On Mar 26, 3:10*pm, Igor Chudov <ichu...[at]algebra.com> wrote:
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And perhaps you can avoid the downside by paying the same as you would
for 15yr fixed, correct?

TIA

On 2009-03-26, Augustine <evandro[at]mailinator.com> wrote:
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Well, I think that there is a non-trivial possibility of substantial
inflation, though I do not necessarily envision extreme inflation.

My current loan is 15 year fixed at 4.875%. Assuming that I can
refinance with a low closing cost, at 5% for 30 years, this would
increase the effective duration of my mortgage.

If that substantial inflation does not occur, I am not much worse
off with a 30 year loan, compared to a 15 year loan.

If substantial inflation does occur, the economic value of my mortgage
payments would go down in inverse proportion to the degree of inflation.

In other words, I think that the market does not price the possibility
of inflation correctly.

If I am wrong about it, my downside is minimal.

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On Mar 25, 12:23*pm, Igor Chudov <ichu...[at]algebra.com> wrote:
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Can you please lay out the details?

TIA

On Mar 26, 2:13*am, Tortoise <nos...[at]sunshine.com> wrote:
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I read him religiously. He posts a new article every sunday evening.

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According to Hussman, his fix income investments are mostly in TIPS.

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PeterL wrote:
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Economists themselves (the supposed experts) argue over how to describe
inflation and exactly what causes it. While the common metric (CPI) is quite
simple, the actual dynamics involved in the phenomenon are rather complex --
hence the endless debates over what inflation is and what amplifies/mitigates
it. Personally, I lean in the direction of this fella's analysis:
http://www.hussmanfunds.com/wmc/wmc090323.htm
(the second chart shows a strong historical correlation between inflation and
growth in government spending).

- quote -

TIPS convey the market's OPINION about future inflation, with the near-term
currently having a deflationary outlook, which changes into inflationary
prospects as you move the horizon further back.

A good quantitative treatment of the subject is here:
http://www.econ.ohio-state.edu/jhm/ts/ts.html
(unfortunately, as competent as this professor appears to be, he's more like a
tortoise when it comes to updating his website).

FranksPlace2 <FranksPlace2[at]gmail.com> wrote:

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Here http://tinyurl.com/jmaldin is an excellent article that addresses the
subject directly and suggests some ways to insure against it.

My opinion is that inflation (or at least avoiding deflation) is the only way
out. Bernanke, of all people, knows this. He is one of the leading scholars of
the Great Depression.

But we are sailing uncharted waters. If he gets it wrong, things could go badly
in either direction. The article suggests that he is more likely to
undershoot, getting more deflation and more recession, than to overshoot and get
double digit inflation. Keep in mind -- the Fed can suck that money back in as
fast as it is putting it out.

-- Doug

On 2009-03-25, PeterL <po.ning[at]gmail.com> wrote:
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I also do not know how to predict the future, but I am refinancing my
mortgage from 15 year fixed to 30 year.

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On Mar 25, 6:52*am, FranksPlace2 <FranksPla...[at]gmail.com> wrote:
- quote -


I don't know how to predict the future, but I am buying a lot of TIPS.

I have heard inflation described as "too many dollars chasing to few
goods." Today I see the government and the Fed dumping trillions of
dollars into the economy while, at the same time, companies are
reducing their goods and services by layoffs, shut downs and deffering
investments. Offsetting this is the fact that trillions of dollars of
assets disappeared in housing and the stock market.

Do you think we will see double digit inflation in the next 3 to 5
years?

Frank