How To Hedge Your Bets Once You’ve Realized A Mistake Was Made

Like it or not, we are all bettors. To make things sound better, we like to call ourselves investors. But either way, we're all constantly taking risks in everything we do.

The other day a Financial Samurai reader named Jim challenged me to a $5,000 bet. Surprising!

I was going to go back to Jim with a more friendly-sized bet of $100. However, after giving the wager some thought I decided what the heck. Jim said he owns a lot of warehouses and commercial property, so he most likely can easily afford the wager he offered. Further, I had conviction.

If you don't take action by betting what you believe to be true, then what's the point? Talking about something without any skin in the game is a waste of time.

Our $5,000 Bet On The Average Mortgage Rate

After reading my post, Why Higher Mortgage Rates May Be Great For The Housing Market, reader Jim disagreed with my thesis: 4% will be the estimated cap on the average 30-year fixed mortgage rate in 2022.

Calling for a 4% cap on the average 30-year fixed mortgage rate is a relatively aggressive forecast given inflation is currently at much higher levels. However, being more conservative by saying something like, “the average 30-year fixed mortgage rate won't surpass 5.5%” is not interesting. That's like forecasting the S&P 500 will be between 3,000 and 6,000 by year end.

Jim went on to write, “I would guess that by the middle of 2023 the average (30-year fixed mortgage rate) will be 6-7%.

When I told him I'd happily wager to take the under, he came back with the $5K bet offer. So I accepted. We traded e-mails and the bet was finalized.

Of course, there is the possibility one of us won't pay up. But a Financial Samurai, like a Lannister, always pays their bets. So don't worry about me Jim!

Why I Accepted The Bet

Since starting Financial Samurai in 2009, I have believed interest rates will stay low for the rest of our lives. The interest rate trend is in a downward channel and will unlikely be broken for an extended period of time due to technology, information efficiency, and capitalism. Partially due to this belief, I have invested heavily in real estate since 2003.

I believe current reported inflation levels will subside by the end of 2022 and definitely by 2023. Specifically, I'm looking for inflation to come back under 5% by end of 2022. As a result, the upward pressure on interest rates will also subside by the end of 2023.

Currently, we are experiencing elevated inflation fear. But the key to making money is looking into the future. Extrapolating current events can be dangerous. I liken today's fear of permanently higher inflation to the fear bearish investors had in March 2020. At the time, bearish investors felt the S&P 500 would keep on crashing into the abyss.

Why Inflation Will Ease And Mortgage Rates Will Stay Relatively Low

Rising long-term bond yields, a stronger dollar, and rising inventories are deflationary. Higher rates slow down borrowing. A stronger dollar makes foreign goods cheaper. And rising inventory means more to choose from at every price point.

Based on the Primary Mortgage Market Survey by Freddie Mac (what we're using to determine the bet on Dec 31, 2023), the average rate for a 30-year fixed-rate mortgage hasn't been above 6% in over 10 years. The last time the average 30-year fixed rate was at 6% was in 2008.

Average mortgage rates 2022

Finally, I was offered a high-enough buffer I could not refuse. If Jim had agreed to an over/under line of 5%, I'd still take the under for $5,000. However, he agreed to an over/under line of 6%. Further, with an over/under line at 6%, I was willing to bet much more than $5,000.

Whenever I believe I have greater than a 70% chance of being right, I will make a move. In this case, I believe with 85% certainty the average 30-year fixed-rate mortgage will be under 6% by the end of 2023.

Overcoming The Fear Of Betting With Hedging

Betting on anything can be scary if enough money is on the line. Every time before I'm about to sign escrow documents to buy a house I'm hit with fear. However, the deeper your analysis and the higher your confidence, the less scary the bet will be. The key is to not suffer from Dunning-Krueger, or delusion.

Fear is partially the reason why most of us don't go all-in on a particular investment. We diversify our investments by investing in index funds, buying smaller positions in multiple stocks, and diversifying into bonds and other assets. At the same time, fear is a key ingredient for achieving financial independence.

With an 85% conviction level I will be right on our bet, that still leaves a 15% chance I will be wrong. All bettors and investors need to be humble enough to know there is never 100% certainty when taking risks. Just know that if you never take any risks, you will unlikely earn outsized rewards.

Therefore, one of the things I can do is hedge my bet, especially once my conviction level drops under 70%. For example, if inflation starts coming in above 10%, there's probably a 40% chance the average 30-year fixed mortgage rate could jump to 6%. As a result, my expected value of my bet might drop from $4,250 to less than $3,500.

