Monday, March 9, 2015

Let's Keep Our Money!

In last week’s chat I voiced a few concerns about the movement to consolidate fire districts within El Dorado County and the potential financial impact on El Dorado Hills.  As mentioned, the Rescue Fire Protection District Board of Directors and our fire board have just voted to explore the merits of EDH Fire annexing Rescue Fire.  Of course it will take some time for both staffs to evaluate all of the issues surrounding this annexation, develop a plan, get their respective board’s approval, EDC Board of Supervisors approval and then LAFCO approval to proceed, but just like the Latrobe Fire annexation, the wheels are set in motion.

I first have to ask the Rescue community:  why support an annexation if there is no elimination of the two fire service special assessments voted for previously?  Similar to Latrobe, Rescue property owners pay special assessments to augment ad valorem property tax fire funding because of their low AB 8 rate.  However, now that the AB 8 rate can be increased as part of the annexation to EDH Fire, why not ask to have the special assessments eliminated as a condition of the annexation?  This takes the form of double taxation if not – paying special assessments for fire service and now fire receiving substantially more property tax funding because of annexation. Rescue Fire receives over $365,000 in special assessments annually.  Would Rescue vote for these special assessments now knowing their AB 8 rate is lifted to a level that would provide the fire service they always wanted?  I think not.

It doesn’t take a CPA to know that migrating to a fully paid firefighter workforce in these outlying areas has a significant financial impact.  Rescue is however a fully paid 24/7/365 firefighter workforce but others like Latrobe are not.  Regardless, although initial annexation staffing projections might mitigate some financial burdens over the first five years, they will begin to become materially significant down the road as increased coverage, OT, retirements and higher salaries plus pension costs start to take hold. Just ask El Dorado County Fire District why they don’t annex anyone into their district.  Unless someone can tell me that these outlying areas will grow in proportion to El Dorado Hills or expense management follows the actual property value growth trajectory in those areas, then EDH is the financial loser in these acquisitions.

It would seem after a Rescue annexation, possibly Diamond Springs/El Dorado down the road (yes that has been brought up too) and Garden Valley not possibly liking a Georgetown marriage, that we could truly become the El Dorado Hills “County” Water District as our actual founding name so states.  It’s also fascinating that the EDC Board of Supervisors is willing to match our 17% AB 8 rate for others, and possibly approve even higher, even when they have a financial crisis of their own.  Truth be told, our funding rate was first established based on the district providing water storage, distribution and water rights to the community and “ancillary” fire protection services (did you notice how our founding name above only includes “water” and not “fire”). 

So, once the district realized they could pawn off the significant expenses of providing water services to EID, all of the funds were freed for just fire services.  Since the funding rate couldn’t be modified downward without the dissolution of the district, EDH went along with all of the money flowing back to the community for fire services alone.  Forget now that we pay EID substantial fees for water and sewer service (geez, did I mentioned anything about double taxation before), throw in the meteoric growth and rise in property values in EDH, and you have one of the best paid fire departments in California.  Should these mostly rural fire districts join this lucrative compensation party?  Seriously, how could this be good for our own firefighters allowing others to take a piece of our financial pie?

Not to use fear inappropriately but it certainly is conceivable that all annexed fire district voters could readily support their own slate of candidates for our fire board at a future election, and take majority control.  I seriously doubt El Dorado Hills wants to wake up one morning and find their substantial fire district cash reserve funds being used to build out new stations in Latrobe and Rescue as well as replace all of their aging fire engines and apparatus to boot.

If we want to be serious about doing what’s right for El Dorado Hills, then let’s explore the merits of consolidating with our own CSD (they have all the governmental powers to provide fire, police and emergency services to our community) and let our tax dollars “subsidize” within the El Dorado Hills community, not beyond.  Frankly, let’s just stick with shared contracts for services with these other fire districts and stop the annexation empire build!

And the Benefits to EDH?

Currently, there are thirteen independent fire districts serving western slope communities within El Dorado County.  A good majority of these fire districts are struggling financially and for a few years now the EDC Board of Supervisors has been encouraging greater unity amongst the fire districts to try to keep them solvent and relevant.  EDH Fire’s annexation of the Latrobe Fire District in November 2014 and a shared contract for services arrangement with Rescue Fire Protection District are some real examples of this unity being encouraged by local leaders.

