Chew on this for a few seconds

[Gunfighter14e2]

The party may be just about over, over there! Which begs the question how long before that is here? Lipstick can not dress this pig anyway you spin it.

Germany for First Time Sells 30-Year Bonds Offering Negative Yields

In an unprecedented move, Germany sold 30-year bonds at a negative yield, as investors desperate for safe assets bet that further falls in yields will boost the value of the bonds in the future.

www.wsj.com

 

[stello1001]

Seen and heard of this from previous times. Not really something new!

 

[brianf]

in theory, no different than buying oil futures at a lower price
the world economy is slowing down a little in general
and germany is so very tied to china, which is why trump treats them the same
and never invests in germany

 

[wh20crazy]

I must be the stupid one here. I don't understand the concept of investing in something that is guaranteed to lose money.

 

[brianf]

You buy a bond that gives you a $100 bond at 5% yield, WITH the plan to trade/sell it on the bond market (just like the stock market)

if interest rates go UP to 6%..no one want to trade for your bond or if they do they will give you $97 (for example) for the same $100 bond
because at the end of the bond life you make less money 5% vs 6%/lower rate of return

if interest rates go DOWN to 4%..your $100 dollar bond at 5% is now worth $103 because you are getting a higher rate of return

numbers exaggerated but its like buying a stock in hopes to sell it when the market goes up, but it also works in reverse

 

[FS1]

I must be the stupid one here. I don't understand the concept of investing in something that is guaranteed to lose money.

You have to be Elected before you can understand it. 2+2=5

 

[Huskydriver]

You buy a bond that gives you a $100 bond at 5% yield, WITH the plan to trade/sell it on the bond market (just like the stock market)

if interest rates go UP to 6%..no one want to trade for your bond or if they do they will give you $97 (for example) for the same $100 bond
because at the end of the bond life you make less money 5% vs 6%/lower rate of return

if interest rates go DOWN to 4%..your $100 dollar bond at 5% is now worth $103 because you are getting a higher rate of return

numbers exaggerated but its like buying a stock in hopes to sell it when the market goes up, but it also works in reverse

Someone gets it.

 

[wh20crazy]

You buy a bond that gives you a $100 bond at 5% yield, WITH the plan to trade/sell it on the bond market (just like the stock market)

if interest rates go UP to 6%..no one want to trade for your bond or if they do they will give you $97 (for example) for the same $100 bond
because at the end of the bond life you make less money 5% vs 6%/lower rate of return

if interest rates go DOWN to 4%..your $100 dollar bond at 5% is now worth $103 because you are getting a higher rate of return

numbers exaggerated but its like buying a stock in hopes to sell it when the market goes up, but it also works in reverse

Thank you for the explanation. I'll leave this investment to others.

 

[W54/XM-388]

It seems you might come out ahead just stuffing cash under your mattress.

 

[MtnCreek]

Does anyone expect to make money off a negative yield bond or is just a 'safe' place to park money?

 

[Huskydriver]

It seems you might come out ahead just stuffing cash under your mattress.

Actually no if interest rates continue to fall, the buying power of those dollars decreases with time as inflation rises.

 

[Huskydriver]

Does anyone expect to make money off a negative yield bond or is just a 'safe' place to park money?

Short answer yes... Cross currency hedgers do it and have been doing it for awhile.

 

[brianf]

you have to think of these type of investments as short term buy sells
not buy a $500 savings bond (for $250) for your nephews baptism that matures in 25 years for college

alot of times the common sense answer doesnt work because of other things in the market like inflation etc
they work as opposing forces...no free ride

but in the short term if its played/guessed correctly the big guys make big money

 

[Nik H]

Does anyone expect to make money off a negative yield bond or is just a 'safe' place to park money?

The answer is no. If you hold on to the bond until you get to the maturity date, you will get less than what you paid for the bond.

The play is
1. Bet on the fact that the German economy will continue to grow and your money will be safe.
2. If you sell prior to maturity, your proceeds are driven by the prevailing rate of interest and where that is as compared to the coupon rate of the bond. If your bond’s coupon rate provides a higher return, you receive more and if it is less you will receive less as described by @brianf

 

[W54/XM-388]

Actually no if interest rates continue to fall, the buying power of those dollars decreases with time as inflation rises.