Below is a nice historical inflation chart from the Bureau of Labor Statistics. It also shows Fidelity Investments' 2022 inflation forecast of 3.5%.

Historical inflation rates chart

How To Hedge Your Bet (Investment)

There are various ways to hedge a bet if you start getting nervous you will lose. Here are three key ways.

1) Offload your risk onto someone else.

Just like how banks who originate a loan can sell it off to a secondary mortgage market, you can sell all or a portion of your bet to other people.

For example, if I wanted to reduce my risk exposure by 50%, I could try and find five other people to take $500 of my exposure each. They would get the same terms as I would get.

2) Become the banker and lock in a win.

Whenever you make a bet with very attractive odds, you have an easier chance of selling your exposure for a guaranteed profit. With my platform, I'm sure I could find enough people to take $5,000 worth of exposure with a lower payout.

For example, I could offload 100% of my risk and offer to pay $4,000 if they bet $5,500. If the average 30-year fixed-rate mortgage is under 6% by the end of 2023, I would win $5,000 from Jim and lose $4,000 to others for a $1,000 guaranteed profit.

However, if the average 30-year fixed rate mortgage is over 6% by the end of 2023, I would lose $5,000 to Jim but make $5,500 from others. When you become the banker, you job is to find the market-clearing price and earn a guaranteed spread.

On a side note, in an inflationary environment with rising interest rates, banks tend to outperform.

3) Invest the other way.

The easiest way equity investors hedge their long investments is by going short. Therefore, to hedge your bet, you could allocate some of your capital that will profit if your bet is wrong.

For example, let's say it looks like 7.5%+ inflation is going to last well into 2023. Further, I start thinking inflation has a 60%+ chance of going beyond 10%. If so, I could buy inverse bond ETFs like TBF (ProShares Short 20+ Year Treasury Bonds) and TBX (ProShares Short 7-10 Year Treasury) that will appreciate with a rise in inflation and interest rates.

If the 10-year bond yield rises from ~2% today to 5%, then the average 30-year fixed rate mortgage will likely be above 6%. However, if I invest in TBX, it may go up from $25.25 to $34.67 a share for a 37.3% gain.

Therefore, to completely hedge out $5,000 of risk, I would need to invest at least $13,405 in TBX. The best situation is if the 10-year bond yield rises from ~2% today to 4% by end of 2023. In such a scenario, the average 30-year fixed rate mortgage will likely be under 6%, while my hedge in TBX will likely be up about 25% for a $3,351 investment gain plus a $5,000 prop bet gain.

Where do you think the average 30-year fixed rate mortgage will be by end of 2023?

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Hedge: You're Not Stuck If You Make A Bad Investment

So many times people will give up once they've made a wrong bet. The reality is, there is always a market out there for something. Complete loss is rare unless you're investing in options, angel investments, or undercapitalized equity real estate investments.

If you want to salvage some of your capital, you can hedge well before you lose everything. You just have to be aware enough to know when your investment is moving against you. Then you've got to make further analysis about the future.

There are all sorts of ways you can hedge an investment and preserve capital. Here are some daily life examples:

  • Hedge against hitting a glass ceiling by getting your MBA part-time
  • Hedge against taking longer-than-expected to find love by egg-freezing in your 20s
  • Hedge against spraining your ankle by wearing an ankle brace
  • Hedge against rejection by applying to multiple schools

Realize Your Upside Scenario

There's one last thing about betting I'd like to mention. Think about the upside if you lose your bet.

In my case, if mortgage rates do shoot up over 6%, this likely means my real assets will do well. Rates would only reach this level if the economy is very strong. Therefore, in a way, the $5,000 bet is like a hedge against my existing investments.

If you want to bet, then bet responsibly. Do your research. Find an edge. Don't be delusional. And bet an appropriate amount based on your income and net worth. Win or lose, be gracious. If you lose, learn from your mistakes so you can improve your odds of winning in the future.

Hedge Your Investments With Real estate

If you’re looking for an easy way to invest in real estate, check out Fundrise. Fundrise offers private real estate funds that invest mainly in single-family and multifamily rental properties. The investment minimum is only $10, so it’s easy to start small and build a larger position without leverage.

I’ve personally invested $810,000 in private real estate to diversify and earn more passive income. I find real estate to be one of the best hedges against a stock market downturn, high inflation, and volatility.

