Originally published November 4, 2008.
Ok, if you’re thinking that I’m talking about an illegal substance, you’re wrong. In fact, I’m not talking about anything of the sort! Sometimes I worry about the people reading this! J
I’m talking about two things other things that are on their way down, and they’re closely related: Inflation and Mortgage Rates!
As I’ve said in previous newsletters, inflation is what causes mortgage interest rates to go up. Let me try to explain very briefly and simply. If you’re looking to invest some money, and you know high inflation is prevalent, you don’t want to buy a long term security like a CD right? After all, if you’re earning 5% on a CD, and inflation is 4%, then you’re only outpacing inflation by .25%! If you’re thinking about that 1% you’re earning over the pace of inflation, you’re forgetting about the taxes! Take a 15% long term capital gain tax, and you’re only truly earning 4.25%!