@derryb said:
Why would anyone invest in anything that offers a negative return? Probably because they think the negative return will have more value than the currency at the time of yield payout. Talk about confidence in your currency, LOL. Another good sign for PMs.
Well, silver has had a negative return over the last decade.
And I'm still betting it will offer a better payout than the dollar when I cash in.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
@derryb said:
Why would anyone invest in anything that offers a negative return? Probably because they think the negative return will have more value than the currency at the time of yield payout. Talk about confidence in your currency, LOL. Another good sign for PMs.
Well, silver has had a negative return over the last decade.
And I'm still betting it will offer a better payout than the dollar when I cash in.
@derryb said:
Why would anyone invest in anything that offers a negative return? Probably because they think the negative return will have more value than the currency at the time of yield payout. Talk about confidence in your currency, LOL. Another good sign for PMs.
Well, silver has had a negative return over the last decade.
And I'm still betting it will offer a better payout than the dollar when I cash in.
Most of us have lots of bets spread around the great roulette wheel of the available investments.
Sure, have some chips on silver, far far more than most players, but not nearly as many as derryb.
Most of my concentration is in the stock market, rental real estate, and private equity as a founder and angel. Then numismatic coins then bullion, followed by Stuff like cars, art, artifacts, ets. So to answer jmski52, the interest rate on bonds and savings accounts hasn't mattered, relatively speaking. Its just the first safety net, and preserving capital and maintaining instant liquidity is far more important for those particular dollars than a percentage or two. Cashing rent checks and harvesting capital gains as passive income is doing the heavy lifting, off and on, for 40+ years
Not following Stockman has been financially advantageous.
I don't really "follow" anyone. I read a bit, I debate a bit, and I learn from that debate a bit. But mostly, I just do what Baley does, albeit on a smaller scale, and perhaps in a slightly different order of priority.
But bonds - oh, I think that buying bonds right now is much akin to drinking hemlock.
Q: Are You Printing Money? Bernanke: Not Literally
“The number of outstanding U.S. $100 bills has doubled since the financial crisis, with more than 12 billion of them across the world, according to the latest data from the Federal Reserve.”
My take: This increase, coupled with a similar increase in $20 bills, amounts to a total increase of over $720 billion in physical U.S. currency over the last 10 years. The increased supply of currency reflects an increased worldwide demand for U.S. dollars (for a variety of reasons), and implies a much larger increase in demand for U.S. treasury bonds, which (so far) pay a positive interest rate. This heavy demand for official U.S. currency and debt instruments is outpacing newly issued supply, even at a $1 trillion rate of annual increase. This is putting upward pressure on treasury bond prices, and consequently is putting downward pressure on the interest rate these bonds pay.
“While granting that demographic shifts are part of the equation, BlackRock’s chief investment officer of global fixed income, Rick Rieder, argues that technological innovation tamps down profoundly on widespread price increases.”
My take: A rapid increase in cost-lowering innovations across the entire world economy is driving prices down almost as fast as government printing presses are driving prices up. I expect this trend to continue and even accelerate. If it does, inflation and interest rates are likely to remain low, and perhaps even negative for “safe” securities such as U.S. treasury bonds.
@cohodk said:
Yes, MsMorrisine, yields are too low and could be bubblicious, which if burst would result in higher yields. And thats actually a good thing.
Depending on who you are and how financially independent you are, it may be a good thing. For the majority, I doubt it would be a good thing to happen.
@cohodk said:
Yes, MsMorrisine, yields are too low and could be bubblicious, which if burst would result in higher yields. And thats actually a good thing.
Depending on who you are and how financially independent you are, it may be a good thing. For the majority, I doubt it would be a good thing to happen.
Rates at 3% are more beneficial to everyone than rates at -1%.
@MsMorrisine said:
We've had yields rise this month.
The historic 30 year under 2% has seen it rise back over 2%. The 2-10 yield spread is comfortably not inverted.
Panic over?
The shorter maturities (1yr, 6mo, 3mo) are still above the 10yr in yield. Currently the 3mo is 1.962 while the 10yr is 1.713. That is still partially inverted even if the 2-10yr spread isn't. The lowest yield is the 5yr at 1.573.
Except for financially irresponsible individuals and governments. And look for corporations to use negative interest loans to continue pumping the equity markets with further stock buybacks.
Negative rates are the latest tool to delay the inevitable.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Except for financially irresponsible individuals and governments. And look for corporations to use negative interest loans to continue pumping the equity markets with further stock buybacks.
Negative rates are the latest tool to delay the inevitable.
No they dont. Negative rates breeds economic stagnation and even decline. Govts do not benefit from that in ways ranging from economic malaise, to dwpressed innovation to civil unrest.
Lots of great commentary in this thread this morning...…..
My take: A rapid increase in cost-lowering innovations across the entire world economy is driving prices down almost as fast as government printing presses are driving prices up.
