Home Equity Line of Credit Question

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<i>"I think one of the biggest mistakes i made back in 2004 was borrowing too little at such a low rate, and trying to pay off my mortgage as fast as possible."</i>




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Congratulations. This is an admirable behavior, not a mistake, IMO.
 
[quote author="no_vaseline" date=1218510064][quote author="EvaLSeraphim" date=1218506216][quote author="no_vaseline" date=1218505601]Why is it otherwise bright people don't understand the terms:



Risk Capital

Working Capital

Equity



Or concepts like why they are different, why they are important, and why you shouldn't mistake one for another?</blockquote>


English, No_Vas. I need you to write in English. ;-)</blockquote>


Fair enough. I'll be more clear.



You shouldn't go to Vegas and gamble with the rent money. And if that's a bad idea, borrowing from your home to do so is REALLY a bad idea.</blockquote>


Oh... come on no_vas. My buddy just went to Vegas, and I told him to put $10 on red 23 for me, he won. Not only that, but he did it again later that night on the same table. No joke, true story. So... the next time he goes I am giving him the rest of my line of credit to bet on red 23. I am sure he will win again, wouldn't you do it?
 
[quote author="PANDA" date=1218538647]Lawyerliz, it seems like everyone believes that this is a very bad move. I got the idea from a book i read "Missed Fortune" by Douglas R Andrew. Douglas says that the equity in your house is dead equity which produces 0% return and we should act like a bank by arbitraging. If we can borrow at 7% try to invest the money elsewhere to beat 7%. I agree there is no place i can guarantee that i can make more than 7% a year. I guess if one is certain that they can get more than what they are borrowing for it would be a good move. This is not the case for me. I think one of the biggest mistakes i made back in 2004 was borrowing too little at such a low rate, and trying to pay off my mortgage as fast as possible. In hindsite, i wished that i would of borrowed $300,000, not $100,000 at 4.25% back in 2004. I guess you learn from your mistakes. I think that i am going to chill and play it safe. Thanks to all who responded.



Link to the "Missed Fortune" Book.

http://www.amazon.com/Missed-Fortune-101-Becoming-Millionaire/dp/0446576573/ref=pd_bbs_sr_2?ie=UTF8&s=books&qid=1218513193&sr=8-2</blockquote>


Panda - Have you read <a href="http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338/">A Random Walk Down Wall Street</a>? If you haven't, then no more reading how to become millionaires by people who became millionaires by writing books. This is your first mandatory IHB book reading assignment, and there will be more. Once you complete your mandatory IHB book reading list, then you can move on to puff pieces, but most likely you will upgrade your mind beyond that and never go back.



I am not being snarky, I am being deadpan serious, you need to upgrade the quality of books you read.
 
[quote author="graphrix" date=1218551058][quote author="no_vaseline" date=1218510064][quote author="EvaLSeraphim" date=1218506216][quote author="no_vaseline" date=1218505601]Why is it otherwise bright people don't understand the terms:



Risk Capital

Working Capital

Equity



Or concepts like why they are different, why they are important, and why you shouldn't mistake one for another?</blockquote>


English, No_Vas. I need you to write in English. ;-)</blockquote>


Fair enough. I'll be more clear.



You shouldn't go to Vegas and gamble with the rent money. And if that's a bad idea, borrowing from your home to do so is REALLY a bad idea.</blockquote>


Oh... come on no_vas. My buddy just went to Vegas, and I told him to put $10 on red 23 for me, he won. Not only that, but he did it again later that night on the same table. No joke, true story. So... the next time he goes I am giving him the rest of my line of credit to bet on red 23. I am sure he will win again, wouldn't you do it?</blockquote>


Well, first off, you got paid 35:1. Problem is, you're a 38:1 dog to get there, so you're taking the worst of it to get there. Lets do some simple degenerate math to figure out your probablilty.



1/38 x 1/38 = a 1 in 1440 chance of getting back to back rolls, for a payout that is 1 in 1225.



So if you assume you'll be able to continue to run this good, here's the math:



1/38 x 1/38 x 1/38 = 1 in 54,720 to roll three strait wins, for a payout that is 1 in 42,875.



So yeah, I think that piling on your HELOC is a great idea. If you're interested, I've a got a foolproof system on how to play Keno Ill share for a small fee.
 
panda,



i'm in process of writing a book as well and here's just some of the chapters i'm working on.



