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Goldman Issuing $250 Million Notes At 6.25%, 50 Year Maturity
A token amount for a test of what the US apparently does not have the guts to do: note maturity - November 1, 2060. Price talk on the $250 million issuance at 6.25%. Use of proceeds: General Corporate Purposes, also known as bonuses for the janitors. Oddly enough, the par on the notes is just $25. Is Goldman now trying to appeal to retail direct? Are pension and mutual funds tapped out, courtesy of endless redemptions and lack of cash for ponzi perpetuation purposes? Either way, if this is successful, and it will be in the broader drash for yield, look for most TBTF banks to start issuing 100 year bonds that will never be repaid.
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Over 50 years, What's the chance of the real rate of return on these being positive?
Everyone keeps projecting out years into the future. 50 years?..hell none of them will be around within months.
I was hearing about the 50 and 100 year mortgages. I guess it is time to start watching for those to materialize pretty soon now. So a person buys a house and he is a debt slave for the rest of his life, just like they want it.
So who's gonna repay this stuff?
Wasn't Allan Stanford taken down for advertising CD accounts with a 10% yield, with the explicit purpose of paying off the rest of the ponzi-scheme subscribers?
So much ongoing fraud, every day I struggle to understand this not collapsing in an instant.
GS Greedy Satan calls for $4 trillion Q/E, then an hour later seeks to borrow $250 million for 50 years? So...Blankfein got Bernankes Tweet that there will be no QE Nov miracle I guess?
its collapsing in slow motion. when the election farce is over it will speed up.
I've heard, on this site, that some are predicting the diarhhea hitting the HVAC about 7-10 days after elections are over.
I myself would welcome it. Change you can (almost) count on.
+21 and falling, just like shares of BofA. LOL
Wait for the bump (pump) of elation after 11/2 and then watch the carnage (from the sidelines or the short side).
The income hungry investor might not care if its ever repaid, just so long as it keeps paying.
such a platry sum for GS. and for such a long period of time. at such a high interest rate... i don't get it.
I think I get it. Q/E wont happen and 'King of Wall St' Giant Squid needs to borrow $250 million for about 50 years? Frankly, we're totaly buggered here, duck and cover its all coming down fast.
Can they leverage up those bonds 100X ?
That's my question as well. JHC.
Will be oversubscribed
Sorry Lloyd, my crystal ball says 6.25% won't be sufficient in the new normal of 2025.
What do your crystal balls say Lloyd?
We'll still be here in 50 years bitchez!
In 2060, the USA will no longer be there. Who bets with me?
Given the current procrastination rate of the financial world, it would not surprise me to see 500-year bonds emissions in the future.
So
a) Goldman does not predict in will be in business in 50 years
b) think inflation will be much higer than 6.25%
hmmm
c) why does a company making 5-10 billion a year want to borrow 250M ???
Good point. Given the dishonesty of Goldman Sachs leadership, it is very probable that Goldman Sachs will indeed cease to exist before 2060.
GS leaders just fill their pockets with the money of naive investors just before the final crash.
+2060
$25 par? I'll buy it!
Talk about superior "investment skills"!
OMFG 50 year bonds? LMAO welcome to Schtupplandia!!
Greedy Satan needs to borrow $250 mill for 50 years? WHAT??
I hope this is the final hour of this fed supplied coke induced bizarro party.
Completely idiotic move. For one; they could have issued a perpetual with maybe 25 bps higher yield and make it callable after 5 years. That, alone, would significantly push down the cost of borrowing since, taking into account how perpetuals trade they would call it in the next 5-7 years. This is only justifiable from cost perspective if this issuance is a test for such long maturities, which it could easily be. I just see not point in 50y or 100y bonds when perpetuals exist.
Right, this is a HUGE tell. No one in great financial shape needs to borrow for a 50 year return date. Ridiculous.
And what does the King of the Street need with $250 million anyway? That sum was recently just a few days worth of HFT trade scalping.