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If you want to become a better investor and achieve financial freedom sooner, purchase a hard copy of my new book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. The book is jam packed with unique strategies to help you build your fortune while living your best life. 

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45 thoughts on “How To Hedge Your Bets Once You’ve Realized A Mistake Was Made”

        1. We’ll find out on June 16! Based on the 10-year at 3.45% today, I think the PMMS will come in at a 5.82%.

          Basically, I’m a big underdog now and will likely lose my bet. However, at least I did some hedging by shorting some stock. But of course, it’s not enough!

          The move up so quickly in rates has definitely been a surprise. But it’s also a positive the Fed believes the economy is strong enough to hike so aggressively. It’s also a positive there’s no discernible uproar about risk assets down 20% – 30% YTD.

  1. Hmm … great bet and debate. This one is far more entrenched than most people realize. Forced to choose, I would say that we will see 6% rates or higher by the end of 2023 and Sam is incorrect and too optimistic. I have 2 simple reasons: Time and number of inflationary causes.

    Inflation is time delayed, and its correctives measure are also time delayed. Sam is assuming we have seen the worst of the inflation and the not even in place corrective measures, will quickly chip at inflation, slowing its pace. Personally, I am not at all as optimistic. Inflation is a slow moving freight cargo liner…like the one stuck in the Suez Canal. Inflation, much like cargo ships DOES NOT turn on a dime. Thinking about the ramping up of inflation; the US government was issuing relief checks in April of 2020, almost 2 full years ago…and we have yet to reach a peak of inflation. Many Americans needed that check to sustain themselves, even more people (thankfully) did not need it and saved or invested it (more on that later). I…me myself and I, do not believe we have fully absorbed all of the price increases from massive government spending, delayed spending of savings (those who saved their relief checks have had limited options on what to spend it on over the last 2 years….so I suspect some is still stashed away, just waiting to be spent). In addition to the massive government spending, we have MUCH MORE recently experienced supply chain constraints that are not resolving quickly. From back logs in ports, to trucker protests in Canada to Omicron moving through nations on various continents at different times…I (me, myself and I) do not see this supply chain issue resolving to a large degree in 2022. I also do not think we have fully seen most consumer facing brands raise prices quick enough. Companies are not prepared to deal with this kind of narrative because leadership has not had this kind of inflation in decades. Many public and private companies are raising prices too slow so I do not see us at peak inflation. Additionally, wages are going up, slowly but surely, I do not think we have had enough time for companies to absorb higher wages and reprice good for consumers. Also…it wasnt JUST massive government spending, rates were dropped TOO low and maintained TOO low TOO long. STARTING to raise the rates now DOESNT stop the inflation train that has been gaining momentum for the last 2 years in an unnaturally low interest rate environment.

    Furthermore, I am no political analysts but I (me, myself and I) do NOT see Russia engaging in a long term conflict, but IF they do, energy prices will be painful. We import more barrels of oil from Russia than ever. Politically, we have painted ourselves into a corner, green initiatives shut down key pipelines from Canada, fracking is volatile and a hot button issue, OPEC said they wont up production anytime soon and we have an embargo on Venezuela. So the longer this narrative with Russia plays out, the worse energy prices will be because we rely on them to a large degree for oil and natural gas. To add to that, massive political issues in Kazakhstan (a Russian ally) and that is pushing up uranium costs. This could be the nail in Sam’s coffin.

    I am not saying well see $6 gas tomorrow, but I am saying the energy price increases we have ALREADY seen will support high inflation levels through out 2022 I believe, regardless of how much the fed raises rates this year. Prices will not stabilize this year, its just too late and the inflationary sources are too many to address efficiently. This is a VERY complex inflation issue we have.

    Next, adding to my time argument: “the great reallocation”. When rates were low, bonds made little sense for many investors. So they piled in stocks, real assets and didn’t think twice about borrowing since rates were so low (and maybe they shouldn’t have been). Then many American’s got big checks and had no where to spend it…some piled into investments. When those investments went up, even more retail investors piled in. During a time when global and national GDP dropped, markets and speculative investments (like crypto and tech companies) soared. That’s where we are today, minus 10-30% correction YTD lol. With inflation very high and bond yields low, I do not see rates climbing fast enough to lure people back fast enough in 2022 (a 4-5% bond isn’t too enticing when inflation is 6, 7, 8, 9%). Thus…I believe we will see a STEADY stream of 1/2 point increases from the Fed each quarter in 2022. The slow movement of people BACK into bonds will keep demand lower, keeping prices lower and continuing positive pressure on bond yields.

