I wonder at it, how come Mish and Tyler Durden, of all people find negative interest rate bonds stupid or controversial? Mish:
Durden:
Again Mish:
Not sure what mish is calling stupid, but negative bonds make perfect sense. Controlling the loss of your money is a good idea. The Swiss are simply recognizing that we are in deflation, and to offer a Soverign Bond that guranteees the rate of loss is a good idea. If you know the stock market and real estate markets will drop 40% certainly over the next ten years, isn't locking in a mere 2% loss a good idea? Why not just hedge your holdings? Because regulators outlaw shorts as they did in 2008, wiping out your hedge. And money hiding in bonds is not taxed, since, in essence, the tax man is holding it (why would he reduce what he has?)
Maybe he just means how we got here is stupid. If so, true, true. But next comes the fix, and if you read these smart people, they all seem to be saying that the hegemon has no power in these circumstances. Putin knows what to do, turn to freedom, but we appear to have lost our sense of that.
If not, why are people turning over their money to otherise lose it?
Feel free to forward this by email to three of your friends.
In January, Switzerland’s central bank, worried about the consequences of buying huge volumes of euros to keep the franc suppressed, scrapped its upper limit on the franc and cut deposit rates to minus 0.75%. Foreign-exchange markets were thrown into turmoil. Given that putting cash on deposit costs money, the very modestly negative yield of the new 10-year bond is marginally attractive. A similar story is playing out in the eurozone, where the ECB has set its deposit rate at minus 0.2% and aggressively bought bonds.
Durden:
Debating a future of inflation vs. deflation is radically new territory for investors. The chaotic nature of the choice facing societies is whipsawing equity markets and dominating bottom-up factors.(the whole thing is a great read, by the way).
Again Mish:
Such idiocy has led to yet another asset bubble of enormous magnitude, in part fueled by corporations borrowing money at low rates to buy back their own shares at ridiculous prices.
Not sure what mish is calling stupid, but negative bonds make perfect sense. Controlling the loss of your money is a good idea. The Swiss are simply recognizing that we are in deflation, and to offer a Soverign Bond that guranteees the rate of loss is a good idea. If you know the stock market and real estate markets will drop 40% certainly over the next ten years, isn't locking in a mere 2% loss a good idea? Why not just hedge your holdings? Because regulators outlaw shorts as they did in 2008, wiping out your hedge. And money hiding in bonds is not taxed, since, in essence, the tax man is holding it (why would he reduce what he has?)
Maybe he just means how we got here is stupid. If so, true, true. But next comes the fix, and if you read these smart people, they all seem to be saying that the hegemon has no power in these circumstances. Putin knows what to do, turn to freedom, but we appear to have lost our sense of that.
If not, why are people turning over their money to otherise lose it?
Feel free to forward this by email to three of your friends.
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