- Borrow at a low interest rate and invest at a higher one

- Buy stocks that go up

- Read next year's Dept of Agriculture Orange Crop Report and trade frozen concentrated OJ futures accordingly

- Buy straw and pin into gold

- Invent cold fusion and sell energy back to utility companies



the problem with my book, like 90% of financial self-help books out there, is they always tell you WHAT to do, but never HOW.
 
[quote author="acpme" date=1218588392]- Read next year's Dept of Agriculture Orange Crop Report and trade frozen concentrated OJ futures accordingly</blockquote>


Nice work-in.



<img src="http://www.channel4.com/film/media/images/Channel4/film/T/trading_places_xl_01--film-B.jpg" alt="" />



<em>Looking good, Billy Ray!</em>
 
[quote author="graphrix" date=1218551592][quote author="PANDA" date=1218538647]Lawyerliz, it seems like everyone believes that this is a very bad move. I got the idea from a book i read "Missed Fortune" by Douglas R Andrew. Douglas says that the equity in your house is dead equity which produces 0% return and we should act like a bank by arbitraging. If we can borrow at 7% try to invest the money elsewhere to beat 7%. I agree there is no place i can guarantee that i can make more than 7% a year. I guess if one is certain that they can get more than what they are borrowing for it would be a good move. This is not the case for me. I think one of the biggest mistakes i made back in 2004 was borrowing too little at such a low rate, and trying to pay off my mortgage as fast as possible. In hindsite, i wished that i would of borrowed $300,000, not $100,000 at 4.25% back in 2004. I guess you learn from your mistakes. I think that i am going to chill and play it safe. Thanks to all who responded.



Link to the "Missed Fortune" Book.

http://www.amazon.com/Missed-Fortune-101-Becoming-Millionaire/dp/0446576573/ref=pd_bbs_sr_2?ie=UTF8&s=books&qid=1218513193&sr=8-2</blockquote>


Panda - Have you read <a href="http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338/">A Random Walk Down Wall Street</a>? If you haven't, then no more reading how to become millionaires by people who became millionaires by writing books. This is your first mandatory IHB book reading assignment, and there will be more. Once you complete your mandatory IHB book reading list, then you can move on to puff pieces, but most likely you will upgrade your mind beyond that and never go back.



I am not being snarky, I am being deadpan serious, you need to upgrade the quality of books you read.</blockquote>


Graph, I told you that already read Random Walk Down Wall Street ten years ago right out of college. It shows you how to invest in the 80s and 90s, but I think the game is very different investing now until 2020. I like books that tell Panda, inflation is going up the roof, Fed is printing money like crazy, dollar is going to tank, mortgages rates will rise to 10% plus by 2010, invest in foreign equities especially in asia and sell all out of all over valued U.S. stocks, Buy Chinese currencies, Buy Canadian Oil and mining stocks that pay big dividends, buy as many commercial properties and residential homes you can afford in Irvine in the next 10 years. Any books that preaches what Awgee says is also Panda's kind of book.



Books like Random Walk Down Street puts Panda to sleep. Did I also tell you that i love books that tell me to load up on precious metals on the dips and get out of the U.S. dollar?



You think this U.S. equity rally we've been having is for real? Did the U.S. just resolve the falling currency issue and credit problems in one week? You've got be kidding me.



Panda
 
I'm sure the mathematics in that book add up just fine.



In the real world, stuff happens.



In the real world, people don't have the discipline to save.



In the real world, if the financial system really does melt down,

and the odds are growing daily, if you own your house, you

have somewhere safe to live.



I'm really disappointed that you weren't, indeed, joking.
 
[quote author="PANDA" date=1218616022][quote author="graphrix" date=1218551592][quote author="PANDA" date=1218538647]Lawyerliz, it seems like everyone believes that this is a very bad move. I got the idea from a book i read "Missed Fortune" by Douglas R Andrew. Douglas says that the equity in your house is dead equity which produces 0% return and we should act like a bank by arbitraging. If we can borrow at 7% try to invest the money elsewhere to beat 7%. I agree there is no place i can guarantee that i can make more than 7% a year. I guess if one is certain that they can get more than what they are borrowing for it would be a good move. This is not the case for me. I think one of the biggest mistakes i made back in 2004 was borrowing too little at such a low rate, and trying to pay off my mortgage as fast as possible. In hindsite, i wished that i would of borrowed $300,000, not $100,000 at 4.25% back in 2004. I guess you learn from your mistakes. I think that i am going to chill and play it safe. Thanks to all who responded.



