Nice work Kieth,
The current flow of news is certainly more upbeat than it was even a few months back, and if we translate this into future economic conditions then it substantiates a rising interest rate environment. I'm starting to feel more convinced that this is a probable outcome, despite my reservations about the state of global credit markets. I still think there's risk to the downside that will see the current flow of good news reversed, but as more time passes before this eventuates I feel more comfortable it won't occur.
Either way its a good result for me personally. Having gone to the bank for construction finance, if the economy improves then my end product revalues upwards as residential property recovers strongly. If the economy tanks then rates stay low or potentially lower and my surplus cash flow given it is already going to be CF+ just gets that much better.
My ideal scenario would be for 5 year fixed rates to hold around 6% for 12 months to allow me to finish my construction which must be on a variable rate, then refinance it into fixed and sit tight with guaranteed positive cash flow. If rates explode upwards too sharply then that option will be taken away from me, but at least my valuation will be improving.
Cheers,
Michael
The current flow of news is certainly more upbeat than it was even a few months back, and if we translate this into future economic conditions then it substantiates a rising interest rate environment. I'm starting to feel more convinced that this is a probable outcome, despite my reservations about the state of global credit markets. I still think there's risk to the downside that will see the current flow of good news reversed, but as more time passes before this eventuates I feel more comfortable it won't occur.
Either way its a good result for me personally. Having gone to the bank for construction finance, if the economy improves then my end product revalues upwards as residential property recovers strongly. If the economy tanks then rates stay low or potentially lower and my surplus cash flow given it is already going to be CF+ just gets that much better.
My ideal scenario would be for 5 year fixed rates to hold around 6% for 12 months to allow me to finish my construction which must be on a variable rate, then refinance it into fixed and sit tight with guaranteed positive cash flow. If rates explode upwards too sharply then that option will be taken away from me, but at least my valuation will be improving.
Cheers,
Michael
