Thank You Letter to Bernanke and Yellen

[J. Martin]

Dear Mr. Bernanke, Ms. Yellen, and the entire FOMC,

I am writing this belated letter to thank you for the $4,000,000,000,000 (Trillion) in monetary base, countless billions in MBS purchases, and aggressive and extended cuts in the target fed funds rate. It has slathered real estate investors with low-cost financing to boost cash flows and returns, added appreciation to our properties, and pushed more people to invest with us in this low-yield environment. I even got one 30-yr fixed rate loan on a 4plex for 3.25%! I'm sure there will be no longer-term consequences to this unprecedented expansion of money supply and extended low-rate period, while asset prices reach new highs in many areas of the economy.

On behalf of myself, and the investors below,
THANK YOU!!!!!!!

Good Day Sirs and Madames,

J Martin

[Steve B.]

I think we have to be a little cautious of mistaking our political viewpoints as justification for valid economic arguments. The facts are we have printed and borrowed an extraordinary amount of money recently they has to be accounted for at some point. We may have a Japanese style or Carter style stagflation or we may have a good amount of inflation that would be tied to a more robust recovery. In either case lets not pretend we can print and borrow money for free then have a full recovery with no deleterious effects.

No matter how many Pual Krugman and J. Stiglitz editorials you read in the WaPo and NYT it still isn't going to up-end the laws of basic macroeconomics. A logical argument is that we needed to print and borrow this money for a "soft landing" and to "prevent the next great depression", recapitalizing banks, etc; i.e a necessary evil. However when you start pretending there aren't negative consequences because "your guy is in office" and the Fed did something brave, wonderful, admirable, or even particularly clever by injecting tons of easy money into the economy I think you need to leave your political hat at the door and deal with reality. When I borrow money on my credit cards to the limit I hardly ever get the same kudos.

At some point we are going to have higher inflation tied to any strong recovery, or stagflation tied to continued high unemployment in a weak recovery. The known unknowns regarding inflation are simply when and how much. In any case Real Estate is a fairly hard asset, and if you look at historical inflation vs. home price charts you will see that. I don't really think there is a great way to hedge your Real estate positions given the reality of the situation.