Link to the "Missed Fortune" Book.

http://www.amazon.com/Missed-Fortune-101-Becoming-Millionaire/dp/0446576573/ref=pd_bbs_sr_2?ie=UTF8&s=books&qid=1218513193&sr=8-2</blockquote>


Panda - Have you read <a href="http://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338/">A Random Walk Down Wall Street</a>? If you haven't, then no more reading how to become millionaires by people who became millionaires by writing books. This is your first mandatory IHB book reading assignment, and there will be more. Once you complete your mandatory IHB book reading list, then you can move on to puff pieces, but most likely you will upgrade your mind beyond that and never go back.



I am not being snarky, I am being deadpan serious, you need to upgrade the quality of books you read.</blockquote>


Graph, I told you that already read Random Walk Down Wall Street ten years ago right out of college. It shows you how to invest in the 80s and 90s, but I think the game is very different investing now until 2020. I like books that tell Panda, inflation is going up the roof, Fed is printing money like crazy, dollar is going to tank, mortgages rates will rise to 10% plus by 2010, invest in foreign equities especially in asia and sell all out of all over valued U.S. stocks, Buy Chinese currencies, Buy Canadian Oil and mining stocks that pay big dividends, buy as many commercial properties and residential homes you can afford in Irvine in the next 10 years. Any books that preaches what Awgee says is also Panda's kind of book.



Books like Random Walk Down Street puts Panda to sleep. Did I also tell you that i love books that tell me to load up on precious metals on the dips and get out of the U.S. dollar?



You think this U.S. equity rally we've been having is for real? Did the U.S. just resolve the falling currency issue and credit problems in one week? You've got be kidding me.



Panda</blockquote>


Guess it is time to write a book. At least there will be one buyer/reader; unless Panda prefers library books, and then just a reader.
 
<blockquote>I like books that tell Panda, inflation is going up the roof, Fed is printing money like crazy, dollar is going to tank, mortgages rates will rise to 10% plus by 2010, invest in foreign equities especially in asia and sell all out of all over valued U.S. stocks, Buy Chinese currencies, Buy Canadian Oil and mining stocks that pay big dividends, buy as many commercial properties and residential homes you can afford in Irvine in the next 10 years. Any books that preaches what Awgee says is also Panda?s kind of book.

</blockquote>


it's quite possible all the events you mentioned will come true, and yet many of those investment decisions go against you. uncertainty is the name of the game right now.
 
[quote author="PANDA" date=1218616022]Graph, I told you that already read Random Walk Down Wall Street ten years ago right out of college. It shows you how to invest in the 80s and 90s, but I think the game is very different investing now until 2020. I like books that tell Panda, inflation is going up the roof, Fed is printing money like crazy, dollar is going to tank, mortgages rates will rise to 10% plus by 2010, invest in foreign equities especially in asia and sell all out of all over valued U.S. stocks, Buy Chinese currencies, Buy Canadian Oil and mining stocks that pay big dividends, buy as many commercial properties and residential homes you can afford in Irvine in the next 10 years. Any books that preaches what Awgee says is also Panda's kind of book.



Books like Random Walk Down Street puts Panda to sleep. Did I also tell you that i love books that tell me to load up on precious metals on the dips and get out of the U.S. dollar?



You think this U.S. equity rally we've been having is for real? Did the U.S. just resolve the falling currency issue and credit problems in one week? You've got be kidding me.



Panda</blockquote>


Cool! Reread the updated version. I love awgee, seriously he is a great guy with good investment advice, but I am not in love with him or his investment advice. Sorry awgee, I know you are not that disappointed and we are all here to learn from each other including their mistakes. I should post more of my mine, like the call options on RIMM that took off the day after expiration. DOH!



Anyway... look at the Shanghai chart from CR, BTW it got worse since the post...



http://3.bp.blogspot.com/_pMscxxELH...AACbA/AZwn--Bxwew/s1600/ShanghaiAug102008.jpg



Then look at the Euro compared to the $...



http://images.tradingmarkets.com/2008/0808Capre1.jpg



Then look at the gold chart...



http://www.kitco.com/images/live/gold.gif



No offense to awgee, but I don't know where you get your investment ideas. If you go back to the post where you asked what to invest in, well... you might as bought a home in the Brightwater project in HB, because you would be bending over either way. You sound like a smart guy, you can and have the ability to do your own research and understand it. Why do you continue to seek reaffirmation of your ideas? Is it because you think they are not solid, or do you think they are too risky? What is your game plan? Long term or short term? What is your level of risk? Are you talking about rainy day funds, fun money you would put on red 23, or savings you don't want to see lose value? What is it you are trying to accomplish? And, if you give me some lame spiel about how you want to buy a home in Irvine, then I will fly to ChiTown to biatch slap you. Seriously, and I mean that I am being serious with you Panda, what is your game plan, what is your level of risk, how much are you really willing to lose? I need to know, I really need to know, because from what you have posted about investing in the past few months, then I would rather have my money in CDs at IndyMac, because they would have provided a much higher and way better return then what you were thinking. I warn you, and I mean I really warn you, do not, do not bet against the dollar right now.