    Any one of the things I have pointed out should be somewhat concerning and cause for professional analysts to look deeper into inflationary pressures….but 4 potential causes of inflation … I don’t think we have seen peak inflation and I do see the road to remedy being much longer than most analyst would believe today.

    So yea…I dont gamble (I “invest” lol) … but I would bet on 6% rates by end of 2023…and I would also bet on 4%+ rates in 2022….I imagine by summer…not even end of year…but I have nothing to back that up….just a gut.

    When you pay out your 5k Sam, can you send a large novelty check? The picture would be priceless.

    1. Jim Johnson

      Sam lost the bet,
      He paid quickly and 2 charity’s benefited.
      Unfortunately I did not get to have a signed as I collect checks but that is the vanity
      on ME… Sam was great.
      He did mention that he might write another story about that I hope he does…
      Sometimes very smart people can be dead wrong about things.
      And I say that knowing that I’m not that smart and I’m so frequently wrong.

  2. Jim Johnson

    Why I offered Sam a $5,000.00 bet that interest rates will be at %6 or higher by the end of 2023?

    I believe inflation will prove higher than reported and harder to get under control. Political response will be largely ineffective and difficult to implement due to their beliefs.
    The covid response and asset appreciation has created a glut of capital in the United States and around the world.
    I believe the Federal Reserve will have to respond much more aggressively to slow down inflation.
    The definition of inflation from my I-Phone is “a general increase in prices and a fall in the purchasing value of money.” I believe that inflation is being under-reported and is going to be a much bigger problem than economists think. Living in East Tennessee, I have to roll my eyes when I see articles stating that energy costs have gone up %27. The reality is that the price of gas is now $3.50 a gallon whereas a year ago, it was under two dollars. Inflation greatly reduces poor American’s quality of life. They do not worry about bond yields, a strong dollar or interest rates. What poor Americans worry about is putting gas in their car and food on their tables.
    Politicians that can remember the late ‘70s and early ‘80s know that inflation is a political death sentence. Currently, democrats are trying to pass an additional trillion dollars infrastructure bill. I think democrats will lose big time if the inflation is not tamed. The New Green agenda makes it impossible for them to backtrack on off-shore drilling, fracking, the pipeline and reduction of red tape. I believe that politicians are beginning to panic and will try to make policies to reduce inflation. These policies will amount to an upgraded “food-stamp” and offer relief on some goods and services.
    The world’s governments with the United States taking the lead response to Covid is unprecedented. I read in Tech Startups that “%80 of the US dollars in existence were printed in the last 22 months from 4 trillion in January to 20 trillion in October 2021 “. Consider the glut of capital from PPP loans, 3 payments for every American citizen, child credits and a second round of PPP. That together with a decade of stock market increases and home value appreciation have created a mountain of cash in United States. There is a whole generation of young investors that have only known low inflation, easy, cheap money and stock markets that have only gone up. I can remember being ecstatic getting a 6.7% loan on a small warehouse I bought. Today, investors seem to think that companies will not be able to make a profit or homes will not be bought or sold at a 6% interest rate. I am living proof that it is not the case.
    I believe that the Federal Reserve will have ten rate increases over the next two years. I believe it will raise fifty basis points in their March meeting and subsequently 5 to 7, ¼ to ½ point rates increases. I believe that inflation will be a persistent problem in 2023. Continued rate increases will keep going in 2023. Assuming a 30 years fix rate today is about 3.75% and with a total of 10 rate increases over the next two years, a 30 years mortgage will be between 6% and 7% at the end of 2023.

    1. Love the thoughts and the conviction Jim!

      One thing to note though, the Fed does not control mortgage rates. They control the Fed Funds rate, the shortest end of the yield curve. In other words, the Fed could raise the Fed Funds rate by a total of 2.5% through 2023, and the 10-year bond yield might only budge from 2% today to 3%.

      The 10-year bond yield is determined by the market. And the market is saying inflation will roll over within 12 months.

      Whoever wins in the end, beers on me!


      1. Are you hedging your bet yet Sam!! Check those rates…I think you might be wrong this time….
        Either way love your blog…
        Your a big asset for financial success!!

        1. I would bet more that you will lose.

          The stock market is down almost 20% with the 10-year at 3%. You really think the economy can handle another 0.75% higher to get to your 6% on the 30-year?

          Very doubtful. I’ll make a side bet with my friend that you will lose Jim. But you have had a good run so far!