From a county perspective increased cooperation is good as it can lead to better fiscal management through operational efficiencies and some cost savings.  It further allows many of the fire districts that agree to consolidate or be annexed to obtain county approval for an increase in their AB 8 funding rate.  This funding rate is the primary revenue source for most of these agencies and so far, the county has been willing to match EDH Fire’s 17% rate for the Latrobe annexation, and they might possibly even agree to a higher funding rate for other combinations in the future.  Note:  A change in this AB 8 rate is merely a reclassification of ad valorem property tax revenues from one use by the county to another, and it is not a property tax increase to property owners within the affected districts.

Now, I’m a true believer that we have far too many special districts in communities across America.  With a majority of these special districts as well as cities and counties everywhere fighting for added funding to keep operational, and the financial obligations and commitments of past boards/councils honored, I agree that some consolidations are in order.  The question becomes for each of these special districts: what is best for the citizens and businesses in the areas being served?  Just because local leaders believe fire district consolidation is the right way to go for them, should El Dorado Hills buy-in that this is the right choice for us too?

I can only imagine what the long-term ramifications of such annexation decisions will be.  These fire districts are small for a reason: their property tax revenues are very limited and thus result in skimpy budgets, a combination of paid/volunteer firefighters for cost savings and their budget frugality provides great expense oversight.  The Citygate fire district study done for El Dorado County back in 2010 stated “not all of the districts will likely ever experience enough growth to provide a stable revenue base for more than a very low level of fire services.” Increasing funding through annexation provides greater financial resources initially but so will go the expense control and eventually the same financial troubles will resurface down the road just be that much bigger. 

In private industry, corporate consolidations and mergers generally are negotiated on the merit that the surviving entity will be stronger through increased revenue opportunities and increased operational efficiencies (i.e., layoffs, closures, etc.) thereby reducing expenses to drive greater profits long-term.  Unfortunately, in government, there may be an initial bump in revenues (due to the AB 8 rate modification) but rarely is there a strong commitment to on-going expense management and tight fiscal restraint.  Public safety personnel costs are a serious concern for communities everywhere.  EDH needs to be aware that when there becomes a budget shortfall down the road, and surely there will be, we’re on the hook for the majority of it.

Also, personnel costs are only one piece of future funding obligations too.  There becomes a push for improved facilities, equipment, vehicles, etc. to upgrade rural fire stations to standards in existence at the best funded fire districts.  For example:  the same Citygate fire district study identified Latrobe Fire District as having $1.1 million in “immediate apparatus replacement needs” and this was back in 2010. Thus, without growth in these outlying areas, who pays for these needs?  EDH will for sure. Certainly the more EDH citizens allow annexation of other fire districts the more we’ll be subsidizing these outlying areas.  And, the costs will become enormous when projecting out over the next 10, 20 and 30 years.

At the February 19th fire board meeting your EDH Fire Board voted 3 – 2 to direct staff to explore the merits of an annexation with the Rescue Fire Protection District who’s board the week prior voted 5 – 0 in favor of further exploring an annexation with EDH Fire.  Stay tuned!

Saturday, January 3, 2015

Public Safety Is My Priority

As your newly elected director to the El Dorado Hills County Water/Fire District, I would like to first thank the voters for their trust in giving me the opportunity to serve the community as an elected official.  I’m looking forward to working with the current Board to help guide the department in a prudent, efficient and responsible manner as it relates to fiscal management and public safety.

As part of my commitment to engage the community more, I would like to invite El Dorado Hills citizens interested in knowing more about operational, financial and strategic aspects of the department to meet with me over coffee on Thursday, January 8, 2015, 8am to 10am at Raley’s in the coffee lounge.  I’m soliciting folks for a Citizens Advisory Committee to meet on a regular basis to discuss the needs and desires of the community.  Anyone with an interest in public safety is invited to be a part of this informal discussion group (Note:  This committee is NOT sanctioned by the department or the Board and is strictly a function of my personal duty to the public).  I have met many citizens that have expressed a desire to be a part of this committee…the more the better!

As I look out over the coming months, the Board will be wrestling with some very important topics such as:
1)      To proceed or not with the planned training facility on 21 acres in the business park
2)      The justification and determination of continuing to charge development fees on all new residential and commercial construction
3)      To move forward on a large investment in solar technology for all four stations
4)      The renegotiation of the Memo Of Understanding on all labor relations

Lastly, I urge everyone within El Dorado Hills to remember to use the Camino dispatch emergency phone number 530-626-4911 for all fire/medical emergencies within El Dorado County rather than dialing 911 from cellular phones.  The cellular 911 reporting and routing system is inefficient and time restrictive when using cellular phones (NOT so when dialed from landline phones though).  Communications and dispatch is another topic to be addressed by the Board down the road and a “hot button” of mine.

