A way to take advantage of these ridiculous interest rates...

Tucker134 · 12-19-2008, 08:31 PM

It's abit aggressive, but overall a smart idea IMO...if you have decent equity in your home (& thus a large untapped home equity line of credit)...draw down your home equity line & put it in a brokerage account. Chances are you're paying just over 3% (obviously check first). Invest the $$ in CONSERVATIVE investment grade bond funds, which currently yield anywhere from 7-9%. Depending on which one u invest in, you can capture 4-6% conservatively without putting up a dime- a nice arbitrage play. I asked my broker & afew smart hedge fund managers & they all thot it was a no-brainer. One inv grade fund u may want to look at is "LIGRX", publicly traded & managed by Loomis Sayles..just a thought boys

Jman21 · 12-20-2008, 09:51 AM

unless your qualified to advise people I suggest refraining. Now is not the time to leverage yourself further.

Tucker134 · 12-20-2008, 12:29 PM

It's an investment idea that makes sense for those who are not leveraged...

BrooklynBound · 12-20-2008, 02:51 PM

I wouldn't use my house as collateral against junk bonds, especially in a crappy economy.

jefethegreat · 12-20-2008, 04:46 PM

[QUOTE=BrooklynBound;2921306]I wouldn't use my house as collateral against junk bonds, especially in a crappy economy.[/QUOTE]

on the other hand its a very good idea if you invest in foreign stocks where you can get 10 to 20 percent dividend yields.

CTM · 12-20-2008, 04:47 PM

[QUOTE=jefethegreat;2921372]on the other hand its a very good idea if you invest in foreign stocks where you can get 10 to 20 percent dividend yields.[/QUOTE]

Like which?

And how do you get 3% home equity loans?

Tucker134 · 12-20-2008, 05:09 PM

[QUOTE=BrooklynBound;2921306]I wouldn't use my house as collateral against junk bonds, especially in a crappy economy.[/QUOTE]

read the post...it's INVESTMENT grade bonds...yielding only 7-9%...junk bond yields right now are closer to 20% & I'd agree, they're not worth the investment vs the collateral in your home

Tucker134 · 12-20-2008, 05:12 PM

[QUOTE=CTM;2921373]Like which?

And how do you get 3% home equity loans?[/QUOTE]

that's where mine is right now..it was prime - approx 1%...rates are at their lowest levels ever. If you have decent equity in your home & dont have credit card debt, this is a great way to take advantage of current rates..check w your mortgage provider to see what your rate currently is..i bet you'll be surprised how low it is

BrooklynBound · 12-20-2008, 08:08 PM

[QUOTE=Tucker134;2921397]read the post...it's INVESTMENT grade bonds...yielding only 7-9%...junk bond yields right now are closer to 20% & I'd agree, they're not worth the investment vs the collateral in your home[/QUOTE]

Ok well first off, it's not arbitrage but leverage.

And I agree my standards are different... I wouldn't touch BBB bonds even though they are technically investment grade (barely). I like fixed income for cash flow and stability. I'd prefer to take my risk on the equity side. Now, if they have money markets or short gov't/AAA bonds that could make more than your HELOC...

A problem with your strategy is if rates go up in the future -- your bonds would plummet in value

I wonder if it's still possible to get a 0% credit card

FF2® · 12-20-2008, 08:49 PM

or you could sleep at night.

jetstream23 · 12-21-2008, 03:54 AM

[QUOTE=Tucker134;2921397]read the post...it's INVESTMENT grade bonds...yielding only 7-9%...junk bond yields right now are closer to 20% & I'd agree, they're not worth the investment vs the collateral in your home[/QUOTE]

Investment grade bonds will have much higher default rates than in years past. Mainstream companies will flop in this recession....guys like Lehman Brothers, Circuit City, potentially General Motors, etc. may just be the tip of the iceberg!

Tucker134 · 12-21-2008, 06:47 AM

[QUOTE=BrooklynBound;2921560]Ok well first off, it's not arbitrage but leverage.

And I agree my standards are different... I wouldn't touch BBB bonds even though they are technically investment grade (barely). I like fixed income for cash flow and stability. I'd prefer to take my risk on the equity side. Now, if they have money markets or short gov't/AAA bonds that could make more than your HELOC...

A problem with your strategy is if rates go up in the future -- your bonds would plummet in value

I wonder if it's still possible to get a 0% credit card[/QUOTE]

Incorrect. An arbitrage play is capturing the difference between the rate you're paying (in this case on a home equity line), & the yield provided in an investment grade bond fund (7-9%). I'm capturing the arb by leveraging the equity in my home.

Inv grade bonds range from BBB to AAA..u can see the holdings in the bond fund.

The cheapest place to put money right now is corporate debt IMO...equities are over valued, even at these levels. The yields u can achieve in bonds don't warrant the risk in stocks. Treasuries dont return anything right now, have u checked?

