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Pay off Debt For Guaranteed Return To Avoid Bubble?

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Been looking for good real estate investments and everything is in bubble state. Stocks and most other assets as well. I have a 5% Commercial Loan with 10 years left that I can prepay toward.

Does it make sense to take the guaranteed 5%/yr return or save $ for post bubble buying? What are your strategies assuming a bubble...

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5% guaranteed return is better than trying to time the market bubble.

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elptrainerny said:   Been looking for good real estate investments and everything is in bubble state. Stocks and most other assets as well. I have a 5% Commercial Loan with 10 years left that I can prepay toward.

Does it make sense to take the guaranteed 5%/yr return or save $ for post bubble buying? What are your strategies assuming a bubble...

  
I would give the bubble 3-4 months and if it doesn't pop, do your 5% guaranteed. And the bubble can pop because Mr. T cannot deliver or gets trapped in the Russian scandal.

It is not completely clear if we are in a bubble. The market keeps rotating around - converting winners to also rans and also rans to winners. The PE ratio, given the interest rate, does not feel obscenely high. But a PE correction from 20 to 18 is a 10% stock correction.

Wall street has an obsession with the quarterly earnings as a representation of all future earnings of the company and the CEO's keep trying to manipulate the system. My strategy - bubble or no bubble, is selling covered calls as a hedge. 2 earnings ago, I sold covered calls on Lowes to hedge my bets and what does it do, it shoots up. And then this quarter, they underdeliver and it is back to being lower.  Given that their RSU's/options cycle was in April, they had a strong incentive in the last quarter to do well. And they can do well by pulling sales from the next quarter by doling out more coupons to the customers.

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See also  http://www.doctorofcredit.com/best-bank-account-bonuses/ 
https://www.fatwallet.com/forums/finance/1569049 

Personally, I am paying off debt to the point that my FICO is the highest it has ever been.
One consideration - Is paying off that commercial loan - does it show on your personal credit report?
IF NO or IF just paying it down. - disregard the following comments.
IF yes, paying it off can have a small impact on your FICO as non-credit card debt gives variety to your credit report - up to 10% of FICO. Find a FICO site you like and play with the simulator to see what that impact may be. 

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I suppose the question is: Would you go out and get a new loan at 5% for the purposes of investing in today's market?

Because that's essentially the same thing you're doing by not paying down your debt.

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Would everyone please stop running around proclaiming bubbles. I get why you do it. It is fashionable. Everyone loves to think they can spot a bubble post-2008, especially once they've watched The Big Short. But there is no more evidence for one now than there was last month, last year, or five years ago. In general, 5% is right on the line of whether you should pay down debt or invest. Anything below that I would invest, anything above I would pay off debt.

But I hope you aren't market timing your investments based on this irrational desire to proclaim bubbles.

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magika said:   Would everyone please stop running around proclaiming bubbles. I get why you do it. It is fashionable. Everyone loves to think they can spot a bubble post-2008, especially once they've watched The Big Short. But there is no more evidence for one now than there was last month, last year, or five years ago. In general, 5% is right on the line of whether you should pay down debt or invest. Anything below that I would invest, anything above I would pay off debt.

But I hope you aren't market timing your investments based on this irrational desire to proclaim bubbles.

  I'm so good at predicting bubbles that I've called 7 of the last 2.

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I read a good point of view recently - "the market" is almost always at or near all-time highs. That's what happens when it grows so steadily. The drops are relatively small and short-lived.

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magika said:   Would everyone please stop running around proclaiming bubbles. I get why you do it. It is fashionable. Everyone loves to think they can spot a bubble post-2008, especially once they've watched The Big Short. But there is no more evidence for one now than there was last month, last year, or five years ago. In general, 5% is right on the line of whether you should pay down debt or invest. Anything below that I would invest, anything above I would pay off debt.

But I hope you aren't market timing your investments based on this irrational desire to proclaim bubbles.

  
Not sure about bubbles (plural) but there definitely was a bubble and it has been deflating. Go check out GS, JPM, FLR. And you should really look at the period from about Nov 3 to now to see the bubble and the deflation in action.

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PrincipalMember said:   magika said:   Would everyone please stop running around proclaiming bubbles. I get why you do it. It is fashionable. Everyone loves to think they can spot a bubble post-2008, especially once they've watched The Big Short. But there is no more evidence for one now than there was last month, last year, or five years ago. In general, 5% is right on the line of whether you should pay down debt or invest. Anything below that I would invest, anything above I would pay off debt.

But I hope you aren't market timing your investments based on this irrational desire to proclaim bubbles.

  
Not sure about bubbles (plural) but there definitely was a bubble and it has been deflating. Go check out GS, JPM, FLR. And you should really look at the period from about Nov 3 to now to see the bubble and the deflation in action.


That's for a specific sector and for a specific political reason.

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magika said:   
  What one should do is to create bunch of blogs with each one claiming a different time-frame & reason for the "coming bubble", if one of those hits then you can live on your fame for the a few years selling newsletter, books, etc..

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rascott said:   
PrincipalMember said:   
magika said:   Would everyone please stop running around proclaiming bubbles. I get why you do it. It is fashionable. Everyone loves to think they can spot a bubble post-2008, especially once they've watched The Big Short. But there is no more evidence for one now than there was last month, last year, or five years ago. In general, 5% is right on the line of whether you should pay down debt or invest. Anything below that I would invest, anything above I would pay off debt.

But I hope you aren't market timing your investments based on this irrational desire to proclaim bubbles.

  
Not sure about bubbles (plural) but there definitely was a bubble and it has been deflating. Go check out GS, JPM, FLR. And you should really look at the period from about Nov 3 to now to see the bubble and the deflation in action.


That's for a specific sector and for a specific political reason.

  How is that different from tulips? specific flower in a specific country. Half the guys on these forums are hiding their money in the mattress and the other half is completely brainwashed by bogle that they are not seeing the disparities in how the different sectors are evolving under this lunatic. 

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PrincipalMember said:     How is that different from tulips? specific flower in a specific country. Half the guys on these forums are hiding their money in the mattress and the other half is completely brainwashed by bogle that they are not seeing the disparities in how the different sectors are evolving under this lunatic
  
You will be neither the first person nor the last person to lose a lot of money because you let your personal politics cloud your ability to make rational investment decisions.
 

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magika said:   
PrincipalMember said:     How is that different from tulips? specific flower in a specific country. Half the guys on these forums are hiding their money in the mattress and the other half is completely brainwashed by bogle that they are not seeing the disparities in how the different sectors are evolving under this lunatic
  
You will be neither the first person nor the last person to lose a lot of money because you let your personal politics cloud your ability to make rational investment decisions.

  
I am all about making money. When it comes to investing, I dont let ethical/social/political stuff constrain my decisions. However, you do have to be careful since a boycott of company's products can lead to depressed prices.

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