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Technically 8% inflation and 6% interest rates should be a great time to load up on debt and buy hard assets. Affordability seems to drive everything though whi
by rr888 4y ago
Technically 8% inflation and 6% interest rates should be a great time to load up on debt and buy hard assets. Affordability seems to drive everything though which is why I've been wrong for 20 years about this. Who knows what'll happen next.
- xuki 4y agoI'll let you guess why (hard) asset prices have increased so much for the past 20 year.
- rr888 4y agoThanks I figured it out while my friends (who bought a lot of property) got rich and I waited for the crash. That's the problem right markets can stay irrational until you're dead.
- s1artibartfast 4y agoI spent 10 years in the same boat. Sometimes it is hard to distinguish a irrational market from one you simply dont like. Hosing prices have always been higher than I would like them to be. However, there has been no shortage of people willing to pay those high market prices. At the end of the day, I had to ask if it was the market that was irrational or just me.
- rr888 4y agoYeah my problems compounded because I grew up in a small unloved city where property was always cheap to big cities with expensive real estate that seemed crazy but maybe makes sense.
- esoterica 4y agoYou're locking in 6% for 30 years, inflation is going to vary.
- welfare 4y agoIf you can afford it then lock in now for 6%, re-finance in 5-10years when interest rates go down.
- boringg 4y agoAssuming rates go down.
- rr888 4y agoThat is the good thing about it. If rates to up you're protected, if rates go down you can refinance. Its a great deal for US consumers that other countries dont have.
- xeromal 4y agoYup, I bought a house at 2.7% last year. At current rates, my house would have to be 20% cheaper to keep the same payments. I don't think I'll ever be able to beat the rate so I'm pretty happy. Even if the market explodes and my house drops by 20-50%, it was still a good deal with those interest rates.
- AnimalMuppet 4y agoOK, assume they don't. Assume they stay the same. Then you've borrowed money at 6% in an 8% inflation environment forever. That's not bad. Or, assume rates go up. Then you've borrowed money at 6% in a 10 or 12% inflation environment. That's not bad, either. Personally, I'm not sure that I like "load up on debt" as a strategy, even if it makes sense financially. But it can make sense financially. Note well: The hidden assumption here is that interest rates track reasonably well with inflation, and also that your income tracks reasonably well with inflation. The first assumption is probably reasonably solid. The second one... your mileage may vary.
- hackernewds 4y agoYou can always refinance as well