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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (5919)	5/9/2004 1:07:08 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Today's Chicago Tribune said according to Freddie Mac, 43% of refis in the first Q this year were cash out refis. M

To: Haim R. Branisteanu who wrote (5919)	5/9/2004 1:16:03 PM
From: mishedlo	Read Replies (3) \| Respond to of 116555

No way that income will rise to compensate higher interest rates. After all 1% rise is 100% more interest No, not even close (not for mortgages anyway). No one is financing at 1% Best around is something like Libor +1.75% (that is what I have). That makes it 3%. If interest rates rise 1 point I will have 25% more interest expense. If it rises 2 full points I will be back to where I was before the refi: 5%. That said, I doubt this economy can take a 2% rise. In fact, I doubt it can take a 1% rise. For companies dependent on short term borrowing (probably tons of them) a 1 point hike might be a 60% increase in interest expense. 1.5 points probably is a full 100% increase in interest expense. Now the real question is what happens about 2 years down the road with corpoarte financing. Many many companies will have tons of debt coming due in a couple of years? Rolling that over if the economy is bad and finacials do not looks as good as they do now, that might cost them 300% more than current rates if not more. Thoughts? M