This page has been archived and commenting is disabled.
Deflationspotting: Norfolk Southern To Issue $100 Million In 100-Year Debt
Deflation is now officially the norm, as Norfolk Southern prepares to issue $100 Million in 100 Year bonds. Hope you have drank your vitamins and wait to receive proceeds at maturity... in 2105. And just in case you were worried there is no benchmark security to reference these to, don't worry, the US government is likely about to start issuing a 100 Year UST soon (with perpetuals to follow).
From Bloomberg:
Norfolk Southern Corp. may sell $100 million of bonds due in 2105 in a reopening of an earlier offering of 100-year debt, according to a person familiar with the transaction.
The bonds may be sold as soon as today, according to the person, who declined to be identified because terms aren’t set.
»
- 6523 reads
- Printer-friendly version
- Send to friend
- advertisements -
They beat you to the punch... in Japan they had 100 year mortgages.
Covered wagon NEW ISSUE show
Take you to the place where the healing flows
Weak in BALANCE we got the MEAT
Wont save your soul it'll BUFF YOUR SHEET
Treated king to kangaroo
Santa Fe to Timbuktu
Don't be fooled by imitation
This is the stuff that cured DEFLATION
We took the tube and the high plains too
Never stopped long just passing through
A drop of the laughter of the maids of France
Makes a hopeless BANKER dance
It was really vile weather
When we got to tarred and feathered
You could hear the six guns sound
As they chased us out of town
In India where IT'S THE BEEF
Discovered its GREAT CASH FLOW RELIEF
Drop in the MARKET OF Japan
Swapped 20 YEARS for ONE HUNDRED, MAN
Immunity from ridicule
Improves your brains if you're a fool
And I read in the Middle East
DUBAI traded some for OBLIGATION RELIEF
Now if you're SHORT IT WILL GIVE YOU CASH
If YOUR LONG, MARGIN CALL IN A FLASH
Feeling up you'll get depressed
Out of style here's SOME DISTRESSED
It was really vile weather
When we got to tarred and feathered
You could hear the six guns sound
As they chased us out of town
The stuff we sell is just the best
Passing all BOND RATINGS tests
Days of heaven nights of sin
BARNEY'S stick and DODD'S FIN
When all around you seems like hell
Just one ISSUE will make you well
Multipurpose DEBENTURE
EVEN COMES WITH AN INDENTURE
In days of yore for RAIL ROAD BONDS
Washing STOCKS and stripping COUPONS
Nowadays its used REPEATEDLY
For all known REPORTING QUARTERLY
It was really vile weather
When we got to tarred and feathered
You could hear the six guns sound
As they chased us out of town
Guaranteed don't you know
Money back?
You'll get a no!
It's the one and only DEFLATION show
http://www.google.com/url?q=http://s0.ilike.com/play%23Big%2BAudio%2BDynamite:Medicine%2BShow:115185:s28326854.8111273.5645930.0.1.17%252Cstd_dea272656d59c72ea34c7cde4501203c&sa=X&ei=QI9yTOuPDIH-8Aalm7G6DA&ved=0CBgQ0wQoADAA&usg=AFQjCNEfkjRZEykNWCJyAeyYB_BJwGENJw
They also had 20% savings rates and record trade surpluses.
I'd like mine denominated in Ameros, please.
HelluvaEngineer,
Loved it! Excellent!
DavidC
If the same people who issued dollars issue amero's using the same economic system we have now. Exactly what will amero's be worth in 60 to 80 years?
ding ding ding ding ding da ding ding ding. <- jeapoardy song.
http://www.federaljack.com/?p=12550
Though they should change the united we stand to "Let's gang up on everyone".
Great...exotic bonds.
This is how a bond bubble is going to playout. Companies issuing 30 year debt paying out 1%. Suck the general public and every pension fund in, and then inflate away baby.
The only way you inflate away is if they issue more and more, that is not happening.
Credit creation is shrinking and has gone negative. If it were inflating away it would be going up at a huge rate.
Too many stupid Peter Schiff books.
Thank you Mako. Unless the Fed prints 10s of trillions of US toilet paper annually, deflation is going to rule the day for several years.
Then step up and put your money into bonds buddy.
" deflation is going to rule the day for several years"
remember that this time next year when you go grocery shopping.
or to the gas station. or buy cigarettes. or send your kid to college.
or order your gold bricks. just because deflation overpowers inflation, does not mean the two do not coexist, or that the inflation is not stronger in certain areas.
Biflation is a good long/short equity theme for a while to come
Info, it won't matter what the prices are when we are all unemployed and broke. The inflation like effects we are seeing is the Fed attempting to fight the black hole of deflation. It costs us $2.5 trillion+ to temporarily fend off the inevitable, bubble collapse hell. QE 2.0 is coming to defend the asset prices. It will appear to us as inflation in certain items as you state, bet it will have less of an effect than the last printing press orgy.
So you don't think there will be enough dollars around to cause hyperinflation when the treasury market sells off ?
