Low Return World

Have we become a habit
Do we distort the facts
Now there's no looking forward
Now there's no turning back
--Pat Benatar

My sense is that the next few years are likely to offer pretty low investment returns. Sure, there may be some special situations, and intra-period volatility may permit catching a nice trend if you're saavy enough to trade 'em. But I doubt I'll be smart enough to do that in a meaningful way.

As such, I want to shed risk and hold lots of cash.

With the tiny returns on cash balances, the other thing that makes sense to me is to pay down debt. Taking my mortgage debt for example, I'm paying 4 5/8% which, after tax, seems pretty low. But if cash is earning 0 to 1% in a money market fund, then I'm actually better off 'investing' this cash in paying down by mortgage, as my real return will be a coupla percent--which beats nearly everything else in my investing universe as I'm seeing it.

Doing some what-if planning suggests that I could pay down my entire mortgage, originated at $194,100 K this past May, by the end of next summer. As it stands right now, this will be my primary personal finance goal for 2010. Debt free by the end of 2010.

position in USD