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The Perfect Mortgage and the Perfect Rules

Mortgage

When interest rates fall, the price of our treasury bills increases, so we realize higher yields and if the yield level remains unchanged and we want to sell our discount treasury bill before maturity, we will realize a time-proportional yield as the discount rate of the discount treasury converges to the face value towards the end of the term.

Incidentally, there has been arbitrage in the government securities market for a few weeks, as yields on government bonds with the same maturity are higher than those on discount treasury bills. In quantitative terms, for example, the yield on a discount treasury bill maturing in June 2009 is 12.2%, while that of a government bond maturing at the same time is 13%. So we advise that those who have discount treasury bills should now buy a government bond with the same maturity. Government securities can be bought with a single click. You can get the best help from the Manchester Mortgage Brokers now.

The question may now be whether to choose bank deposit or government paper. It depends on how long we want to invest our money. If you need it in 3-6 months, you will definitely need to look for a promotional bank deposit to get a higher return. If we think in 1-2 years, a government bond with the right maturity seems likely to be the better solution, as it provides a yield of 12.5% ​​until maturity, while interest rates on bank deposits are expected to decline.

Gold, Real Estate?

Many people think that in an uncertain economic environment they have to turn their backs on financial assets, so they take their money out of the bank, buy money from the stock market and buy “tangible” assets, i.e. precious metals or real estate.

In our opinion, this is a wrong idea. Gold currently hovers around $ 750, while its long-term average is $ 350-400. Gold has no interest, and even has to be stored, which is expensive. It is true that in times of inflation gold keeps its real value well, but inflation-indexed or floating-rate government bonds do the same. In our opinion, the price of gold is currently a bubble, which has not completely burst. For example, silver is priced at $ 9.30, a 50% drop from its peak around $ 21 in March 2008. In contrast, gold fell just 25% below its $ 1,000 peak in March 2008. What makes gold other than silver?

  • In other words, anyone who spends their money on gold has a good chance of additional 20-30% depreciation.
  • The situation is similar with real estate. Although real estate is generating income, the price of real estate has been kept at today’s level by foreign currency-based mortgages, which will fall and the real estate market will become oversupplied. In addition, the recession will trigger an increase in payment difficulties among mortgage lenders, leading to forced sales, including a fall in property prices. Finally, let’s not forget real estate investment funds, which will probably have no choice but to force the sale of their projects, which will collapse the commercial real estate market.

In summary, panic is a bad counselor. Now there is a huge price for security, who is willing to take risks, and they pay a lot.

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