I agree with you halfways. I think agricultural productivity (and oil production) both drive prices down. Not so sure about innovation anymore, kinda depends on what types of innovation.
@Baley, re: buying bonds & drinking hemlock - don'cha do it. You'll be sorry.
Rates at 3% are more beneficial to everyone than rates at -1%.
And 4% would be better yet.
No one. No one, benefits from negative rates.
OMG, I agree with cohodk!!!!!!!!!!!!!!!
@cohodk said:
No one. No one, benefits from negative rates.
Except for financially irresponsible individuals and governments. And look for corporations to use negative interest loans to continue pumping the equity markets with further stock buybacks.
Negative rates are the latest tool to delay the inevitable.
I also agree with derryb.
@derryb said:
Governments don't benefit from negative rates on their bonds?
I said nothing about corporate debt going negative.
No, they dont. Yes you did.
Yes they do. Yes you did.
Issuing zero coupon bonds has been done for decades. Thats not the same as issuing a negative coupon. I know you know the difference.
I don't know that zero coupon bonds allow for anything different than what the plethora of other types of bonds allow for already. Either way, financial derivatives should be outlawed and governmental casinos should operate openly - call it what it is.
Q: Are You Printing Money? Bernanke: Not Literally
Issuing zero coupon bonds has been done for decades. Thats not the same as issuing a negative coupon. I know you know the difference.
technically, the talk of negative yield issuance has been as described - zero coupon but negative yield to maturity. they accomplish this buy charging more than the principal that will be returned. thus the talk of negative yields.
Those that think negative interest rates help govts do not see the damage tha is being done to the socio-economic constructs. That damage is orders of magnitude greater than interest not paid.
In fact, jmski, if you truly believe a 3% interest rate would be better than negative rates, then this damage should be quite evident to you.
True enough, but there's no reason that other bonds issued with a coupon wouldn't serve the same purpose.
Those that think negative interest rates help govts do not see the damage tha is being done to the socio-economic constructs. That damage is orders of magnitude greater than interest not paid.
In fact, jmski, if you truly believe a 3% interest rate would be better than negative rates, then this damage should be quite evident to you.
Agreed. Negative interest rates issued by a government destroy the whole "time value of money" paradigm, which is in fact based upon reality. Nothing good will come of it.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
And I'm still betting it will offer a better payout than the dollar when I cash in.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Time heals all wounds. Mostly.
Knowledge is the enemy of fear
Most of us have lots of bets spread around the great roulette wheel of the available investments.
Sure, have some chips on silver, far far more than most players, but not nearly as many as derryb.
Most of my concentration is in the stock market, rental real estate, and private equity as a founder and angel. Then numismatic coins then bullion, followed by Stuff like cars, art, artifacts, ets. So to answer jmski52, the interest rate on bonds and savings accounts hasn't mattered, relatively speaking. Its just the first safety net, and preserving capital and maintaining instant liquidity is far more important for those particular dollars than a percentage or two. Cashing rent checks and harvesting capital gains as passive income is doing the heavy lifting, off and on, for 40+ years
Liberty: Parent of Science & Industry
Not following Stockman has been financially advantageous.
I don't really "follow" anyone. I read a bit, I debate a bit, and I learn from that debate a bit. But mostly, I just do what Baley does, albeit on a smaller scale, and perhaps in a slightly different order of priority.
But bonds - oh, I think that buying bonds right now is much akin to drinking hemlock.
I knew it would happen.
Here are two reasons that may help explain why inflation is muted and interest rates continue to trend lower:
https://cnbc.com/2019/02/27/theres-been-a-mysterious-surge-in-100-bills-in-circulation-possibly-linked-to-global-corruption.html
“The number of outstanding U.S. $100 bills has doubled since the financial crisis, with more than 12 billion of them across the world, according to the latest data from the Federal Reserve.”
My take: This increase, coupled with a similar increase in $20 bills, amounts to a total increase of over $720 billion in physical U.S. currency over the last 10 years. The increased supply of currency reflects an increased worldwide demand for U.S. dollars (for a variety of reasons), and implies a much larger increase in demand for U.S. treasury bonds, which (so far) pay a positive interest rate. This heavy demand for official U.S. currency and debt instruments is outpacing newly issued supply, even at a $1 trillion rate of annual increase. This is putting upward pressure on treasury bond prices, and consequently is putting downward pressure on the interest rate these bonds pay.
https://cnbc.com/2017/06/28/technology-is-the-hidden-driver-of-low-inflation-blackrocks-rieder.html
“While granting that demographic shifts are part of the equation, BlackRock’s chief investment officer of global fixed income, Rick Rieder, argues that technological innovation tamps down profoundly on widespread price increases.”
My take: A rapid increase in cost-lowering innovations across the entire world economy is driving prices down almost as fast as government printing presses are driving prices up. I expect this trend to continue and even accelerate. If it does, inflation and interest rates are likely to remain low, and perhaps even negative for “safe” securities such as U.S. treasury bonds.