I believe they are just testing the market for such long maturity bonds. Hence the small notional. There is NO other reason to do it. Call it market research or whatever, but this is IMO a test issuance. 100y sure to follow. OT: Just look at Brasil and all the rage perpetuals are there. Every bigger company is either issuing new ones or just re-financing old ones, and they cant keep up with the demand from investors. And if you have a willing counterparty which would write you a CDS on perpetual you basically net 9% return a year by owning those. Well, I strayed from the topic.
Is that how you would refinance corporate debt that can't be at the moment or laughable commercial real estate debt that is coming due?
So trial balloon makes sense...
I think GS knows, or "implicitly understands" that 06/07 SP vintages that mature in 2011/2012 will be in the worst case guaranteed why FED balance sheet. Meaning banks buy them back, dont roll the debt, and "suddenly" there is again "systemic risk stemming from possibility of banks failing" and FED steps back in and buys up the products, easing banks balance sheets. Think 1.75T MBS monetization. That but with all kind of SP shit being bought. But, to get back on your point; yes definitely; this is how, if I would be in the position to make that decision, I would roll the debt. Either with 50 and 100 years or just perpetuals. It would produce a loss, but what-fucking-ever, better that than massive defaults. But, AIS, FED will probably step back in and monetize it and just call it QEIII. Think Q2,Q3 period of 2011.
Thanks for the info CB...
This is why my motto is:
Always listen to the clown face (avatar CB), never the clown (Cramer)....
Well, I strayed from the topic.
Seems to me you nailed the topic, CB.
I recall my sister issuing some o'those long duration bonds to me when she was short of change at the local mall.I've been in touch with her many times and in a telephone conversation she assured me she'd pay up inc.interest and ruled out default as an option.Its been over 5 years since i last spoke to her and have now realised that t'was some o' those perpetual bonds she had sold.
Deeply saddened i recently asked her husband if he would be kind enough to lend me their petrol driven lawn mower.BTW it sadly went missing soon after.............. stolen i think...LOL.
Fortunately,i still have the pawn receipt.
Now i'm happy,as those perpetual bonds she issued have matured."Whee,this investing stuff is easy"
That was my second thought. This is a test. What they could be testing for I have no idea. Appetite? Gullibility? Liquidity?
Read the offering, think Japans debt composition. I mean who owns Japanese debt.
That was my thought, Cheeky. Fishing for suckers. They want to see how many income starved morons will bite on anything flashy. Same with the reverse repo crap last week. They want to see what they can get away with in the days before the fall.
Its the latter stages of the bond bubble. These corporates are like the condos. GS is looking to find a new demographic buyer with the $25 par and 50 year maturity. Cant afford a single family with standard 30 year fixed? how about a 1 bed condo with an ARM? That is what is happening here.
Not worth paying up the extra yield for the option i suppose..
Still, forget the duration, 6.25 is pretty good for a firm you know isn't going anywhere.
Dude, it doesnt matter. Even if they had to issue perps with 8% yield. This is just product testing [and a laughable product at that]. Why it doesnt matter is that even with a hypothetical perpetual yield of 8% adjusted for inflation for they years they would be paying it, they would borrow money at negative interest.
Sure, but i was mostly agreeing with the discussion above on why the hell they'd bother such a low offering, unless as you say, to see how (over)subscribed it gets.
And in the mean time, that 6.25 isn't looking bad compared to any other IG, forgetting the POS HYs.
I'm not so sure either Goldman or the Dollar will still be around in 50 years...
I want to open a bank and issue 50 year bonds with no intent of ever paying it back. Hell, I won't even have to open up branches and or teller/atm's to service my customers.....Goldmen Sucks
Slow fucking news day.
As usual Tyler is bang on with his prediction of further issuances at increasing maturities that will eventually stretch to infinity.The UK government has got away with this scam for hundreds of years with CONSOLS and WAR LOAN(issued to pay for the First World War),the coupon is only around 2.5% and they have no maturity date and are thus considered perpetual notes.A gift for a profligate government that refuses to cut spending and prefers to inflate away its debts and problems,transferring the loss to the mugs that buy them.
There are very few undated gilts left now,presumably the supply of mugs ran out,but the US govt and US banks have got a seemingly endless supply of idiots prepared to buy them.Why only the other week Timmy was re-assuring the people he wasn't going to destroy the dollar, so they are quite safe then and with a nice juicy 6% yield,just imagine how many hard pressed Americans will welcome a 6% "return" on their money.