See that's why I'm not a financial genius.
To my simple brain if you give someone money and they promise to give you less back in the end than you originally gave them, that seems like you are loosing both ways, inflation + getting less back than you started with.
Possibly they hope to sell them to others later on when you get back even less than the less they were first giving you?

I guess I'll have to leave the fun finance to those that understand it all, and let them have fun till they figure out how to crash the whole thing & then we will simply say NO to bailing them out and start over with a different system without their kind.

 

[Nik H]

Liquidity is a gift...ignore it at your own peril

 

[isofahunter]

There is over 15T dollars invested in negative yielding bonds right now. For those that think of bonds as buy, hold and collect the interest those days are coming to a close if we keep on this trajectory.
Everything is Liquid until you NEED to sell it. Stay liquid my friends and understand what you own and how to sell it.

 

[Threadcutter308]

It seems you might come out ahead just stuffing cash under your mattress.

No, not cash. Inflation eats up it's value over time.

Precious metals.........brass and lead.

 

[Greg Langelius *]

Breakeven is reckoned on inflation vs yield. A loss is a gain as long as it is less than loss due to inflation.

Otherwise it would not have made any sense to keep the market open during recession.

Money can still be made in a falling market.

It's about comparisons. In a losing market, the one who loses less wins.

Greg

 

[MtnCreek]

I understand I'm an idiot for having cd's earning ~1% and now know there are people making big money on negative yields. I will just have to accept that I will never understand why.

 

[theLBC]

importing millions of muslim migrants doesn't help grow the economy if they are all on the dole.
migration doesn't solve problems, it spreads them.

 

[Gunfighter14e2]

No, not cash. Inflation eats up it's value over time.

Precious metals.........brass and lead.

While fussy math was never taught when I went to school, we were taught money is worthless unless someone is willing to take.
Now I'll freely admit I'm the dumbest rock in the pile but until the day comes that I can get life sustaining nutrition from inked paper I think I'll stick with tangible assets . I've never went hungry using the tangible I own to . However I have seen the effects of money gamers who now have nothing, an some are living in a car/truck or on the street. Inked paper vs tools is a no brainier to me.

 

[Nik H]

You’re not dumb at all but we live in different times than previous disasters.

Fact is that cash will be in a very different position relative to desirability due to the enormity of the debt people carry. For the first time in collective history, people execute 99% of financial transactions via credit cards. In a time of chaos, name a disaster of your choice, access to credit, ATM or other commonplace transactions will be gone. We no longer conduct business on a cash basis so people will do what do buy what they need?

I would keep some cash and gold in a box as you will be butt fucked without it.

 

[Gunfighter14e2]

I was taught by my kin if you can't put you hand on your cask w/o leaving your property, someone else controls you. Court have already rule the money you put into a bank belongs to the bank as soon as you deposit it. There was a thread on that here just a few weeks ago IIRC. Many things were instilled into me by my whole family, who all went threw the depression,...
Compared to many I own nothing, but what I do own is free a clear. However, it looks like to me I may have to protect it all at some point, from those who think a balance sheet is the be all. What are people going to do when people will not take their money? my guess who be to die while trying to take other peoples property.

I remember the day my kin told me what they did, when the gov came to take their crops an store's, long short, word quickly spread an people hid stores for the family then torched, an contaminated the rest. I see that happening again if need be,...

 

[W54/XM-388]

In a time of chaos, name a disaster of your choice, access to credit, ATM or other commonplace transactions will be gone. We no longer conduct business on a cash basis so people will do what do buy what they need?
I would keep some cash and gold in a box as you will be butt fucked without it.

Don't need a disaster to put that to paid.
Just ask the folks in Greece and Cyprus how it goes when the Global Elites decide your elected government is not quite subservient enough to "their betters" and (illegally I might add) turn off the banks and ATMs till your government decides to "vote the correct way" and bow the knee to the 4th Reich.

 

[W54/XM-388]

I remember the day my kin told me what they did, when the gov came to take their crops an store's, long short, word quickly spread an people hid stores for the family then torched, an contaminated the rest. I see that happening again if need be,...

That has played out not only several times in this country but countless times in countless places all throughout human history.
Africa is pretty much a continuous object lesson in progress.

