Well you sure heard about inflation right? that's when prices rise and the dollar looses its buying power due to fast growing demand.
Deflation is the exact opposite of that. that's when demand falls so short that prices will have to come down to move products off the shelf. So whats the problem you might ask?
Well 2 fold:
- First of all for existing loans. existing loans which will be paid back in an deflationary environment will be paid back with more expensive dollars then the dollar borrowed, real bad for consumers.
- It will further push economy in a stand still almost stone age like, because nobody wants anything so why would anybody pay you for anything?
A Little bit trivial but not as much as you would like. with talks of economic recession on the horizon and company's cutting back, with interest that low and a tight credit market there is actuial a possibility of deflation.
Idea to capitalize on : Stock up on money and lend it during a deflationary ENVIRONMENT YOU WILL GET BACK DOUBLE ITS WORTH.
You always need money when things go well, and when things do not. When all goes well you want to have asses to cash to capitalize on it. When things do not go so well you need it for security reasons!
Make sure you make the right choice with yours!
Joel Silberstein
Certified Mortgage Planner, CMPS
917.660.3630
joel@joelsilberstein.com
Good comment on deflation.....cash is king..... got to have a good balance..
Fellow CMPS
Thanks Chris for your comment,
I bet you understand the opportunities we have in this market lets spread the word.
Thanks again
Joel Silberstein
You make a good point. Deflation is not a pleasing idea except for those who have money to spend and can make investments right now. Thanks for sharing.
Thanks Jenn
We all have money, Lets mortgage as much as we can, and keep the difference for a rainy day or sunshine day our choice!
Thanks again
Joel
Nice deflation explanation. I agree that private money lending is and will continue to be big business. Just look at all the micro lending sites online such as prosper.com
Excellent summary. In deflationary times "cash is king." I have been working with a client who became concerned with the recent October financial crisis. He's taken a look at his financial situation and decided it was time to deleverage. We have taken one of his real estate assets with considerable equity and sold it to reduce his mortgages. Next, were we are looking at smaller real estate assets that he can buy in this down market for cash. He will sleep better. Not have to be as concerned with deflation that some pundits say is coming. But he will also be positioned in real estate should inflation come back as other pundits are predicting.
Thanks steven for your comment.
I was just wondering if to deleverage is whats needs to be done. When I got to the point in your comment where you mention that now he is looking at smaller real estate assets for cash, so I figured he is really not deleveraging he is just shifting equity from one property into another.
Now the question, can this be done with a mortgage without the need of selling the property?
sort of milking the cow without cutting down the whole apparatus?
one exception of doing would be if he is really spreading himself thin, and his investment philosophy is equity and not cash flow, is this deleveraging in this case?
Thanks again Steve,
Joel