are AT LEAST as smart and could do as well for their clients as any damn stockbroker! Well o.k, whatever. These guys LOVE having initials after their names and are in an endless pursuit to add more. They even create new organizations of which they can become chairpersons. "The Oregon and Southwest Washington Society for Financial Planning and treating recently divorced wealthy clients ethically and fairly Association/Organization" (or something like that). Dude......WTF?
As I've said previously, with so few choices in the avg. employer sponsored 401K plan analysis takes about 15-30 minutes. Anyone offering to "manage" your choice of 4 Fidelity funds is just looking for more AUM (assets under management) on which they can charge a fee! These guys LOVE financial software programs and spare no expense (yours of course) to get new ones! Just post the link to your plan provider, we'll look at what's available, your comfort zone and make suitable rec's. Sheesh, it's not that big a deal.
Please educate me as to how RISING inflation, and thus REAL interest rates, can ever be NEGATIVE for holders FIXED RATE debt.
Only a fool would take that bet! You’d be broke so you wouldn’t be able to pay back.
Why would I be any more likely to "go broke"? I think what you're trying to say is that you wouldn't take the bet.
I'm just testing rhetoric versus resolve.
News flash: Per talksport.net/BBC, there is a bill proposed in england, ushered by the mortgage industry to stimulate sales, that would allow people to borrow 5 times their income to obtain a mortgage. This considered tobe quite speculative in the UK.
FollowBefriend2 threads2,498 comments
Dang it, it’s HOARD.
Now, "I" never said any of us would walk away from this thing "unscathed"...... There will be some pain to go around but certainly not on the scale realtors would love to see. Misery loves company and that's why we've gotten so many "be careful what you wish for" type comments from realtors.
It seems we often go back to the tech wreck for the most current model and my example will draw from it as well. When we look back at the popularity of "on-line brokers" it certainly does look silly. Imagine cold calling from coast to coast and finding that three of the most commonly held issues at the time were ETrade, Ameritrade and Charles Schwab!
Well, it's only too obvious that had it not been for the outrageous run-up in tech stocks and the notion that tow truck drivers could become zillionaires these stocks would have been trading on the pink sheets, if at all. They began by coat tailing on the success of a legitimate bull market and then created a momentum all their own. (Now they've had to consolidate and revamp their business models just to survive).
No one cares! Neither should you. Housing has gone from being a legitimate core industry to just another momentum player! So some 3rd. tier furniture retailer w/a market cap. of $300m goes belly up! Other than the people that worked there, why would any of us give a rip? So some "mortgage firm" w/10 buddies goes "tango uniform" who cares?
If you need your money liquid, then you don't have really any choices other than CDs, Money Markets, and bond funds which allow withdrawal without penalty.
At first, when I wasn't sure how long the bubble would last, I put our cashed out equity into primarily fed/state tax free muni bonds which earned slightly under money rates, but higher returns net of taxes for our bracket.
That configuration was 100% liquid but barely matched inflation + the remaining bubble gains (what I was losing being out of the market).
I have since rebalanced to a 25% liquid portfolio, with 75% redeemable in progressive steps. This has allowed me to allocate some to international growth, indices, and corporate bond funds. Boring, typical low risk diversification. A market risk of about .35 (the market is 1.0).
This configuration has returned well above real-estate returns + inflation.
I'm not an investment advisor, so do your own homework. I use Vanguard for funds, which has both traditional and ETFs available free of load. Many funds do have redemption fees for early withdrawal, though.
Two things I avoid:
1. Currency related bets. I don't care about the USD's strength because I don't own any foreign property, derive foreign income (anymore), or need to spend USDs in foreign places in any large number.
Betting currencies is very difficult. All large-cap funds and major indices are comprised of international/multinational corps that already do major currency hedging. So trying to hedge yourself against USD drops may actually have the opposite effect on your total portfolio.
2. Commodities bets. Some of my funds have small commodity positions, but I avoid these where possible. They are a bad bargain for anyone who doesn't own a red or yellow jacket with arcane patches on the front. High volatility, not high-enough return for the risk. Not a place to park your home-equity-in-waiting.
The other benefit (in spite of a slightly lower rate) is that the muni's can make filing less of a pain too! Also there are certain ETF's which actively seek "qualified dividends" that are taxed at the lower rate. I believe on the 1099 you rec. it will be in box 15 (b) not 15 (a)? I know it sounds trivial but your accountant will applaud you!
You and I are of the same mind when it comes to protecting "the family jewels". Some folks seem to want to treat their equity savings the same way they treat their "play" money.
I want this money to be simple, easy to manage, well protected, and largely self-managed (rebalance quarterly). I'll play with shorting options on ETFs on commodities correlated to currencies in my E-Trade account, which is not money intended to buy our next house.
The other great thing about muni bonds is that they have really somehow remained something of a "mom and pop" shop. There hasn't been huge foreign or hedge fund interest in them and for liquidity that may be called upon in short order they make a lot of sense.
