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Could just leverage up on some 30 year treasury bills for at least 9% annually. 3-4x leverage will get you that.

by elastic_church 10y ago

ant6n 10y ago
So borrow money to lend money? What if the interest rate changes in those 30 years?
- beachstartup 10y ago
  > So borrow money to lend money? this is how it works. you don't think those lenders were lending you their own money do you? > What if the interest rate changes in those 30 years? the original loans are almost certainly fixed rate, the end borrowers may very well have to pay an adjustable rate, which just means more profits for the intermediate lender.
John23832 10y ago
And tie up at least $1k for 30 years... most people can't afford to do that. The current rate is 2.9 and the long term average is 7. If you can get a 9 return right now, it's illegal.
- elastic_church 10y ago
  a) its not tied up, treasuries are one of the most liquid markets, you can buy and sell in a milliseconds notice. b) if you are talking about self directed investments at all, you are waaaaay past the financial situation that "most people" are in and probably accepted that a long time ago c) and what's 2.9 multipled by 4?
refurb 10y ago
And what happens if the inflation rises and interest rates follow? You'll be earning a cool 7% nominal interest rate and a -2% real interest rate.
shostack 10y ago
Where are you getting 9% from annually with T-bills?
- elastic_church 10y ago
  with leverage..... as aforementioned
  - slededit 10y ago
    It would be amazing if you could get leverage at rates below T-Bills. You are most certainly not at lower risk than the US government. It may be possible if you play duration arbitrage taking short term loans to buy long term treasuries. But then your playing a very dangerous game.
    - elastic_church 10y ago
      Would be amazing right Four child replies deep and someone mentions that leverage could be dangerous, might be a new record folks! Ironic if you are successful then poor people that can't even lock up $1,000 for a few years will say you are a rent seeking mess.
      - kgwgk 10y ago
        You can have margin interest rates below the 30-year rate. Is that amazing? (Edit: Never mind, I see this possibility was mentioned in another comment. If your point is that your previuos comment about getting 9% using a leveraged investment in 30-year bonds makes no sense, I agree completely.)
      - slededit 10y ago
        Its not that leverage is dangerous necessarily - if you could get money at a lower rate for a similar time period its in fact nearly risk free. Its just that these opportunities are extremely rare and short circuiting it by using shorter term debt negates the benefits.
kgwgk 10y ago
If you invested in 30 year treasury bonds six months ago, you have lost 15%. With 3-4x leverage you would have lost half of your investment!
- elastic_church 10y ago
  yep, fortunately you have those 9% coupons to lower your cost basis but really thats what the stop losses are for (man this really isn't the place to talk about financial markets huh, whats this article doing here then)

Could just leverage up on some 30 year treasury bills for at least 9% annually. 3-4x leverage will get you that.

ant6n 10y ago

So borrow money to lend money? What if the interest rate changes in those 30 years?

beachstartup 10y ago
> So borrow money to lend money? this is how it works. you don't think those lenders were lending you their own money do you? > What if the interest rate changes in those 30 years? the original loans are almost certainly fixed rate, the end borrowers may very well have to pay an adjustable rate, which just means more profits for the intermediate lender.

John23832 10y ago

And tie up at least $1k for 30 years... most people can't afford to do that. The current rate is 2.9 and the long term average is 7. If you can get a 9 return right now, it's illegal.

elastic_church 10y ago
a) its not tied up, treasuries are one of the most liquid markets, you can buy and sell in a milliseconds notice. b) if you are talking about self directed investments at all, you are waaaaay past the financial situation that "most people" are in and probably accepted that a long time ago c) and what's 2.9 multipled by 4?

refurb 10y ago

And what happens if the inflation rises and interest rates follow? You'll be earning a cool 7% nominal interest rate and a -2% real interest rate.

shostack 10y ago

Where are you getting 9% from annually with T-bills?

elastic_church 10y ago
with leverage..... as aforementioned
- slededit 10y ago
  It would be amazing if you could get leverage at rates below T-Bills. You are most certainly not at lower risk than the US government. It may be possible if you play duration arbitrage taking short term loans to buy long term treasuries. But then your playing a very dangerous game.
  - elastic_church 10y ago
    Would be amazing right Four child replies deep and someone mentions that leverage could be dangerous, might be a new record folks! Ironic if you are successful then poor people that can't even lock up $1,000 for a few years will say you are a rent seeking mess.
    - kgwgk 10y ago
      You can have margin interest rates below the 30-year rate. Is that amazing? (Edit: Never mind, I see this possibility was mentioned in another comment. If your point is that your previuos comment about getting 9% using a leveraged investment in 30-year bonds makes no sense, I agree completely.)
    - slededit 10y ago
      Its not that leverage is dangerous necessarily - if you could get money at a lower rate for a similar time period its in fact nearly risk free. Its just that these opportunities are extremely rare and short circuiting it by using shorter term debt negates the benefits.

kgwgk 10y ago

If you invested in 30 year treasury bonds six months ago, you have lost 15%. With 3-4x leverage you would have lost half of your investment!

elastic_church 10y ago
yep, fortunately you have those 9% coupons to lower your cost basis but really thats what the stop losses are for (man this really isn't the place to talk about financial markets huh, whats this article doing here then)