  3. This direction of interest rates topic is hidden in hedging when you’ve made a mistake. I think you should elevate the direction of interest rate topic to its own article and discuss impact on stocks and housing. Its seems your view is inflation is transient so only modest impact on rates, still important to give your hypothesis on stock and real estate market under that scenario. Would also be interesting article what if inflation is not transient, what plays out in both markets. I would be interested in your analysis of these points.

    1. Sounds great. I’d love to get your thoughts on where interest rates are headed and why, especially if you disagree with my written reasons why inflation will come down.

      Don’t be shy!

  4. Great article as always, but I wanted to point out something with this bullet point:

    “Hedge against taking longer-than-expected to find love by egg-freezing in your 20s”

    Eggs are typically only frozen for up to 10 years, and the best time to freeze your eggs is actually in your early 30s! If you freeze your eggs at 25, and you meet your future spouse at 27, then you have plenty of time to make babies the natural way in your early 30s.

    If you don’t meet your spouse until you’re 35, then the eggs you froze at 25 aren’t really viable, especially if you’re thawing them when you’re 38. But if you had frozen your eggs at 33 then you’d be good to go until your early 40s.

  5. Manuel Campbell

    Sorry but, contrary to what you said, I’m not a bettor. “Like it or not, we are all bettors.”

    Personally, I hate betting, and I stay away from it as far as I can. I have nothing against people who are betting. But I consider it a waste of time.

    I agree with you I don’t think interest rates on mortgages will go higher than 6%. But I won’t do anything with it, except I won’t buy a 3% 30y bond at this time because I think they are a poor value proposition.

    If you said to me “If interest rate on mortgages go up higher than 6%, we can organize an investment pool and lend money at 6% to other people via mortgage loans on specific homes, and then share the profits”, then it would make sense to me as an investment and I would consider investing with you.

    That’s the difference between betting and investing. Betting is a zero sum game. Like the situation you described. Either you win or you lose. But the opposite is true for the other person. In total, no one end up with more money after the bet.

    In investing, by contrast, all investors end up with more money after the deal is over, like in my mortgage pool example above. Even the borrower could end up in a better position, if the home he purchased gained in value over time and with the rent he avoided to pay during that time.

    I’m not saying that an investment could not turn badly. The homeowner could default on the loan, the house could lose value, and all investors could end up losing money in the end. But that is not the initial intention of the deal. The deal is made in the expectation that everybody will win.

    That’s the big difference between betting and investing …

    So, you do what you wanna do – this really don’t matter to me.

    But, please, don’t say again we are all bettors. I am really not of this type !

  6. I think it’s an excellent bet for you Sam.

    Hard to see the 30 year rate getting to 6% any time soon. Inflation will be high in 2022 but after a bunch of rate increases by the fed it will tamper down.

    I’m curious why you would need to potentially offload risk in this case; $5k is a drop in the bucket for you. Of course when you mention doing so if the 30 year rate starts climbing near 6%, that would indicate you might lose. But then I think it would be expensive to offload risk.

    At any rate another interesting article!

    Thanks for posting.

    1. I don’t need to offload risk now. I’ve made three suggestions on how someone can offload risk if they bet and have second thoughts.

      But if the average 30-year fixed shoots to 5.25% or higher, I may want to lighten some of the risk.

      $5,000 is still a lot of money. Can buy more than 4,500 double cheeseburgers!

      1. I’d like to make a bet that there’s no place in California with double cheeseburgers for $1.11 each. :-)

          1. You’re right about me not eating at McD, just people with kids are required to eat there. I bought my first new auto when in High School working evenings at Jack in the Box, yuck. Recently bought a new sofa and I explained to my wife that it cost double what my first car, brand new, cost in 1968.

          2. Do you think those cheeseburgers will still be only 99 cents in a year? Restaurant costs are skyrocketing and McDonalds is already in the news forecasting price increases.


  7. Boy, the bet reminds me of the cartoon I saw the other day. A mobster was playing pool with a mister milk toast and says to him, “The bet on this pool game is $200, that is unless I lose, the bet is off”

  8. At 6%, I’ll be oweing a lot of money on my ARM. In February, they bumped the interest back to 3% (it was originally at 3% for 5 years, then went down to 2.625% for 1 year).

  9. When thinking about the expected payout on a bet, we should also consider the probability that the losing party actually pays. You suggest you would definitely pay, but without a reasonable estimate of the other party’s commitment to pay it seems hard to be rigorous about expectations. If the other party knows you are honorable but they are not, that might tip the scales into being a good bet for them.