I have personally noted this emergency phone number in my cellular phone as a “Favorite” labeled:  Fire/Med Emergency El Dorado County Only .  Get everyone in your family to do this as an added safeguard and possibly quicker response times than dialing 911 from a cellular phone.  This number is for fire/medical emergencies only and SHOULD NOT be used for police or other public safety emergencies.

Stay tuned as I keep you apprised of department happenings and public safety issues while serving on this Board.  Again, thank you El Dorado Hills for electing me to serve you.

Friday, May 2, 2014

Garwood Kotite - Forever In My Memory!

I didn’t know Gar in his earlier party days.  I never shared an alcoholic drink with Gar but never ever felt like he was not partying with me, whatever we did or wherever we went. Whether floating down the river, traveling abroad or hitting a 49er game, Gar needed no superficial additive for a fun life…he was simply just full of it - sharing his infectious joy with all us all the time.  His smile was mega-watt, his laughter contagious and his non-judgmental character flawless.  He was charismatic, a rare trait that definitely personified this man!  He wanted you to have fun…he never stopped anyone from having a great time, and if babysitting some of us along the way was needed, this dude stepped up.  Lord knows how many times he was the designated driver on “boy’s night out” despite being affectionately abused about his driving skills all the way home by his drunken passengers.  Can’t figure out why he never rolled the van to shut us up!

His eating habits are legendary… we all know him from his healthy food habits shopping at Whole Foods Market…picking up some sprouts, tofu, maybe some veggie burgers…  NOT!  This man loved real food and could eat…like no other.  I recall one meal, looking forward to a steak and lobster dinner on a cruise ship one day with him and some other friends and I’m thinking about skipping lunch to leave some extra room for our evening feast.  No less than one hour before table sitting, I catch Gar hanging out at the pool deck consuming two hamburgers with all the fixings.  He said he needed an appetizer before the main course.  I’ll be damned if he didn’t match us fork for fork at the dinner table!

I could go on with other stories so fun and special.  We all have so many of him as well.  Collectively, we have memories of a person that transcended life here on earth.  I think we all realize that now…just how special of a person he truly was.

Speaking of which, I want to thank you Karin for all the joy, adventure, love, fun, excitement and support that you brought to Gar.  You two were an awesome couple and the respect and love between the two of you was evident to us all.  You brought to him a real life not otherwise possible on his own.  He was able to expand his boundaries, open his eyes to different and inspirational concepts and cultures, to live, and to just be more at peace with himself as he shared a new life with you, somewhat unfamiliar but fascinating all the same.  Still one to watch nearly every penny spent (something about those finance guys) he didn’t waste time realizing he couldn’t take it with him…thank you for helping him enjoy so much more while he was with us!

Speaking of his finance mindset…contemplating the cost of a $30.00 unlimited all-you-can drink soda pass on a weekend cruise, Gar quickly added up all the hours he’d be awake and then projected the number of cokes he could consume per hour, and decided that was one hell of a deal.  He bought the pass and never looked back!  I can’t recall the final Average Unit Cost here Gar but it’s safe to say that you got the better end of that deal.

It is so hard to believe that this deal is real….Gar is gone…forever in our memories but gone from our daily lives, and it hurts.  We love you Gar!

Monday, November 25, 2013

Today's Housing Strategy - Don't Get Burned Again!

So, how would I approach real estate today?

Well, I've made several references in prior blog posts to having a well thought-out housing strategy so I will expand upon things here for a full perspective.  It is so important to be thinking long-term when buying, owning or selling real estate these days yet many give that little thought.  You don't want to buy, sell or even own real estate just based on current market conditions (e.g., you buy just because someone tells you "it's a great time to buy" OR you sell because you think the market has peaked OR you own because "housing has been a sound long-term investment"). These are not valid reasons to be a principal to likely the highest valued asset you'll ever own in your lifetime! 

