Wednesday, May 18, 2016

How Stupid Do You Have To Be? 
100-Year Bonds?
John Rubino* highlights the insanity of buying 100-year maturity bonds, such as the bonds now being put out by Ireland .. "Who in their right mind would tie up money for five years in this world, let alone 100? Here’s a chart above of the dollar’s value over the previous century .. Remember that this is the best currency. Most others have lost even more value. And this decline happened when global finances were far, far stronger than they are today. Had you bought 100-year bonds in, say, 1920 you might still be getting paid, but in 95% cheaper dollars. And your principal would be so diminished as to be hardly be worth considering. Going forward, even economists who think the global financial system is fixable define the fix as a burst of inflation that allows debtors to pay their interest in cheaper currency. A 4% inflation rate achieved through sustained currency devaluation would make today’s 100-year bonds the Platonic ideal of a bad investment. And that’s the best case scenario — all the others involve extinction-level events for financial assets."
LINK HERE to the commentary

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