    Feels like buying government bonds from Argentina.

    1. For sure. Counter-party risk is real. The interesting thing is, nobody has not paid up with me since 2009. Maybe I’ll lucky.

      Or maybe there is too much reputational risk not to pay up.

      Where do you think interest rates are heading?

  10. I’m usually pretty low risk in general so I’ve never really thought about hedging through offloading risk onto someone else or becoming the banker to lock in a win. Clever logic; I like it. I do a fair amount of day to day type of hedging though. That’s always come pretty naturally to me. From now I’ll start thinking more about how I can hedge risk in my investments. Thanks!

  11. Interesting post Sam, thanks. One thought is you could ask Jim to write a counterpoint guest post as it would be interesting to know his thesis on high rates.

      1. That is a great idea. I was mildly interested in you post about hedging a bet. Future of interest rates is huge interest

  12. I’m “willing” to accept accept some of your risk if you want to offload it!

    I’d say 80% confident rates will be under 6% at the end of 2023.

    65% confident rates will be under 5% at the end of 2023.

    It’s a good point about inflation and how it’s easy to take recent/current information and extrapolate that out to infinity. Even with a tight job market, some recent conversations with HR/Headhunters/Recruiters leads me to believe that wage inflation either has peaked or is near the peak.

    Supply chains are under less stress and materials are starting to move more freely. Not saying there aren’t long lead times on some items, but in general it is getting better. The worst part is behind us and I’d expect continued improvement through the rest of the year.

    Feeling confident about another strong year in Real Estate for 2022, but then things will start to revert to normal/historical returns on real estate.

    I’ve read your comparison to Canada and how there could be additional upside, along with potential pent up demand from outside the US. Just not sure how long that scenario takes to play out (18 – 24 months?).

    1. How much action do want from my $5,000 exposure? :)

      It’s hard to offload risk now given we just made the bet. Maybe if the average 30-year fixed rate mortgage hits 5.25% will I want to offload some risk.

  13. Does the rate have to just touch 6% or stay at 6% for a time period?
    Also what are your thoughts on tesla stock as a “bet” both short term (1-2yrs) and long term (8-10 yrs)?

    1. We didn’t specify. But I did give him two benefits already:

      1) 6% or higher and he wins vs. his 6% – 7% prediction
      2) By end of 2023 versus his prediction of 6% – 7% by mid-year

      Maybe I will negotiate with him on this point. However, I doubt a 6% average will be hit at any time before Dec 31, 2023.

  14. If you make that kind of bet you need to both agree on what piece of data, from what source on what date settles the bet. Maybe there is only one official average house interest rate but it may be you could find several sources claiming different rates. The last thing you want to do is to end up with an argument over whether source A or source B is the proper source to settle the bet. I’m not sure how you see high interest rates as being favorable to your portfolio. Seems like it would hit your portfolio, and mine, negatively in every single sector. I’ve lived through high interest rates, my house loan was 8.75% fixed. And the housing market did poorly then. The stock market didn’t do that great either averaging low single digit returns, it lagged inflation by a lot. Maybe it would be different this time but the only thing that carried us through the late 70’s and early 80’s was my salary was going up 25% a year from my job. None of my investments were doing anything positive.

      1. Sorry, I looked back twice to try to find it in the post because I was sure you had covered that and I missed it both times. My bad.

        I’m’ not betting you Sam, that’s crazy, you are way more versed in these topics than me. I kind of threw that straw man argument out there so you could tell me why I’m wrong. Economics always feels circular to me, much different than my engineering where there is usually only one math answer to a problem.

        I think mortgage rates will climb but I don’t think they can get all the way to 6% this year or even the end of next year. I feel like you’ve got a very high chance of winning barring some black swan event. I’m betting on inertia alone to make that kind of increase unlikely. Plus inflation curbs spending which reduces demand which curbs inflation so unless you have hyperinflation, which isn’t going to happen, then you’ll have slow measured inflation at worst due to the competing forces at play.

        So when you win will you splurge the money as fun money or invest it. Its small change given your net worth?

        1. No problem. I actually view it a failure on my part if readers miss points or cannot understand what I’m writing. It shows that I don’t write clearly enough. So now I will go back to the post and bold the section and make it more clear.

          If I win, I’ll probably spend some of it on a nice meal for my family, donate at least $1000 of it to a center that takes care of disabled children and adults, and use some of it to buy my parents a gift.

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