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Old 08-11-2011, 06:39 AM   #61
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Originally Posted by Gone4Good View Post
I guess the 10-yr market is also in on the war on savers, driving rates down to 2.11%. Long-term investors obviously don't have much regard for themselves, waging war on themselves and all.

If there is a 'war' it is being waged by those of us who have an excess demand for safe assets. The Fed doesn't control long rates. And if the Fed's zero rate policy were wrong, we'd be seeing inflation raging and the bond vigilantees driving rates ever higher.
It has a ripple effect. The more you drive down short term rates, the longer people have to go to chase yield -- which drives down demand for long term rates as well.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 08-11-2011, 09:58 AM   #62
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Let's face it, plenty of people who depend on interest income have seen their income cut back. Who is getting this money that the savers are not getting? One thing for sure, with interest rates this low, my spending has gone down and will stay down. What I earn by working (not yet fully retired) cannot pay for all the goodies I enjoy.

The worst decisions are usually made in times of anger and impatience.
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Old 08-11-2011, 12:33 PM   #63
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We don't depend on interest income, but it does provide maybe 1/4 of our annual net income. Most recently loaned $129,600 on a place in Camas Washington to a flipper. The flipper paid $162k for the property and we did an 80% loan to value. Also charged him (first time doing this) 2% up front as an origination fee, 12% interest, and have a 9 month balloon. It is our earnest hope that he flips the place in a few months. If so we will have made 4-5% on the money in a 2-3 month time period. Or maybe we'll end up with a place in Camas for cheap.

There is risk - we may end up foreclosing on a shaggy 15 acre trailer park in the wilds of Gates Oregon as the borrower is just now two months in arrears, but it is nice having a consolation prize if the loan goes bad.
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Old 08-11-2011, 07:29 PM   #64
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Just my 2 cents, to clarify : "Low yield has no effect on retired people."
I assume retired people have certain amount invested in bond funds and they live on some of the distribution from these bonds and stock. The bond's distribution is fixed. What is really changing is the bond price.
However for people buying new position in bonds and having individual maturing bond, yes the current rate environment is pretty bad. I beleive the long term bond is 50% more expensive in historical standard.

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