As far as rates going up....when do u think the fed will start raising rates? No time soon. Bond funds are liquid, u could sell them in a day & put the money back into your home.

This isnt a very risky play at all, but def not for everyone. You need an excellent credit rating & a fair amount of equity in your home to begin with...but it makes sense.

Tucker134 · 12-21-2008, 06:50 AM

[QUOTE=jetstream23;2921936]Investment grade bonds will have much higher default rates than in years past. Mainstream companies will flop in this recession....guys like Lehman Brothers, Circuit City, potentially General Motors, etc. may just be the tip of the iceberg![/QUOTE]

Circuit City was never inv grade...

GM & LEH are 2 of the biggest failures in American history..u cant fear that happening again or u shouldnt be investing. Besides, that's why you invest in a bond fund...it's well diversified.

PlumberKhan · 12-21-2008, 07:33 AM

Right here is what is wrong with this country.

We used to make sh*t. Tangible real sh*t you could touch, smell and see. Now we have a bunch of Gordon Geckos playing with other people's money as the root of our economy. Let's hope something bad doesn't happen. Oh, it did? And we just handed them $700,000,000,000 with no oversight? And the same people that were clamoring for the $700,000,000,000 wanna bust Detroit's balls because they need [B][SIZE="4"]2.5%[/SIZE][/B] of that to stabilize their companies and keep millions of jobs secure.

Oh...Wall Street isn't unionized. I get it. So if you call "labor costs" "commission costs" instead, it's OK to flush trillions of dollars down the drain. But when people have the audacity to want to retire make enough to buy food and a house...IT'S CRAZY SOCIALISM!! But if a Wall Street guy wants to make enough to start his own space program...it's OK because he isn't union...plus we will hand him all the taxpayer money he wants.

12-19-2008, 08:31 PM	#1
Tucker134 Let's go Isles! All League Join Date: Dec 2007 Location: NYC Posts: 3,005	A way to take advantage of these ridiculous interest rates... It's abit aggressive, but overall a smart idea IMO...if you have decent equity in your home (& thus a large untapped home equity line of credit)...draw down your home equity line & put it in a brokerage account. Chances are you're paying just over 3% (obviously check first). Invest the $$ in CONSERVATIVE investment grade bond funds, which currently yield anywhere from 7-9%. Depending on which one u invest in, you can capture 4-6% conservatively without putting up a dime- a nice arbitrage play. I asked my broker & afew smart hedge fund managers & they all thot it was a no-brainer. One inv grade fund u may want to look at is "LIGRX", publicly traded & managed by Loomis Sayles..just a thought boys

12-20-2008, 09:51 AM	#2
Jman21 Veteran Join Date: Apr 2003 Posts: 1,773	unless your qualified to advise people I suggest refraining. Now is not the time to leverage yourself further.

12-20-2008, 12:29 PM	#3
Tucker134 Let's go Isles! All League Join Date: Dec 2007 Location: NYC Posts: 3,005	It's an investment idea that makes sense for those who are not leveraged...

12-20-2008, 02:51 PM	#4
BrooklynBound Hall Of Fame Join Date: Jan 2005 Posts: 15,550	I wouldn't use my house as collateral against junk bonds, especially in a crappy economy.

12-20-2008, 04:46 PM	#5
jefethegreat lovin' America Rookie Join Date: Aug 2005 Posts: 848	[QUOTE=BrooklynBound;2921306]I wouldn't use my house as collateral against junk bonds, especially in a crappy economy.[/QUOTE] on the other hand its a very good idea if you invest in foreign stocks where you can get 10 to 20 percent dividend yields.

12-20-2008, 04:47 PM	#6
CTM Hall Of Fame Join Date: Jan 2006 Location: Not bababooey and I resent the implication Posts: 21,029	[QUOTE=jefethegreat;2921372]on the other hand its a very good idea if you invest in foreign stocks where you can get 10 to 20 percent dividend yields.[/QUOTE] Like which? And how do you get 3% home equity loans?

12-20-2008, 05:09 PM	#7
Tucker134 Let's go Isles! All League Join Date: Dec 2007 Location: NYC Posts: 3,005	[QUOTE=BrooklynBound;2921306]I wouldn't use my house as collateral against junk bonds, especially in a crappy economy.[/QUOTE] read the post...it's INVESTMENT grade bonds...yielding only 7-9%...junk bond yields right now are closer to 20% & I'd agree, they're not worth the investment vs the collateral in your home

12-20-2008, 05:12 PM	#8
Tucker134 Let's go Isles! All League Join Date: Dec 2007 Location: NYC Posts: 3,005	[QUOTE=CTM;2921373]Like which? And how do you get 3% home equity loans?[/QUOTE] that's where mine is right now..it was prime - approx 1%...rates are at their lowest levels ever. If you have decent equity in your home & dont have credit card debt, this is a great way to take advantage of current rates..check w your mortgage provider to see what your rate currently is..i bet you'll be surprised how low it is