Eventually the Communists or other government types large or small, legit or self proclaimed, have run out of money to steal and people to extort from and start sending the "just doing their duty" types with the weapons of the day, to go take foodstuffs and supplies by force.
Usually they start with raiding the shops & warehouses in the cities, then going door to door stealing in the cities, then eventually come for the farmers.

That's usually the way you know a big famine is coming and a lot of folks are about to die.

Raising food requires that the farmers feel and are safe from harm and theft long term and feel it is in their best interest to grow enough food.
Once you show up with weapons to take and enslave, the "quality" of your farming rapidly crumbles.

You can force people at gunpoint to farm... but you'll just wind up with more starvation.
The Soviets forced as many to farm for "the state" as they wanted, and shortly turned Russia from the "breadbasket of Europe" to a country that had to import food from those "dirty capitalists" to survive.

The farmers would be right to make sure that nobody gets anything if it is being taken from them by force. As that will help speed up the collapse of the evil regime doing it which will shorten the suffering for everyone in the long run.

Also kind of the plot of Seven Samurai which is a brilliant movie about how the meek have the actual power once famine starts.

 

[Nik H]

Don't need a disaster to put that to paid.
Just ask the folks in Greece and Cyprus how it goes when the Global Elites decide your elected government is not quite subservient enough to "their betters" and (illegally I might add) turn off the banks and ATMs till your government decides to "vote the correct way" and bow the knee to the 4th Reich.

Yes I forgot about the incident in Greece. I heard all about it from my relatives who live there

 

[atepointer]

Gonna confound you a bit more. Denmark goes balls deep into the abyss:

This Danish Bank Is Offering 'Negative' Mortgage Rates—Here's What That Means

Denmark's third largest bank is offering ten-year -0.5% fixed-interest mortgages.

fortune.com

 

[sharac]

Problems are various banks and insurance companies who need to put money somewhere. And since there are as many dumb (and vile) fucks in finance industry as in government and since government makes rules where this money can be stored at, those with excess money park it into safest place they can (there is some part of money parked into riskier papers but .gov limits amount of funds one can use in riskier classes). Compared to rest of the crappy states in EU Germany is least worst hence dumbfucks buy German paper shit as its considered (keyword here as entire modern economy is based on appearance if you believe in something and if enough lemmings believe the same than it works - until that belief is gone ofcourse then it doesn't) least likely to default on their debt. For bonds its basically like this (since there is plenty of demand for them) the higher the likely hood of not being able to deliver principal (100$ in upper case) the higher the coupon (interest) value to attract demand. Since you have rating companies and since you have MSM and big boys (JPM, Bloomberg etc. that brainwash smaller fishes) its quite logical that Spain/Italy/Greece etc.. are more likely to suffer some kind of default event than Germany hence negative coupon for Germany. SUre there is ability to sell bonds and speculate on their future worth but generally due to reserve funds at ECB also being negative (to store money at ECB you have to actually pay them also negative rate) there is basically no totally safe place to store money but Austrian/German bonds. Basically what negative rates for Germany say is this:

Most believe that EU is fucked and that periphery will be fucked pretty soon (10y TOPS) and we better put money into Germany as it will survive or be minimally fucked and we'll either get most of our investment back or later when fuckary starts we might be able to sell this bond at a premium to scared fucks who were fucked by defaults in periphery and will look to exit from periphery into safer paper.



PS: Little is advertised that ECB already owns about 40% (data i think is 12/2018) of all government issued bonds is EU. In other words (ECB is owned by central banks of all EU member states) EUSSR is buying government debt of its member states at an unprecedented rate clearly showing that there is no bid for most of the paper issued (there is data i think on balance sheet for ECB how this debt is structured but i frankly don't give a shit anymore but most likely its PIGS government bonds).

 

[atepointer]

Problems are various banks and insurance companies who need to put money somewhere. And since there are as many dumb (and vile) fucks in finance industry as in government and since government makes rules where this money can be stored at, those with excess money park it into safest place they can (there is some part of money parked into riskier papers but .gov limits amount of funds one can use in riskier classes). Compared to rest of the crappy states in EU Germany is least worst hence dumbfucks buy German paper shit as its considered (keyword here as entire modern economy is based on appearance if you believe in something and if enough lemmings believe the same than it works - until that belief is gone ofcourse then it doesn't) least likely to default on their debt. For bonds its basically like this (since there is plenty of demand for them) the higher the likely hood of not being able to deliver principal (100$ in upper case) the higher the coupon (interest) value to attract demand. Since you have rating companies and since you have MSM and big boys (JPM, Bloomberg etc. that brainwash smaller fishes) its quite logical that Spain/Italy/Greece etc.. are more likely to suffer some kind of default event than Germany hence negative coupon for Germany. SUre there is ability to sell bonds and speculate on their future worth but generally due to reserve funds at ECB also being negative (to store money at ECB you have to actually pay them also negative rate) there is basically no totally safe place to store money but Austrian/German bonds. Basically what negative rates for Germany say is this:

