Look at the debt like a finance person… If you can borrow money at 3% interest and make 15% FROM that money for a net gain of 12%, why wouldn’t you? Companies make that decision every day.
But to put it in more personal terms… if your home was paid off and you could take money out with a mortgage for 3% (in the past, not now!) and invest that money at a 15% return… would you?
I wouldn’t. That is too much personal risk to me. If you did that 3 years ago, you’d look like a genius. 1 year ago, you’d likely be crying right now.
Big difference between corporate risk and personal risk!
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The article doesn’t tell us the relationship between debt and net assets. Toyota’s net assets were $602 billion at the end of March 2022. The debt was about 31% of assets. That doesn’t seem bad to me.
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Years ago I was at a seminar by wealth enhancement boys who are still on the radio. They were pushing second mortgages to buy stocks. Shortly after, the market collapsed leaving some with huge mortgages and market losses and maybe no jobs. Over these 30 years or so I ask myself if their advice was so good, how come they are still working? So ten years ago you wanted high debt with big investments. Now you want zip debt and lots of cash. It’s all timing but when thing collapse, might be time to buy but with cash. In the last realignment, a friend had bought much on margin. Every month he had to come up with thousands in cash to cover his margins in a down market. Experts?
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Very true. Common sense says a company’s debt stat must be considered as a % of total assets. Same, a yearly budget deficit should be compared as a % of yearly revenue. If Toyotas debt % is much higher than say Honda or Nissan or GM, that would indeed be news. The absolute number of dollars? Not so much.
t’s interesting that I get an on-going credit report anytime I go to the credit union site. If the wife charges $2000 one month, it goes down a point or two. The falacy of the whole thing is that nowhere does anyone know our total assets or cash on hand to make that determination. All they are interested in is percent of credit used and payment history. Total farce but everyone globs on like it is golden.
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NEVER invest money that you cannot afford to lose, and NEVER buy stocks or other securities on credit. And it goes without saying that you should NEVER borrow against your primary residence, except maybe to pay for major repairs to the house, or pay for life-saving medical care. Any “investment adviser” who would tell you otherwise is a thief or a fool.
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Of course your interest rate, and so forth is also based on your age and expected lifespan.
Better if you’re the federal government you have a potentially unlimited lifespan. You could take your sweet time on loan repayment.
I guess this is turning into money talk. I’ve never heard of interest rates being based on life span. But I agree my grand kids are the ones that are going to have to pay for this mess.
Now a scary Halloween story. The fed raises interest rate and issues bonds to pay for the trillions in borrowing, except the interest payments in the not too distant future will equal the entire federal income. No money left for programs, just interest. Like a family living on credit cards.
Not really. The government sells bonds with specific endpoints. When they mature, they have to be paid off. The bond owners may want to buy new bonds, but how they use the funds they receive is up to them. As a practical matter, there are always buyers for US bonds because they are the safest bonds in the world. If their safety is ever compromised then the bonds will still be for sale but will have to pay a higher rate to account for the lack of safety. Over the last decade treasury bonds have been a great bargain for us citizens in that the interest rate paid was low, giving us a lot more bang for the buck loaned to the government. As interest rates rise to attract new investors, more money goes to investors than whatever it is the loans were made for.
Like the social security trust fund bonds. Cmon man. Smoke and mirrors.
Some have suggested a one time cancelling of the Chinese owned bonds as reparations for the havoc and loss caused by the virus. Most adults though think this would be a bad idea in the long run. Still nice discussion.
Doesn’t matter. My post was an example.
It seems correct that a person would use a different personal financial strategy to optimize their returns if they knew they were going to live 1000 years, compared to 85 years. Easier to sit back without worry & wait problems out.
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