Form a queue.
Even better; leverage it 5x and make it 30% ....
All in bitches !!!
Tyler is bang on
Price talk: First one to get 12% wins the ZH gold cup.
Do I get Gold for 25 dollar man?
Then I'll buy it!
The Circle Jerk is hard to break.
TPTB are in heat.
The US gov't doesn't have the nerve to offer 50 yr or 100 yr "perpetual" bonds for the simple fact that we bond investors all know- it would be a total failure, unsuccessful auction. I'm wondering who will be dumb enough to fall for the 6.25% yield when come 10 years from now, that decimial point will need to move to the right one place.
The real money comes due very soon. The ponzi is failing.
JLR,yes you are right,the average ZH'er or Pimco fund manager won't touch them,the Squid and others that will follow know this,they are going to aim this shit at retail,who will not realise that with inflation annually anywhere between 15 and 30%,their 6% annual return(before tax) is meaningless,because if inflation is 15% for 5 years for example they have lost half their money!
Has Mexico's announced offering of, what was it, 100 year bonds been sold yet?
Co-managers [TBD]
You never told us your middle name Tyler.... Is it Bill?
Who buys these?...are people that ignorant?
Somewhere, in a place such as Ca or FL, a middle man is calling a pension fund manager to set a lunch appointment or a round of golf.
Perhaps they are intended to be used as "security" for some kind of derivatives leveraging
to "earn" 100x the original "investment"!
I'll take the 67 ft^3 gold cube instead, thanks.
I just sipped the koolaid and NOW I GET IT.
This offering is nothing but marketing. It's meant as an apparent good faith representation of their confidence that they'll still be a going concern 50 years from now.
It's all about plausible deniability.
The market price of this unusual and paltry issue will probably be used as the as the index for $100 billion of OTC derivatives which they also plan to sell to gullible customers and then manipulate the hell out of for the next 50 years.
OK, but what will the Estate Tax be in 2050? ;-)
I think CB nailed the jello to the wall.
Japan is fresh out of internal financing. Their vaunted savings rate has been destroyed by 20 years of semi-ZIRP. They have to borrow, large, in the international markets.
Why not make that impossible, by offering similar bonds with better rates? Short the Yen, short their bonds, 300X..., bonuses and pussy galore. Aren't trade wars fun?
Why do I hear SW muttering about unintended consequences?
The author is twice mistaken.
1] No need to denigrate janitors.
2] In truth, Goldman arranged clawbacks of the 2009 janitor bonus after prop desk protests they were "excessive".
[dose of sarconol here]
No, FED policies are not distorting the Markets! LOL
Think about the up-side though. In 20 years these notes will be collectors items worth far more than $25!!!
Notice the key words here "Senior Unsecured", a fool as his money are soon parted. Enuff said. Anyone who buys this, is a sucker who deserves to be robbed. Suck all the idiots in before the collapse. Where have we seen this before? 2007-2008 maybe?
The second clue to stay away are the underwriters involved:
Underwriters include Goldman Sachs, Bank of America
[BAC 11.16 -0.28 (-2.45%) ]
, Citigroup
[C 4.21 0.10 (+2.43%) ]
, UBS
[UBS 17.92 -0.01 (-0.06%) ]
and Wells Fargo
[WFC 25.72 -0.39 (-1.49%) ]
, according to the filing.
Can you underwrite your own offering? According to this you can. This market never ceases to amaze me at the amount of corruption going on. We will never fully know the extent until it is closed down for good.
Sounds simple to me The Squid is expecting Massive Hyperinflation. Testing Locking in paltry 6.25s when prime moves to 20% like back in the Volker days.
This is my expectations as well for a while now. Hyper-inflation due to FED policies. How do you think the best way to play this one will be? All in stocks once the next crash takes place an hold till 20% interest rates, then all out and lock into bonds permanently once the rates peak? That was my plan. But open to suggestions.
pay back Buffett who claims preferreds are worse than junk. Wells is Lead?