Kerry : When we have low Real (after inflation) interest rates (like today), leveraging at close to zero rates and investing in more risky, but profitable assets does make sense. However, the key is being ABLE to borrow at those low rates. Many consumers are so highly leveraged with many high cost debts (credit cards, HomeEquity Loans etc) that they can no longer get these low rates. As a result, I don't believe too many people can do this.

You may remember the late 70s as a period when mortgage rates were not that high and the standard advice was to borrow as much as you can and pay off the debt in cheaper dollars (because of the high inflation rates of those days). I think we may be returning to that era again. Getting those zero to low REAL rates is the key to the success of this strategy. I am sure PIMCOs of this world have the wherewithal to do it but not us lowly individual investors ..... Anil