The reason why we will not have hyperinflation during the initial stage of the sell off will be the contraction in credit and money velocity within the economy will cease. No one will have access to any form of credit. Everyone will be unemployed. Corporations will stop spending. Anyone with cash, will horde if they are not forced to spend. Once the defaulting period ends, hyperinflation will the kick in due to a massive supply side shock. The companies who produced anything in the past will be bankrupt. Those who have cash will scramble for the limited resources available. Zimbabwe will be proud!
The government taxes the real economy to service the debt(bonds). When the economy"deflates" enough, it will not be capable of servicing the debt and the debt will sell off(bond bubble pops) The US dollar is not backed by gold, its backed by this debt.
We need no more money printing to have hyperinflation. If there was no bailouts in late 08, the dollar would have been done by May of 09. All the big US banks would have been bust, the whole economy would have been bust, there would have been NO TAX REVENUE TO SERVICE THE DEBT.
In a way, Bernanke printed money in 08 to stop hyperinflation. Hyperdevauation if you deflationists understand that better.
The hyperinflation in our future will be the end game. Nothing left after the majority of debt was already defaulted upon. It will be a while before this occurs as long as our gubbimint defends the current system.
Yet that's not impossible, and arguably likely. The real question on deflation/inflation is what the political class/Fed intend to do. And so far, haven't they appeared much more frightened of deflation?
I guess you missed the part where the US is issuing unprecedented amounts of debt on a weekly basis.
What is with your Peter Schiff fetish? You want to bone him or what?
+++. Big fucking grin out of that one.
actually, the only way you inflate away is to monetize. They'll monetize once there are no more suckers to jump into the bond market.
Monetize is such a rude word. Please call it 'Quantitative Easing' or Benron might cry.
actually no.....debt issuance is inflationary in and of itself per the mandrake mechanism. New debt = new money in the system, thx fed. currently though, the government is losing the battle between their debt/money creation and the private sectors debt/money destruction.....that can easily change and will at some point down the road when the private sector is done deleveraging or the gov. succeeds in restoring "confidence" and lures the sheeple back into massive credit card debt....
No, the Euro started inflating before they even anounced that bailout. It went from 1.5 to 1.1 remember ?
nobody epecially Peter Schiff EVER said that we would have demand pull inflation, only currency devaluation inflation.
When Greece was on the cusp of "debt distruction" in early summer, did the Euro gain in value(DEFLATION) ?
or did the Euro fall in value(INFLATION) ?
IBM and Disney issued 100 year bonds back in the '90s. Issuance of century bonds stopped because tax issues arose about the interest deductibility for a security with a 100-year maturity. The safe-harbor changed to roughly a 50-year maturity.
Don't know if interest deductibility for tax purposes will be an issue for NSC.
I've read of 150 year railroad bonds in the 1800's.
wow thats ridiculous. inflation in 100 years would cause these to be garbage right? NSC pays these bonds back with MUCH MUCH cheaper dollars
Leo's buddies at the pension funds will be gobbling up these bonds. Only thinking about the asset / liability duration match.
Only a complete fool would buy this. How much more assinine can it get, really?
In England, one can sign a 999-year lease.
wtf is the rate on these? 50%? No way I would lock up capital for the rest of my life for anything less.
You mean you wouldn't take 8% ? what is wrong with you man ?
This is the bond bubble, get with the program. How do you get in line to buy these bonds ? Do I have to camp out somewhere ?
Did I hear bubble?
http://money.cnn.com/galleries/2010/fortune/1008/gallery.five_investing_...
FTFA: "Verdict: a major bubble
Gold has already started slipping. It declined 6% in July to a recent $1,160 an ounce. Some economists are warning that continued weakness could lead to deflation. If that happens, expect gold to crater."
Writer is a moron.
haha, thanks for that. Its going to be a classic
I remember a couple of companies issued "century bonds" in the 1990s. After concerns developed that the IRS may "deem" them to be equity and eliminate the tax deductibility of interest for the issuer, the issuers walked away from them. I wonder if this means Norfolk Southern has gotten a definitive ruling on that issue. (The answer may be in the article you linked to, which I probably should read before commenting, but haven't.)
The streets are a wash with drugs you can have for unhappiness and pain, and we took them all. Fuck it, we would of injected vitimin C if only they'd made it illegal.
If the next scene (Worst bathroom in scotland) is any hint at what happens to these bond buyers, it wont be pretty.
So let's do a quick analysis. Norfolk Southern is issuing 100 year bonds assuming that there are going to be railroads in 100 years. This is sort of like Joe's Buggywhip issuing 100 year bonds in 1886. Or Lehman Brothers in 1993.
?
It seems that a railroad is more likely to exist 100 years from now than virtually any other type of company I can think of.
Are you proposing that technology will have advanced so far that railroads will by then be irrelevant, perhaps due to some anti-gravity device that allows us to move large, heavy things and commodities over land? Or that we will have regressed so far that we can't even manage or use a technology that was in widespread use by 1860 and perfectly capable of being operated with only 1860's technology and resources (notably, no petroleum)?
