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Alton, Ia | In theory, from the economics guru's, is that you should put your money into wherever it has the best risk/reward ratio that suits you. So, today you have an asset worth $8. OK. You also have a loan out there costing you ~ 7% per year or so. So, given what you know and believe TODAY, do you want to leave the $8 in a risky place, by owning the ethanol share, or make a guaranteed 7% return by paying off the note. Keeping it in E may make you more than 7%, may make you 30%, like E shares have in the last few years, or maybe 1-2%, now that we have $4 corn and the supply has expanded. Hard to say, and please remember to account for dividends and cap gains taxes when you figure your returns.
On the other hand, paying off the note is a guaranteed 7% return. Your annual interest bill will be reduced XX dollars of prepay times the interest. That's set. Any risk with the land purchase was made the day you singaled the auctioneer, and that's a separate decision from paying off the loan.
So, it's up to you. If'n it were me, I'd probably pay off the loan, especially if you have money out there in short term loans. I am not optimistic about the US economy mid term. So much of our jobs growth and expansion was due to housing construction in recent years, and that bubble is starting to delfate, if not pop. Manufacturing in the US is barely there anymore, and we can't keep buying crap from CHina on credit cards forever. But that's just my opinion. | |
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Ethanol Stock
