It’s Gonna Be Awesome

Joe Doakes from Como Park emails:

Germany is selling 30-year bonds with negative rates. You pay the government to hold your money, betting they’ll be willing to give back some of it, in the future.
This is like Guido saying “That’s a nice nest egg you got there. It’d be a shame if anything happened to it. I’ll just hold onto it for you, you know, to protect it, like insurance.”
How is it possible that in a world of 7 billion people there are absolutely no worthwhile Investments?
I suspect it’s because people only invest when they believe there’s a reasonable prospect of getting a return in the future. And the future right now is chaotic, because all of the fundamentals – security of property, property rights, profit, order, rule of law – are being overturned by the revolutionary socialists who want to spread the wealth, your wealth.
Negative Bond. A losing investment. S***, I’ve got plenty of them. Why send my money to Germany? I can lose money right here at home.
Although now that I think about it . . . in the olden days, investors paid a premium to buy government bonds because they were safe, even though the investor would have to wait years to start making money. With a negative bond, will investors demand a discount to buy the bonds so they can start losing money sooner?
And can I bundle a bunch of negative interest bonds, then sell derivatives to investors so they could take the losses as a set-off to income and thereby reduce their income tax? Hmmm, this could be a whole new business opportunity.
Joe Doakes

The free market will eventually figure things out – provided government doesn’t throw a wrench in it all over political expediency…

…oh.

15 thoughts on “It’s Gonna Be Awesome

  1. I am waiting for the German government to offer a zero coupon perpetual bond as final proof of investor insanity.

  2. I am still trying to understand the person with money to invest that buys such a bond. Do they really think the mark is going to increase in value over that term, which is the only reason you should accept negative interest? And if they believe that, what do they base that belief upon?

  3. Investors are not screaming at Germany to borrow more, no one in their right mind will buy zero or negative yielding bonds.

    ECB is buying them with freshly printed euros.

    Investors are simply trying to front run ECB to make a quick buck.

    The only way one would buy a negative yielding bond is with the hope to sell it to a greater fool at an even bigger negative rate.

    This is the definition of speculation not investment.

    ECB seems to be the greater fool for now.

    Things seem to be entering the twilight zone. How will this madness end?

  4. I doubt its ‘people’ investors much at all. Its institutional investors with $ to allocate to government bonds as a matter of course…. its like they’d be buying them no matter what the rate.

    I’m dubious about that, though… the Yahoo finance article I just read says the bond auction didn’t go very well.

  5. “The only way one would buy a negative yielding bond is with the hope to sell it to a greater fool at an even bigger negative rate.”

    I agree, whoever you are buying the, you only buy to trade around in them.

  6. This is how you end poverty.
    Borrow every citizen a million dollars at 0% for the lifetime of the borrower.

  7. MP, are you practicing your UpperMidwestern which can’t distinguish between “loan” and “borrow”? 😉

  8. Investors are not screaming at Germany to borrow more, no one in their right mind will buy zero or negative yielding bonds.

    Well, we all now know that Emery is investing in German bonds for his retirement.

  9. Not a close follower of Jim Grant. But if I remember right he coined ‘zero coupon perpetual’ years ago.

    It was meant to be ironic at the time.

  10. dm on August 26, 2019 at 1:49 pm said:
    MP, are you practicing your UpperMidwestern which can’t distinguish between “loan” and “borrow”? 😉

    Not practicing, it comes natural.
    I grew up in Fridley.

  11. I’d go even money on Warren becoming the D nominee.
    She has many allies in the media. She is a figure that they identify with. The media can’t pick the R nominee, but they can pick the D nominee.

  12. Never underestimate the left’s ability to lose elections by virtue signalling and banging on about lifestyle issues that should have little or nothing to do with the government and are a massive turn off for most voters.

  13. Apparently those investing in Germany have never heard of passbook savings, federally insured, with 0.1% returns.

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