The "perfect storm"?

[windsurf]

Zipper said: At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.

I thought it already had!!

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Originally Posted by windsurf Zipper said: At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash. I thought it already had!!

The bird flu so far has only gone from Bird to Human - Not Human to Human! - You have to be in direct contact with an infected bird.

[Zipper]

We had SARS in Toronto last year and the cost to the ON economy is still being felt. It measured in C$billions.

Mrs. Zipper works at the London Regional Cancer Centre, and believe me, even though we are 100 mi. away from TO, every hospital was burdened by extra costs.

We have 350 000 people here. If the Bird flu hit, and 1% need ventilators to stay alive, then we, and you, have a major problem. Who gets intensive care?

[Nords]

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Originally Posted by Laurence BTW, what is "all your worth"?

Yeah, I guess it looks like an offshoot from "All your base" but "All Your Worth" is the Warren's sequel to "The Two-Income Trap".

[sgeeeee]

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Originally Posted by wab Yes, this year, you get a discount.* *In fact, if you increased your loan amount and stuck the money in i-bonds you would make a free 2% from your loan.* *That's the reason I still have a mortgage.* *And if that scheme stops working for me, I can just exercise my free put option.

Where were you guys when TH was giving me a ration of Sh#t about the advantages of keeping your low interest mortgage? I feel betrayed.

[laurence]

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Originally Posted by ((^+^)) SG Where were you guys when TH was giving me a ration of Sh#t about the advantages of keeping your low interest mortgage? I feel betrayed.

But wasn't that debate with regard to a retired/distribution phase person? As a young accumulator, I'm in a different boat. Just like the mortgage deduction, if you have to have a mortgage, inflation could benefit you. For the record, I'm in a 20 year fixed, I plan on having no house payment when I'm retired. For me, the motivation is taxes. If I don't have a big payment, I don't have to withdraw as much, stay in a lower bracket, pay less taxes. For those of you ready to pounce about mortgages being a tax deduction, that's just the interest, and if you look at an amortization table, the last ten years of a 30 year don't have much going to interest, mostly principle.

But don't feel betrayed SG. I thought you held your own very well in "the great safe mortgage debate". Different strokes for different folks, those who have the stomach for that kind of risk could do very well. In fact, I think I split the difference of your opposing viewpoints.

[wabmester]

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Originally Posted by ((^+^)) SG Where were you guys when TH was giving me a ration of Sh#t about the advantages of keeping your low interest mortgage?* I feel betrayed.* *

Betrayed? I didn't even know we were going steady. Anyway, I participated in the first of about 100 instances of that particular debate. My reasoning is different than yours -- I'm just looking for a risk-free interest rate arbitrage play rather than leveraging my stock market bets.

These days, I do a little better than break-even. If rates skyrocket, I'll lock in a term that matches my mortgage and thouroughly enjoy my debt.

[sgeeeee]

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Originally Posted by Laurence But wasn't that debate with regard to a retired/distribution phase person?* . . .

I didn't think that was what we were arguing about. *But then, much of that debate seemed like it had a dot product of zero. *

I don't think that retired/distribution phase changes the result qualitatively. *And wab is in that phase too. *Where were you, wab?

[sgeeeee]

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Originally Posted by wab . . .*My reasoning is different than yours -- I'm just looking for a risk-free interest rate arbitrage play rather than leveraging my stock market bets. . .

What's the difference? Think about that a little before you answer.

[wabmester]

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Originally Posted by ((^+^)) SG What's the difference? * Think about that a little before you answer.

I don't know what I'm supposed to think about, but the differences are:

1) I know exactly what my upside/downside is at any time.

2) I can stop playing the game at any time without the possibility that I may have to sell securities at a loss.

I'm getting a sense of deja vu as I ask you this, but what do you do if you decide for some reason that you need to pay off your mortgage, and your leveraged stock holdings are 50% below where they were when you decided to play the leverage game?

I never run into that scenario (as long as I'm using CDs, i-bonds, or some other instrument that is guaranteed against principal loss).

[MRGALT2U]

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Originally Posted by wab I don't know what I'm supposed to think about, but the differences are: 1) I know exactly what my upside/downside is at any time. 2) I can stop playing the game at any time without the possibility that I may have to sell securities at a loss. I'm getting a sense of deja vu as I ask you this, but what do you do if you decide for some reason that you need to pay off your mortgage, and your leveraged stock holdings are 50% below where they were when you decided to play the leverage game? I never run into that scenario (as long as I'm using CDs, i-bonds, or some other instrument that is guaranteed against principal loss).

Hi wab! As you probably know, I am in a position now where I can't sell
a lot of my stuff as the NAVs are down. However, I knew that would happen going in.
Unfortunately, I have no guarantee "against principal loss" on most investments. However,
I do have multiple "fallback" plans. I don't forsee any condition
where I would need to sell "at a loss" in order to stay ERed. As I have posted
before, even a 100% loss of my entire portfolio (excluding real estate)
would not force me back to work.

JG

[Jarhead*]

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Originally Posted by MRGALT2U Hi wab!* As you probably know, I am in a position now where I can't sell a lot of my stuff as the NAVs are down.* However, I knew that would happen going in. Unfortunately, I have no guarantee "against principal loss" on most investments.* *However, I do have multiple "fallback" plans.* *I don't forsee any condition where I would need to sell "at a loss" in order to stay ERed.* As I have posted before, even a 100% loss of my entire portfolio (excluding real estate) would not force me back to work.* JG

JG: I remember a short time back when you were purchasing a long term bond, and thought to myself, "Don't do that", for crying out loud.

Of course, that's from my own feelings that we are headed for a long period of time with our old "inflation" buddy.