Most believe that EU is fucked and that periphery will be fucked pretty soon (10y TOPS) and we better put money into Germany as it will survive or be minimally fucked and we'll either get most of our investment back or later when fuckary starts we might be able to sell this bond at a premium to scared fucks who were fucked by defaults in periphery and will look to exit from periphery into safer paper.



PS: Little is advertised that ECB already owns about 40% (data i think is 12/2018) of all government issued bonds is EU. In other words (ECB is owned by central banks of all EU member states) EUSSR is buying government debt of its member states at an unprecedented rate clearly showing that there is no bid for most of the paper issued (there is data i think on balance sheet for ECB how this debt is structured but i frankly don't give a shit anymore but most likely its PIGS government bonds).

This will warm your heart!

Love,
Bernie

The Disaster of Negative Interest Policy | Thorsten Polleit

Those who had hoped that things could not get worse with the monetary policy of the European Central Bank (ECB) have been proven wrong.

mises.org

 

[gigamortis]

The idea of negative rates is to encourage people to spend rather than save, since parking cash in a bank will be a guaranteed loss. If cash in the bank will eventually erode away from negative rates, people will be more apt to spend it now, thereby propping up sluggish economies. Negative rates are pretty much a last resort to kickstart a dying economy. I think people will eventually warm up to decentralized cryptocurrencies as they can't be manipulated by deficit plagued money printing governments. Decentralized blockchain technology is awesome in that there is no one single door for the .gov types to bash in and shut it down. It would take an EMP on a worldwide scale to kill off all the computing power that makes up the blockchain ledger.

 

[W54/XM-388]

I think people will eventually warm up to decentralized cryptocurrencies as they can't be manipulated by deficit plagued money printing governments. Decentralized blockchain technology is awesome in that there is no one single door for the .gov types to bash in and shut it down. It would take an EMP on a worldwide scale to kill off all the computing power that makes up the blockchain ledger.

Yes and No

If you look at Bitcoin, you'll find that there are a couple big players that pretty much control the game and those players aren't exactly the "law abiding US citizen types". How much do you want to pay to get your transactions processed in a reasonable amount of time?

Blockchain things are a lot less "anonymous" to the "correct" 3 letter agencies than people realize.

Facebook is trying to get into the game for of course the worst possible reasons for the "consumer", basically Facebook plans to get the stupid part of their users to hand over their currency for virtual tokens that Facebook sells them but doesn't actually guarantee and then let Facebook track all their purchasing and saving and transfer habits to sell off that information to anyone that asks.

In the end the blockchain stuff is just another fiat paper currency. It has no value at all on it's own and actually negative value because of the power/computing requirements to do anything with it. It only has value because people believe in it. But when things go wrong well... tough luck... who are you going to vote out of office or start a revolution against? The blockchain stuff over the past 5 years has been more of a roller coaster than a lot of other things.

 

[Gunfighter14e2]

The bottom line is those who think inked paper or anyother none tangible payment method is worth something, are going to be proven wrong again just like in 29. Money, be it paper or electronic is nothing but a control item.

 

[sharac]

Consumer does not have negative interest rate when purchasing and with .gov stealing more and more of their disposable income by taxes, fines and whatnot its fundamentally wrong to call "negative interest rates as a kickstart to economy".

Negative interest rates are system of kicking the can of government overspending (aka .gov debt accumulation) down the road for a while longer
Tax reforms, lowering of taxes, low interest rates on consumer credit and safe legal and work environment are "a kickstart to economy" but as far as i can tell no government is doing that...

Bitcoin in our language vaguely can be translated to BeHorse and entire "blockchain" bullshit is just that. So if you wanna be a horse please sure do transfer as much of your wealth into virtual tokes it will work out just beautifully and while at it put a microchip up your ass...