Further, don't let the National Association of Realtors or anyone else whom has a vested interest in your doing something to tell you "now's the time!"  Get their input but make such decisions based on your timeline not someone else's.  What I'm referring to is having a minimum of seven years but prefer a 10 year window on your life.  I know that sounds difficult given so many variables and unknowns let alone all the good and bad surprises that life throws at you.  However, anything less suggests there is too much uncertainty whether it be your relationship status, the security of your income, your family size, geographic preference, climate tolerance and so forth.  If you know you'll be finally relocating to be closer to family in a few years or can't stand the cold weather for the foreseeable future you better start considering your options about housing today not later. The possibility of renting rather than owning during transitionary periods should be considered.

Be it as it may but renting is not such a bad option when not knowing if you could tolerate another winter or "hang with your job" for another few years let alone another few months.  Don't make the mistake of buying just to own nor renting long-term when you know you'll want to live in the neighborhood for the foreseeable future.  In other words, so many personal life choices need to be taken into consideration before transacting homeownership at any level.  And, therefore with the "clearest" window into the future of your life, here are my top ten housing tips for long-term success in real estate for the new debt-ridden American landscape:

· Don't pre-pay any additional principal on any home or investment property mortgage if your interest rate is 4% or less.  Take full advantage of these incredibly low rates for the life of your loan.  If you have a 30 year loan term and in 5 years interest rates were to double (it's possible given the economic backdrop of this "recovery") that money you have saved on prepayments will earn more than the mortgage rate and you've got 25 more years that it could do so.  You must be able to save that money though or this provides no benefit whatsoever.  If you're a compulsive spender, better to force yourself to pay off debt than to try and save when all is lost on the next credit card bill that comes in the mail.

· Don't get into 10, 15 or even 20 year term mortgages get the full 30 year mortgage term almost regardless of the interest rate differential.  Having the ability to pay back debt with "cheaper" dollars down the road due to inflation or loss of purchasing power of the dollar will put a mortgagee in a better position not worse.  This kind of cheap debt is a good "diversification" that matters when the future is more cloudier than ever.

· Don't have but the bare minimum cash or equity in your home or investment property.  Again, a low interest rate loan below 4% today would surely qualify for low and be much better than cash.  Don't get a 2nd or an equity line of credit to access that equity either. Typically, you'll pay much higher interest rates and the term of the loan will be much shorter.  Lock-up as much cheap debt as possible on a 1st mortgage only but don't treat the market's rise as another opportunity to get cash out - stick to the original cost or current market value, whichever is lower, as to what can be financed.

· If going to buy with all cash to beat out other buyers then state your intention to do in the contract to have the best shot to lock-up the property.  Then finance the purchase if escrow time allows (do the financing in the background of the escrow transaction - you always have the option to close with cash should it not play out as hoped).  Ask the seller for a time extension too if needed, it doesn't hurt to ask.  Lastly, refinance your cash out of the property ASAP afterwards if close with cash...don't leave so many eggs in one basket!

· Look at your business and ask yourself if your business failed or your business income were to get hit as it did in the Great Recession or worse, what house could you afford to live in with the reduced income or replacement job you'd be comfortable securing.  Need to be sure you're living not just within your means but at an income level that can be easily shaved by 30 to 50%, if necessary.  Having a mortgage payment and other housing expenses treated as though you make half of your current annual income or combined annual income is not only great expense management but it allows for savings and emergency funds too.  The freedom from being "married" to your mortgage is also liberating as well.

· Don't sell because you just got back to breakeven on market value from what you paid for it and you never thought that would happen.  Sell because you don't foresee yourself living in that home for an appropriate amount of time to be comfortable about what a changing real estate market might do when you're ready to make a lifestyle change.  Each year, go through that mental exercise of how long you can stay in the home you're in now.  The lucky ones say forever and never sell.  Think strategically not emotionally!
· Live closer to your employer and don't buy if commuting more than 10 miles each way - suburban life works if your job is around the corner.  At a minimum, live close to a large employment center if at all possible and consider a very high cost of fuel when determining if a rural or suburban home is affordable versus a more urban property.
· Consider downsizing, rightsizing or upsizing well in advance of actually being there in real time.  If you know this now, then this is the best time to act not later in hopes for a "better" housing market or for the better opportunity.  Today's market is really good and only because of the low interest rate environment.  Maximize the opportunity today presents and look as far in the future as possible.  Heck, maybe look for and buy that retirement home you want in Arizona now and rent it out for awhile until you get there.