My Adolph A. Weinman signature
>
Heh, I've thought that for a decade
And I've been wrong almost the whole time 😉
Liberty: Parent of Science & Industry
Depending on who you are and how financially independent you are, it may be a good thing. For the majority, I doubt it would be a good thing to happen.
We've had yields rise this month.
The historic 30 year under 2% has seen it rise back over 2%. The 2-10 yield spread is comfortably not inverted.
Panic over?
Rates at 3% are more beneficial to everyone than rates at -1%.
And 4% would be better yet.
No one. No one, benefits from negative rates.
Knowledge is the enemy of fear
nemefita is now a word
If Trump can do it, then so can I. Lol
I thought i had edited that. Lol
Knowledge is the enemy of fear
The shorter maturities (1yr, 6mo, 3mo) are still above the 10yr in yield. Currently the 3mo is 1.962 while the 10yr is 1.713. That is still partially inverted even if the 2-10yr spread isn't. The lowest yield is the 5yr at 1.573.
My Adolph A. Weinman signature
The people/entities issuing the debt at -1% definitely do benefit.... but I know I'm splitting hairs at this point.
BEWARE THE WAR ON CASH.
Except for financially irresponsible individuals and governments. And look for corporations to use negative interest loans to continue pumping the equity markets with further stock buybacks.
Negative rates are the latest tool to delay the inevitable.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
No they dont. Negative rates breeds economic stagnation and even decline. Govts do not benefit from that in ways ranging from economic malaise, to dwpressed innovation to civil unrest.
Corporate debt will not go negative.
Knowledge is the enemy of fear
Governments don't benefit from negative rates on their bonds?
I said nothing about corporate debt going negative.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
negative yielding corporate debt has already been issued in Europe.
https://www.cnn.com/2019/08/30/investing/siemens-corporate-bond/index.html
most likely because it has to compete with negative public debt.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
No, they dont. Yes you did.
Knowledge is the enemy of fear
https://www.bloomberg.com/news/articles/2019-09-11/bond-wizards-find-exotic-ways-to-profit-from-negative-yields
Knowledge is the enemy of fear
Issuing zero coupon bonds has been done for decades. Thats not the same as issuing a negative coupon. I know you know the difference.
Knowledge is the enemy of fear
Lots of great commentary in this thread this morning...…..
My take: A rapid increase in cost-lowering innovations across the entire world economy is driving prices down almost as fast as government printing presses are driving prices up.
I agree with you halfways. I think agricultural productivity (and oil production) both drive prices down. Not so sure about innovation anymore, kinda depends on what types of innovation.
@Baley, re: buying bonds & drinking hemlock - don'cha do it. You'll be sorry.
Rates at 3% are more beneficial to everyone than rates at -1%.
And 4% would be better yet.
No one. No one, benefits from negative rates.
OMG, I agree with cohodk!!!!!!!!!!!!!!!
@cohodk said:
No one. No one, benefits from negative rates.
Except for financially irresponsible individuals and governments. And look for corporations to use negative interest loans to continue pumping the equity markets with further stock buybacks.
Negative rates are the latest tool to delay the inevitable.
I also agree with derryb.
@derryb said:
Governments don't benefit from negative rates on their bonds?
I said nothing about corporate debt going negative.
No, they dont. Yes you did.
Yes they do. Yes you did.
Issuing zero coupon bonds has been done for decades. Thats not the same as issuing a negative coupon. I know you know the difference.
I don't know that zero coupon bonds allow for anything different than what the plethora of other types of bonds allow for already. Either way, financial derivatives should be outlawed and governmental casinos should operate openly - call it what it is.
I knew it would happen.
technically, the talk of negative yield issuance has been as described - zero coupon but negative yield to maturity. they accomplish this buy charging more than the principal that will be returned. thus the talk of negative yields.
Those that think negative interest rates help govts do not see the damage tha is being done to the socio-economic constructs. That damage is orders of magnitude greater than interest not paid.
In fact, jmski, if you truly believe a 3% interest rate would be better than negative rates, then this damage should be quite evident to you.
Knowledge is the enemy of fear
Zero coupon bonds are.not derivatives. They are simply bonds that do not make coupon payments but are issued at a discount to par value.
The US govt has issued them for just about forever. In fact, if you've ever bought a savings bond, then you've bought a zero coupon bond.
Knowledge is the enemy of fear
Zero coupon bonds are.not derivatives.
True enough, but there's no reason that other bonds issued with a coupon wouldn't serve the same purpose.
Those that think negative interest rates help govts do not see the damage tha is being done to the socio-economic constructs. That damage is orders of magnitude greater than interest not paid.
In fact, jmski, if you truly believe a 3% interest rate would be better than negative rates, then this damage should be quite evident to you.
Agreed. Negative interest rates issued by a government destroy the whole "time value of money" paradigm, which is in fact based upon reality. Nothing good will come of it.
I knew it would happen.