Sunday, June 28, 2015

The Cunning Investment Plan of the Year

June 28, 2015
Should You Ever Pay Cash for a Home?

Also, real estate has a historically lower return on investment than stocks or bonds, meaning you could be losing out overall if other investments would have outperformed the interest on a mortgage.

Well, you certainly don't want to miss out on the returns that bonds could give you. That would be silly. But what kind of bonds? Treasuries? Heavens no. You'll want to take on more risk for more rewards, but ideally in a risk free way. That's why I suggest a special opportunity in mortgage backed securities.

The Cunning Plan

1. You'll want to talk to the bank about securing a home loan. It won't be just any loan though. Tell them you want your mortgage to go into a special mortgage pool for your house and your house alone.

2. Once that is in place, tell the bank manager that you are very interested in investing in mortgage backed securities. You don't just want any mortgage backed security though. You only want to invest in the pool that has your home mortgage in it and no others. If they ask what makes this particular pool so interesting to you, feel free to mention that you have insider information concerning the true quality of the loan. You know for a fact that it is AAA all the way, regardless of what the ratings agencies might say. Put another way, you trust yourself completely to make the mortgage payments.

3. Make your loan payments on time and under no circumstances ever consider walking away from your loan if you ever owe more than the house is worth. This is very important because as a deadbeat mortgage payer you will only be hurting yourself as a cunning investor in your own mortgage backed security. The less you pay, the less you'll earn.

4. Anxiously await investment income to appear in your bank account. The more mortgage payments you successfully make, the more investment income will appear. The income probably won't be quite as much as you pay in mortgage payments though, since Wall Street is in the business of making money. You are their customer for both the mortgage payments and the investment income. They'll need their fair share of the transactions, you know, for facilitating this unique opportunity for you to profit off of yourself.

Oh, sure. Some would argue that you'd be doing better by just cutting out the middleman and avoiding Wall Street entirely, by simply paying off the house. But where is the fun in that? Wall Street and you. You and Wall Street. Enjoy the perfect symbiotic/parasitic relationship where nearly everyone, on Wall Street, can benefit! Woohoo! ;)


Joseph Constable said...

No sarcasm alert.

Brilliant idea.

Stagflationary Mark said...


Rob Dawg said...

Consider the obverse. Me and nine neighbors each put up $80,000 to form a bank. Using 12x conservative leverage we have enough for each of us to take very low interest rate mortgages on our million dollar houses. We ten are the bank owners/directors. See where this is going? Win.

Stagflationary Mark said...

Rob Dawg,

Just be the bank, be the bank, be the bank. ;)