· Seek out and/or hold rental properties that have a cost-to-income ratio of less than 15 times current annual gross rental income.  Many rental properties don't warrant holding them as such as they provide very low if not negative returns on capital when factoring in all costs of maintaining the property and the "renter risk" of additional damage occurring unbeknownst to you until much later.  Market values fluctuate but rents are more constant.  Properties at the lower-end of the price range will generally be the better investments due to rent affordability.  Holding high-end homes seeking rents above $3,000 per month starts getting dicey in my mind regardless of your ability to afford the monthly shortfall.  Housing is much more speculative when doing this.  Sell that property and buy two yielding $1,500 per month in rent each.

· Don't buy because the market seems right, buy when you're right.  Too many folks see what others are doing and they want to follow the crowd.  America has been about "keeping up with the Joneses" since the end of WWII but today just might be different.  Try to follow your own lifestyle path and not that of your neighbor's - it pays to be different!  We all know many of those that used their homes as ATM's during the housing boom this past decade and lost their homes for being so reckless with their spending. 

Remember, having a strategy for whatever you're doing is the most important factor not whether you've got it perfectly market timed or not.  Housing is not about making money anymore or even buying at the "perfect time" but simply living the lifestyle you desire and can comfortably afford.  Homeownership is way overblown in this country and will become another example of the American Way diminished by poor governmental policies and short-sightedness.  And, yes, there is some self-interest and greed by so many others that taints housing as a stable long-term investment too not just government.  Just be sure you're on a solid "affordable" housing foundation and that's the best you can do.  Future housing prices are anybody's guess up or down including mine.  But following my tips should keep you from getting burned or at least not burned too badly going forward provided your initial housing time horizon is realistic.

Monday, June 10, 2013

A Housing Evolution Not Revolution!

Given I'm a veteran Realtor(r) one would expect me to talk a lot about housing and even promote it "as a got to own it" like so many within this industry.  I recently read an article from another Realtor(r) titled "The Housing Revolution" and comparing what today's robust real estate market means to America "the engine that will drive our U.S. economy." He concludes his article with "I would like to think we are not experiencing a housing bubble but actually a housing revolution" with a job growth creation comparison to the Industrial Revolution.

OMG, that is not the way to go about creating jobs nor building an engine for driving an economy forward!  This is quite the opposite and is more of a broad characterization of a housing bubble forming than not.  Even if not a bubble that deflates suddenly but a housing market trend that is very troubling and certainly not sustainable regardless of how far below we are still from 2006 home prices.  Why?  Well, housing is not a sustainable job creator and certainly not the best use of today's available funds for investing in the future of this country.  I would rather today's cheap dollars be spent on investments in manufacturing, mining, technology, agriculture and many other real job creators.  Housing is dependent on people working and having incomes to pay mortgages from non-housing related jobs.  We need new and expanding industries not more new houses! 

Without real jobs housing will become suspect to deflationary pressures that can get exponentially worse with each housing dollar malinvested. This huge misallocation of financial resources spells big trouble to me...not real economic growth.  This path of rising home prices is not sustainable because it's not based on created jobs but jobs created.  A colossal difference!  Another pyramid scheme or Ponzi scenario for that matter that will adjust once again when the foundation for this economy is exposed for the lack of real employment support it has.  Scary, but housing has been monetized by the government once again and that means trouble as it did leading to the Great Recession.  Housing is evolving into just being a place to live not a place to be heavily invested financially like the last fifty something years.  All of this might make "renting" the new American dream!

All of these new housing construction jobs, retail and service jobs (like mortgage officers, real estate agents, escrow officers, inspectors, etc.), government jobs and many other industries feeding off new construction and increased consumption due to improving housing prices tend to expand/contract as real estate markets expand/contract.  So, anyone within those industries buying today really shouldn't as a large percentage of these jobs are here today gone tomorrow.  They're cyclical jobs...we have cyclical housing markets so correspondingly cyclical job markets. 

But, don't shoot the messengers (all those newly employed or previously under-employed "housing related" persons) for buying!  The biggest culprit in this pyramid scheme is the U.S. Federal Reserve.  By driving interest rates to historic lows and printing money to purchase U.S. Treasuries and mortgage-backed securities they've effectively invigorated an economy with easy money flowing to hard assets not otherwise worth holding (except for a lifestyle argument).  Reminds me of folks using the equity in their homes as ATM's back in the day except now the bank is giving you the cash over the term of your mortgage.  How's that for the government doing this one better! 