If it were GM issuing these bonds, I would be saying +1000. But I expect railroads to be important long after automobiles are a historical footnote.
You just made the exact same assumptions that:
Shenandoah made when creating new equity and bond issues in the late 1920's.
Buggy manufacturers made in the 1880's.
Telegraph manufacturers made in the 1890's.
Rotary phone manufacturers made in the 1970's.
Commodore Computer corporation made in the 1980's.
Should I continue the list? The assumption that mankind will not create technological innovations making the railroads irrelevant and extinct is similar to those that said people would always take cruise ships across the Atlantic instead of flying.
Never remain static or fixated on traditional historical analysis in economics or science. Or as an investor your ass will get smoked.
Well said!
Are they assuming that? Or are they simply assuming the bond investors will be under that assumption? For all we know, Norfolk Southern may have no intention whatsoever of being around in 100 years.
"Investors" (giggle, snort, belly laugh) are assuming that. The management at NS or any other corporation issuing 100 year bonds couldn't give a crap.
They are all dead when they are to be redeemed.
Classic...I love the line about vitamins. Ha ha..
We're gonna need an "entire body" version of Viagra if we expect to be upright to collect the principal payout on these bonds. But what a way to go.
Just as Buffett selling S&P puts that expire when Buffett is not goign to be alive, 100 years from now either the civilization won't exist, or we'll find new ways to power "stuff that transport things" and reailroads won't exist.
Buy at your own risk.
Several Asian companies (Reliance, Tenaga) and Sovereigns (China) issued US$ century bonds just prior to the Asian Crisis meltdown in 97.
I think all the 'fools' that bought those bonds back then are well back in the money now, not including the fat coupons they've clipped all the way through.
are you serious ?
KO also did this.
The ultimate Keynesian fantasy 100 year zero coupons
even better are the zero coupon perpetuals
Consols bitchez.
Sorry, had to say it since nobody else has yet.
That's what I was thinking. You can't have a multi-generational, end of empire, right proper Bond Bubble, without at least attempting to issue some perpetual debt. http://en.wikipedia.org/wiki/Consol_%28bond%29
Thanks for that -- both of you.
It still can't top Canadian Pacific 4% perpetual bonds CP issued (pounds sterling]88m of perpetual bonds from 1889 onward. They paid 4pc interest, were perpetual and secured. ) .In the US, interest was paid in gold coins - entitling anyone investing $1,000 to the equivalent of an ounce of gold every six months...They were called in 1996
edit. someone beat me to the zero coupon bond funny.
-this is a reopening of their outstanding 7.9% 05/15/2097 notes currently trading at +262 bp vs. 30yr
-despite the 100yr maturity, the duration is only ~16
If NSC is deciding to raise $$ via a hundred year bond doesn't that indicate that they at least are expecting inflation? In 10, 20, 60 years their debt service on this thing will be minuscule in an inflationary environment.
Doesn't Disney have 100 year bonds?
Completely agree. Interpreting this bond issuance as a deflationary omen follows a disturbing ZH pattern to meld each headline into its own view of the market. Perhaps the justification is that these issuers see the latest threat of deflation (coupled with the Fed's monetization response) sparking hyperinflation (not demand pull inflation), so these issuers are locking in now for 100 years. I doubt these issuers would agree with such a strained interpretation. Rather, rightly or wrongly, they view this low rate bubble as a smart time to lock in rates for as long as possible, since they do not see it continuing. Just the opposite of what the healdine suggests.
KO, DIS and IBM all issued 100-year bonds. I guess NSC did as well since this offering is a re-opening of an existing issue.
$100 MM offering would seem to indicate only modest institutional demand. Probably no more than 3-4 buyers, probably via reverse-inquiry. Maybe BRK is a buyer looking for an extremely long duration asset - Buffet knows the name and has (had) a position in the equity.
$650 MM of 7.02% debentures due 2097 and 2105 currently outstanding.
The novel "Snowcrash" was right. Our currency will be so much green toilet paper, and anyone who will want payment will only take "kongbucks" or yen.
http://en.wikipedia.org/wiki/Snow_Crash
Our currency IS green toilet paper... wtf you think my avitar has been telling you for years?
One of my (many) favorite parts is where Y.T.'s mom (who works for the former U.S. gov't in their own little enclave) peruses an office memo where they plead for people not to use US currency in lieu of actual toiletpaper due to ongoing hyperinflation and shortages. Usual stern warnings about defacing currency, etc..
Great read.
AMERO COMETH......Pretty images of the new currencies AMERO....i didnt know they had done an interview in CNBC regarding the AMERO....::
http://pakalert.wordpress.com/2010/01/25/death-of-us-dollar-secret-image...
Updated S&P500 chart:
http://stockmarket618.wordpress.com
100 year company bonds and the US treasury thinking about 100 year Treasuries, we are officially screwed.
Thanks for such a great post and the review, I am totally impressed! Keep stuff like this coming!...
cheap site hosting
windows web hosting
windows vps hosting
windows vps