12-20-2008, 08:08 PM	#9
BrooklynBound Hall Of Fame Join Date: Jan 2005 Posts: 15,550	[QUOTE=Tucker134;2921397]read the post...it's INVESTMENT grade bonds...yielding only 7-9%...junk bond yields right now are closer to 20% & I'd agree, they're not worth the investment vs the collateral in your home[/QUOTE] Ok well first off, it's not arbitrage but leverage. And I agree my standards are different... I wouldn't touch BBB bonds even though they are technically investment grade (barely). I like fixed income for cash flow and stability. I'd prefer to take my risk on the equity side. Now, if they have money markets or short gov't/AAA bonds that could make more than your HELOC... A problem with your strategy is if rates go up in the future -- your bonds would plummet in value I wonder if it's still possible to get a 0% credit card

12-20-2008, 08:49 PM	#10
FF2® Believes Sloppy Guy was involved JetsInsider.com Legend Join Date: Mar 2005 Posts: 46,589	or you could sleep at night.

12-21-2008, 03:54 AM	#11
jetstream23 recovering from turf toe Jets Insider VIP Join Date: Dec 2005 Location: Phoenix, AZ (New Jets Stadium Section 246) Posts: 31,711	[QUOTE=Tucker134;2921397]read the post...it's INVESTMENT grade bonds...yielding only 7-9%...junk bond yields right now are closer to 20% & I'd agree, they're not worth the investment vs the collateral in your home[/QUOTE] Investment grade bonds will have much higher default rates than in years past. Mainstream companies will flop in this recession....guys like Lehman Brothers, Circuit City, potentially General Motors, etc. may just be the tip of the iceberg!

12-21-2008, 06:47 AM	#12
Tucker134 Let's go Isles! All League Join Date: Dec 2007 Location: NYC Posts: 3,005	[QUOTE=BrooklynBound;2921560]Ok well first off, it's not arbitrage but leverage. And I agree my standards are different... I wouldn't touch BBB bonds even though they are technically investment grade (barely). I like fixed income for cash flow and stability. I'd prefer to take my risk on the equity side. Now, if they have money markets or short gov't/AAA bonds that could make more than your HELOC... A problem with your strategy is if rates go up in the future -- your bonds would plummet in value I wonder if it's still possible to get a 0% credit card[/QUOTE] Incorrect. An arbitrage play is capturing the difference between the rate you're paying (in this case on a home equity line), & the yield provided in an investment grade bond fund (7-9%). I'm capturing the arb by leveraging the equity in my home. Inv grade bonds range from BBB to AAA..u can see the holdings in the bond fund. The cheapest place to put money right now is corporate debt IMO...equities are over valued, even at these levels. The yields u can achieve in bonds don't warrant the risk in stocks. Treasuries dont return anything right now, have u checked? As far as rates going up....when do u think the fed will start raising rates? No time soon. Bond funds are liquid, u could sell them in a day & put the money back into your home. This isnt a very risky play at all, but def not for everyone. You need an excellent credit rating & a fair amount of equity in your home to begin with...but it makes sense.

12-21-2008, 06:50 AM	#13
Tucker134 Let's go Isles! All League Join Date: Dec 2007 Location: NYC Posts: 3,005	[QUOTE=jetstream23;2921936]Investment grade bonds will have much higher default rates than in years past. Mainstream companies will flop in this recession....guys like Lehman Brothers, Circuit City, potentially General Motors, etc. may just be the tip of the iceberg![/QUOTE] Circuit City was never inv grade... GM & LEH are 2 of the biggest failures in American history..u cant fear that happening again or u shouldnt be investing. Besides, that's why you invest in a bond fund...it's well diversified.

12-21-2008, 07:33 AM	#14
PlumberKhan HAIL SATAN! Hall Of Fame Join Date: Feb 2006 Location: Van down by the river Posts: 21,080	Right here is what is wrong with this country. We used to make sht. Tangible real sht you could touch, smell and see. Now we have a bunch of Gordon Geckos playing with other people's money as the root of our economy. Let's hope something bad doesn't happen. Oh, it did? And we just handed them $700,000,000,000 with no oversight? And the same people that were clamoring for the $700,000,000,000 wanna bust Detroit's balls because they need [B][SIZE="4"]2.5%[/SIZE][/B] of that to stabilize their companies and keep millions of jobs secure. Oh...Wall Street isn't unionized. I get it. So if you call "labor costs" "commission costs" instead, it's OK to flush trillions of dollars down the drain. But when people have the audacity to want to retire make enough to buy food and a house...IT'S CRAZY SOCIALISM!! But if a Wall Street guy wants to make enough to start his own space program...it's OK because he isn't union...plus we will hand him all the taxpayer money he wants.