Replies to post #2304 on Cross Border Resources, Inc. (XBOR)

[downsideup]

Agree... with the caveat that when inflation really kicks in, debt is a more useful form of leverage because it evaporates... in relative terms, at least, and, in the case of most hard assets, fairly often in more than relative terms.

Buy a house when both rates and home prices are low, before larger rates of inflation happen... and then let inflation whittle your mortgage down to nothing.

I remember looking at mortgage rates that were well over 8% and house prices in the multiple 100K's not that long ago... while comparing them with what the people you were thinking of buying from had paid, and the interest rates they had ???

Buy a $250,000+ house at 8%... from people who paid under $50,000 with a 3% mortgage ???

Timing matters...

Right now, or recently, there have been a fair amount of oil industry assets winding their way through liquidations, because the former owners were leveraged up to the hilt buying assets when oil prices were over $100 and moving higher... and with oil at $35 in early 2009 that meant they couldn't cover what it cost them to pump it... much less cover the cost of their loan payments...

Better then to be the one with no debt, cash to spend, and no oil properties in hand... than to be the one with a huge load of debt, no ability to get cash, no way to pay the debt, and no ability to get out clean with prices crashing ?

I think we're probably getting pretty near to the point where the shift from one stage to another may begin to happen... at least where the growing inflation risks get us to neutrality relative to the deflationary pressures.

I'd still rather have cash in hand right now than too much debt at too high a cost... but, I'm not thinking I'd want to be holding onto cash instead of assets when and if inflation hits... and, oil probably isn't going back to $35 soon even without any inflation... so, if you CAN make money on it at current prices, while getting hold of reserves for the future that will be worth more ? A little debt leverage, at a manageable level, might be a good idea...