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Subject:  Re: Future balloon payment Date:  6/4/2004  1:55 PM
Author:  TwoCybers Number:  10238 of 36468

Loren wrote - A 5% to 7% return on an "equity" investment would be a relatively "safe" return by market standards (half the long term average return on US stocks). I'm just looking for ideas here. Preferred stock? Asset backed securities? Hedged equity investments?

These levels of return are averages over long periods of time. Yes equities may average 10% over 100 years. Take a look at all 5 year segments and find out how many you find unacceptable for your "plan" -- I am sure from July 1929 through 1934 does not please you, but then 1937 to 1942 was not so good either. If you are willing to live with a 5 or 10% risk you will loose you shirt and have to refinance that balloon in 5 years what you propose might be OK. Now that also assumes that we are not in a housing bubble and that you will not be underwater -- banks just don't like loaning money for more then a house in worth at the time of the loan. (I think this is unlikely - but look at the last 5 years in Tech Land - Seattle & San Jose)

For my view, 5 years is short. Pay off the mortgage or at least refinance it so you can not get killed with a balloon in 5 years.

Gordon who is generally opposed to debt, both personally and in companies in which I invest.
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