Where I'm a little more cautious is in the scale of the "down payment" when one finds a suitable home. None of us have been on the other side of a bubble of this magnitude and really have no idea how easy it will (or won't) be to get cash out if you want/need it? Most here have decent fico's and something of a cash reserve but I still wouldn't put any more down than is needed to close the deal or put the payments where you're comfortable. Just b/c you can put 40-60% down may not mean it's in your best interest to do so.
You raise a point that has been troubling me.
There are two competing factors that are at odds with one another. The first is what you point out: credit crunch, liquidity, etc. may make it unwise to put any more down than absolutely necessary, while still holding back the remainder somewhere safe like munis so long as they return higher than your interest burden. This way you get the benefit of fixed rate debt without the risk of financial distress -- as long as you really leave those munis alone and don't dip into them.
But there's a catch. Crunches like this are usually accompanied by high interest rates. If you _know_ that rates will keep going up or stay high for a while, then you might do better earning return by buying down your mortgage debt (assuming your fixed rate loan is a high rate).
There really is no way to time this effectively because there are too many major variables, any one of which can shift your pay-down versus hold-back decision.
With regard to your banned addresses: don't push your luck. You haven't been unbanned officially, just no action has been taken to ban this address. We'll see how it goes.
With regard to shorting oil stocks. Anyone who does something like that with their home-equity/home-savings cash deserves to never own a home after they lose their $ to the pros in those markets.
FollowBefriend15 threads5,071 comments astrid's websitePremium
"if there ever were hyperinflation, then fixed rate mortgage debt would be among the most valuable instruments one could hold. Remember that inflation increases the value to fixed rate debt holders and punishes savers. "
I have big plans to profit from the converse of this situation. I hope long term interest rate shoots up to 15% in 2009 and I buy into some nifty 30 year treasury bonds. As long as long term interest rate drops down below 10%, the spread should do very nice things for my retirement account.
FollowBefriend (4)117 threads17,655 comments Premium
With regard to your banned addresses: don’t push your luck. You haven’t been unbanned officially, just no action has been taken to ban this address. We’ll see how it goes.
CG/GC is probably just someone wilder and more extreme than me. I do not think he is evil or mean.
Sometimes I even deplore my own insensitivity.
allah failed to either read or understand:
All large-cap funds and major indices are comprised of international/multinational corps that already do major currency hedging. So trying to hedge yourself against USD drops may actually have the opposite effect on your total portfolio.
Owning a foreign commercial REIT may help some people, while hurting others regardless of the direction of the dollar. It depends where your other investments are held. If you hold lots of things like Exxon, for example, then a foreign REIT will hurt you because it will un-hedge the hedging Exxon is already doing on billions of USDs.
Claim you were born somewhere in Asia and all will be forgiven.
Pending home sales for September 06 are down:
Didn't I do that already?
I have an aversion to activities that lack risks or dangers. It’s just me.
So you are a risk seeker. What is your birth month/day?
Not til now.
Okay, you're forgiven. Congrats!
CG/GC is the only person I've banned. I continue to believe (s)he is a bona fide Troll, but that is just my opinion. If Peter P and either HARM or SQT want to unban, (s)he should be unbanned. In fairness, CG/GC has probably done less Trolling in the past half year than some others' running commentaries purely designed to offend various regulars.
I guess we’re even now.
Touche. Your point is well taken, sir.
Peter, I will PM you.
If Peter P and either HARM or SQT want to unban, (s)he should be unbanned.
I will delegate judgement to others.
This is just what is scary about trying to figure out how to wait out this housing bubble collapse:
"Can the economy survive the housing bust?"
Real estate downturns have a way of leading to recessions and stock market slumps. So far the damage has been limited, but the numbers keep getting worse, says Fortune's Jon Birger.
The article is not so bad considering it's MSM, but this quote is ridiculous:
"The effects of the housing correction will be entirely contained within the housing sector," says Mike Englund, chief economist of Action Economics.
Makes me think who is relying on the economic forecasts from those bozos.
CG/GC is the only person I’ve banned.
How about banning ConfusedRenter?
I think spam is a bigger threat now.
My opinion on CR is that (s)he is really MP/FR. If so, the ban has been decided and should be updated.
But I seem to recall the "vote" to ban failed.
True, many of us have agonized over the "hold back/buy down" dilemma and as you suggest timing this whole matter can drive one self quite insane! Since this is really a personal decision I don't want to sway people one way or the other.
Where I'm concerned, I lean toward being a little 'cash fat' and having the option to implement that toward incrementally paying down/off the mortgage early yet having it liquid gauging that on a monthly basis. It really is going to be that "day to day".
There are plenty of Economists with negative sentiment/predictions. A part of the blame goes to the media which doesn't usually give these guys a platform. Or, when they do, they pick the worst negative economist and put him/her against a really slick positive one.
There's even one extremely negative economist who's a Federal Reserve Governor right now, and keeps dissenting on all the decisions.
But I seem to recall the “vote” to ban failed.
Actually, I vote to unabn MP/FR. What damage can they do? The idea of perpetual 20%/yr housing appreciation is getting funnier every day.
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