As I am sure you know, holding a long term bond bought early on in an inflationary cycle, is like being "nibbled to death by ducks". The opportunity dollars are being overwhelmed by short term instruments paying more, and selling at that point is going to result in a massive loss in NAV. (Not a pretty picture).

Wabs approach to continue to hold a low interest mortgage, and allow the market to come to him with his other investable funds is (if one believes as I do), a classic defensive strategy to survive a long period of inflation.

If it were me, JG, and it's not. I'd consider taking a small hit now, while you could get out somewhat whole.

Of course if we go the other way, you'd have something to crow about.

[sgeeeee]

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Originally Posted by wab . . . 1) I know exactly what my upside/downside is at any time.

So do I.

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Originally Posted by wab 2) I can stop playing the game at any time without the possibility that I may have to sell securities at a loss.

So can I.

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Originally Posted by wab I'm getting a sense of deja vu as I ask you this, but what do you do if you decide for some reason that you need to pay off your mortgage, and your leveraged stock holdings are 50% below where they were when you decided to play the leverage game?

I use i-bonds and CDs.

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Originally Posted by wab I never run into that scenario (as long as I'm using CDs, i-bonds, or some other instrument that is guaranteed against principal loss).

Me either.

I simply keep my low interest mortgage because the down side potential is very small and if I begin to get behind, I can stop the bet at any time. My investments are still in a balanced portfolio.

[wabmester]

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Originally Posted by ((^+^)) SG I can stop the bet at any time.* My investments are still in a balanced portfolio.* *

If I remember your manifesto correctly, you argued for looking at the historical odds of your portfolio beating your mortgage interest rate (via FIREcalc), right?

Now, you seem to be saying that you match the size of your mortgage with i-bonds and CDs, and you'll sell those if you want to unwind, right?

Errhm, won't that unwinding "unbalance" your portfolio?

And, would you like to amend your manifesto to say "kids, don't try this at home unless your guarantee-principal fixed income component >= mortgage size."

What would you say to poor helpless Nords who bought into your idea with a 100% stock portfolio?

[Nords]

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Originally Posted by wab If I remember your manifesto correctly, you argued for looking at the historical odds of your portfolio beating your mortgage interest rate (via FIREcalc), right? Now, you seem to be saying that you match the size of your mortgage with i-bonds and CDs, and you'll sell those if you want to unwind, right? Errhm, won't that unwinding "unbalance" your portfolio? And, would you like to amend your manifesto to say "kids, don't try this at home unless your guarantee-principal fixed income component >= mortgage size." What would you say to poor helpless Nords who bought into your idea with a 100% stock portfolio?

FIRECalc gives our 5.5% mortgage a 62% chance of making money by investing the funds in the stock market.* Since those numbers we've refinanced to a 5.375% loan, and when I run FIRECalc the results give a bit over 63%.

A larger portfolio (swollen by the amount of the mortgage) is also more survivable, so FIRECalc gives it a higher success rate despite the higher withdrawal rate.

I'm neither helpless nor hapless, and I do my own due diligence before I invest our money according to the ideas of total strangers I've met through the Internet.* You know, kinda like your idea of catching a falling MOVI.

[wabmester]

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Originally Posted by Nords FIRECalc gives our 5.5% mortgage a 62% chance of making money by investing the funds in the stock market.* Since those numbers we've refinanced to a 5.375% loan, and when I run FIRECalc the results give a bit over 63%.

And there's nothing wrong with making that kind of bet if you're a risk taker and can afford to lose the bet.* *My point was that my approach is different.* *I'm not making that kind of bet.* * I didn't side with SG (or TH) in the Great Mortgage Debate because I thought they were both nuts.*

[Nords]

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Originally Posted by wab I didn't side with SG (or TH) in the Great Mortgage Debate because I thought they were both nuts.*

That may be possible but it's irrelevant. The math works out the same whether they're sane or not!

[laurence]

So, just so I have it straight, SG and Nords are 100% equities with mortgages they could pay off because odds are they will come out ahead with the mortgage. Wab is taking advantage of the spread between his mortgage and i-bonds, and TH has a paid off mortgage and enjoying his reduced volatility, right?

Me, I locked in a 5% 20 year mortgage for no cost last year and max the retirement accounts (401k and Roth IRA) with near 100% equity holdings (I have some Wellington, otherwise pure equity). I guess I want it both ways. The reason I plan on having the house paid off in retirement is I fear future tax rates and the lessoning of deductions. I'd rather plan for a low withdrawal rate, because this debt burden will come home to roost.

[Nords]

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Originally Posted by Laurence So, just so I have it straight, SG and Nords are 100% equities with mortgages they could pay off because odds are they will come out ahead with the mortgage.* Wab is taking advantage of the spread between his mortgage and i-bonds, and TH has a paid off mortgage and enjoying his reduced volatility, right?* Me, I locked in a 5% 20 year mortgage for no cost last year...

Damn we're all smart.

In the tradition begun by my FIL with his 1964 5.5% mortgage, I'm going to save my latest mortgage paperwork and show it to my adult children-in-law when (at least 30 years from now) we see these low-low mortgage rates again...

[MRGALT2U]

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Originally Posted by Nords Damn we're all smart. In the tradition begun by my FIL with his 1964 5.5% mortgage, I'm going to save my latest mortgage paperwork and show it to my adult children-in-law when (at least 30 years from now) we see these low-low mortgage rates again...

I'm pretty sure I could have a mortgage (or 2) and make a little money
on the interest rate spread. Don't want to. I like having no mortgage
and am willing to give up the "spread" in order to remain mortgage free.
It used to be called "psychological income". Whatever..........works for me.

JG