You see, lower mortgage payments on an artificially inflated risk asset means you get to "take some ATM cash out each month" through reduced mortgage payments and when housing declines you get the same whether you have equity or not.  Sadly, it has convinced many with cash saved in money market, CD's and other liquid accounts to follow along in the re-inflation of real estate prices by buying now.  We all know what happens next when assets are artificially inflated. 

Basically, no one wanted to buy those assets then, so why do they want to buy them now?  Even with lower interest rates than what drove the market to the tipping point previously should that be the reason to buy especially in a jobless recovery?  If an asset is falling in price, the government's response is to re-inflate it with cheap money.  Makes you wonder why you hold anything of value that can be so easily monetized by the government. 

Cheap money is twofold too on housing:  low interest rate mortgages for homebuyers and conversely cash investors drawn to housing seeking higher yields not available elsewhere. The Great Recession brought about a huge downturn in real estate prices even when interest rates by historical standards were already very low. We're now not anywhere better than what was done back then except now we have the illusion of a safer investment as lenders tightened lending standards due to increased government regulation.  Unfortunately, not the case here as U.S. Federal Reserve monetary policies are an indirect unwinding of such controls.  I see the evolution being deflationary on real estate prices for the foreseeable future despite all the efforts of the government to otherwise promote sustainable long-term inflation!

My dad once commented, be careful what you say as you might turn away real estate business talking "bad" about buying real estate. An interesting thought.  My response was "it's much better to take the self-interest out of the equation and guide people into what is right for them than what is right for me." Let them make the decision to buy or sell based on a lifestyle desired not based on a market bottoming or peaking to earn a commission.  Besides, there are always one of each on any transaction in any evolving economy, up or down.

Thursday, May 23, 2013

Apple Confirms It's Too Good To Be True!

Apple recently got back into the financial borrowing business with its selling of $17 billion of floating and fixed rate corporate debt obligations.  Granted they've done this before but never at this grandeur scale.  Why would a company with a market capitalization of over $400 billion and over $145 billion of cash already in its coffers tap into the corporate bond market at this time?  After all, they have announced their desire to pay higher dividends and to increase their stock buyback thereby returning some of their cash hoard to shareholders through these programs rather than invest it either internally or externally.  So, why borrow money?

Typically, most corporations only return cash to shareholders when management is of the opinion that organic growth prospects ("spending money on R&D") is not likely to give them the return on investment they could realize from returning that cash to shareholders.  Acquisitions are also another way for management to grow a company but for an innovative company like Apple such acquisitions would hardly make a dent in their future revenue or bottom-line net income.  Besides they still have ample cash should some "killer" new company come along and they want that technology for their own devices.

So, why is this event worth noting?  Besides it helping Apple to avoid $9.2 billion of corporate tax implications had it chosen to repatriate their cash reserves held at international subsidiaries, well, it tells me that one of the smartest companies in the world knows an amazing deal when they see it.  They view the corporate debt market as a great opportunity to secure cheap money and better act upon it or it could easily fade into the sunset never to be realized again.  So, with that, Apple borrows a ton of money at an incredibly low interest rate to be paid back over the next 3 to 30 years.  And, with interest expense being tax deductible, they can now get that after-tax interest rate down by another 35% (their effective tax rate).

I believe Apple management's timing here is impeccable and will be looked at as one of the greatest engineered financing transactions of 2013.  After all, it is the largest corporate debt offering on record.  Now, let me be clear, I'm only referring to the cheap debt aspects of this transaction not their chosen use of the proceeds.  I'm not a believer in buying back stock of a company in such a precarious economic climate but I am for one paying dividends especially with their huge cash position.  Some might argue that's one in the same as they both return cash to shareholders only dividends are paid to ALL shareholders and the buyback is limited to just those shareholders that actually sell stock.  Any inflated share price due to the buyback (increased demand for the stock) could easily be deflated by a down market and economy just as quickly so this kind of payback can be limited.

So what does one do with this information?  Well, if you've not locked in to a long-term mortgage by now, expect to be paying higher borrowing rates soon.  If you are holding long-term debt instruments (like newly issued Apple corporate bonds!) then you might consider unloading them before everyone else does in a rising interest rate environment.  It seems crazy to me to be a holder of any long-term debt obligations at this time but makes all the sense in the world to borrow money at manageable debt service levels during this unprecedented low interest rate environment.  Remember, whether it is a company the size of Apple or you buying or owning a home, don't pay with cash when you can lock in such a low interest rate on borrowed money and for now, it's tax deductible interest expense.  It really is less risk!