Am I blow hard? Ask the fish about Lehman, Wamu, and the others. My gains far out exceed my losses.
 
Oh... and as of right now the Hang Seng is down 348 points, the Nikkei is down 280, gold is up 15 points, oil is up slightly (if it breaks the support level of $110, then we might see a real drop), and the dollar is down .004. Mind you it is 84 degrees in Rome but only 66 degrees in London. US futures are taking a dump, but if you search the posts where I have mentioned the futures before, then you know they are usually wrong.
 
And I am not done ranting... you need to read the boring books to understand the fundamentals. You need to read <a href="http://www.amazon.com/gp/product/0066620597">Stock Market Wizards</a>, and <a href="http://www.amazon.com/gp/product/0735201447">Trading in the Zone</a>. If you think they are boring, then have someone hook you up with some Ritalin or Adderall, because you need to suck it up and read up on the basics. Otherwise you will continue to read the shortcut, but shortcut to failure books, that the thoughtless provider of ROC of Lansner's blog aka Janet reads and ends up looking like the fool with the dunce cap in the corner of the room. Have you read The Secret? You might as well have if you think you can believe the market will be and come back to what she believes. Fundamentals never lie, people who don't understand the fundamentals lie to distort their opinion, only to look like the polar bear painted to look like a panda and when the rain comes the truth comes out. They are fake, and hide behind their lies.



I am disappointed you came out here to Irvine and didn't invite me, IR, IR2, zovall, awgee, and many others to join you for a drink. You would see I am not the a-hole you perceive me to be, but a down to earth guy who gets it, sometimes wrong, but right more than wrong. PM Skek, he will say I am a nutter, but a nutter who knows his stuff.
 
G-man,






Even though I don't "trade", (less than a two year hold), precious metals, I am curious. What do the MACD, stochastics, and Fibs on your six month chart tell you about gold right now?




And just for the heck of it, if you look at a long term, (say three year) chart of gold, what does it tell you?
 
IMO it's a currency arbitrage of sorts, caused by the Fed dumping rates, the EU cranking them up, and now equalized because the EU was wrong wrapped around a bunch of commidities related margin calls.



Always remember: the biggest competitive advantage you can have is to be on the right side of a currency exchange imbalance.
 
Regardless of the investment, the key to life and making money on a consistent basis is to not get emotional about it.

My advice is to get out of your own way and let this process happen.
 
[quote author="Astute Observer" date=1218543901]Reminds me of using your spare kidney to gamble. It is an underutilized organ, you know.</blockquote>


Sure, until you need it. :P Random fact: you can live on 1/4 of a kidney.



<blockquote>Douglas says that the equity in your house is dead equity which produces 0% return</blockquote>


In my world, shelter for my stuff is a return.



<blockquote>Ask the fish about Lehman, Wamu, and the others. My gains far out exceed my losses. </blockquote>


1) That's right. I am THE fish. :smirk:

2) Graph does do his research and makes informed investment desicisions that usually turn out well.

3) Apologies to the group that the Graph Rant Prevention Team was asleep at the wheel last night.
 
[quote author="skek" date=1218678983]Three consecutive rants? The Secret? Polar Bears?



Cayci, what the heck have you done to Graph? He's been on fire this week.</blockquote>


This is what happens when she travels for business. I think I need to have a chat with uncle Larry the next time he is in town.
 
[quote author="tenmagnet" date=1218668622]Regardless of the investment, the key to life and making money on a consistent basis is to not get emotional about it.

My advice is to get out of your own way and let this process happen.</blockquote>


This is really sage advice. It is also one of the most difficult things to do. That is one of the key points to <a href="http://www.amazon.com/gp/product/0735201447">Trading in the Zone</a>. I highly recommend this book for anyone who trades. Hat tip to IR for recommending this book a long time ago.
 
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