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"One Of The Defining Investment Moments Of The Next Few Years"
Some very spot on observations (which contain the amusing line: "inflation has been a modern day (last 100 years) phenomenon tied to the evolution of central banks (the Fed started in 1913) and the gradual demise of precious metal currency systems") of what will be the biggest trouble with the credit bubble, from Deutsche Bank's Jim Reid:
One of the more interesting stories of yesterday was a €1bn 50 year private placement bond issued by the Spanish Government with a 4% coupon. It’s a measure of how far things have come in a couple of years that such a deal could be launched. It was also a day when 2 year French yields traded below zero for the first time ever. We still live in remarkable financial times. Back to the Spanish deal, although current low levels of inflation make this deal look optically attractive on a real yield basis we thought we'd look at the rolling average 50 year level of inflation in Spain to highlight what real returns might potentially be over the lifetime of the bond. I hope I survive to see it mature but I hope I won't be writing about it then. Anyway the average annual inflation over the last 50 years in Spain is 7.0% and as the graph in today's pdf shows the last time the 50-year rolling average was below 4% was in 1956. Clearly prior to this the average rate of inflation was constantly below this level as inflation has been a modern day (last 100 years) phenomenon tied to the evolution of central banks (the Fed started in 1913) and the gradual demise of precious metal currency systems. So it’s a measure of how buoyant fixed income markets are that investors are prepared to ignore that last half century's inflation record and the current fiat currency world when pricing long-term bonds. This is not a Spain-specific issue but on a slow news day the story stood out. The same would be true for most countries issuing similar long-dated debt today. Indeed yields elsewhere would likely be even lower.
Herein lies our dilemma with bonds. We've been a member of the lower yields for longer camp for a number of years now due to our near-term growth and inflation outlook and our belief that financial repression is rife. However we also think that debt restructuring or inflation will eventually be the only way of successfully reducing debt burdens for many countries with the latter route the most likely. As such whilst bonds are a near-term safe haven they are also likely to be very poor real investments longer term. Timing the big switch in view on this will be one of the defining investment moments of the next few years. Let's hope we're lucky.
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Perhpas "pray" to the likes of Yellen et al is a better way of phrasing it?
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...Western Canada remains the safest quadrant on our Planet.
A Plethora of Natural Resources, Vast lands, only 12.5 million citizens, and No guns.
Investments are Worthless without Food or Water.
Food for thought
You had me till the "no guns" shit. Prepare to be invaded by all sorts of people, idiot.
BandGap & Deeply Invested
I refer to Hand guns friends.
Like all them hand guns in the USSA has prevented Your Republic from going down the Drain?
Like all us USA hand gun owners have a say in all this shit going down?
Thanks for the tip RE: Western Canada.
Exactly the opposite is true: twenty-nine per cent of Canadian homes possess an estimated total of nine million firearms. Other authorities insist that even this figure is too low, and that there is at least twenty million firearms in Canada. The UN reported that Canada ranks third among the developed western countries (behind the United States and Norway) in the civilian ownership of firearms.
There is an average of three firearms in every gun-owning Canadian household. The majority of gun-owning households in Canada own rifles and/or shotguns; on a per capita basis, Canadians own nearly as many rifles as Americans.
Want to know why?
Adams was instrumental in writing and passing numerous Constitutions.
Exactly. The American form of government worked quite well when the vast majority of th epeople answered to a higher calling, be that God, conscience, morality, or whatever you want to name it.
What we have now is a breakdown of that and that breakdown is fed by government itself. My eprsonal opinion is the reason for that is because government thrives and needs more power to control the rabble as they become more and more lawless. Government creates the very conditions for it's own expansion.
what BandGap said.
How will you keep what you have? Tell me rifles fron Oregon won't beat shotguns from Canada.
I'd let the 'no guns thing' stay a shameful dirty litte secret.
There are a lot of rednecks in Western Canada, guns are plentiful
No guns makes it safe?
Moron...
It makes it safe for the gun owner.
No guns my ass. Totally ignorant comment to anyone who is familiar with gun ownership in Canada.
12.5 million people and no guns? Is there a bag limit?
Once you brought up the no gun bullshit you lost me...
Troll in disguise for the socialist leadership
....Paranoid Americans....
Ha! Head over to Huff Po!
Total Troll
Sidelines the discussion of the article for 40 posts.
In a land of no guns, the one gun man is king
Would seem that hunting is a pretty a big game in Western Canada? No? And tourism?
"No guns". Seriously? sounds like a lot of free shuff to be had in Western Canada by the Scum Class.
Safest, my ass. A guy could freeze to death up there, if the bears don't eat 'em.
Yeah. Sure. The "great rotation" will be here any minute now.. Where have I heard that, before?
When does the can become too big to kick?
Or is my model of can kicking totally wrong?
They just keep printing bigger boots.
Atrophy happens.
Bonds are in a bubble..stocks too...but PMs are getting slammed down....go figure...should not money be chasing everything....
If they were trying to hide the fact of their war with PMs, then yes, money should be chasing everything.
I think that they are saying, "the war with gold is right out for everyone to see. You mess with me on that and I will kill you." They want you know that.
Money has tired of chasing paper gold that can not yield the real thing when needed.
Since all gold is priced by the paper gold price look for prices to go lower...until....
Ripe for the picking for the nation that chooses to invade. What you consider a strength (no guns) will be your downfall.
The day I pray to Mr. Yellen or any Central Banker is the day I cut my pecker off.
Lorena Bobbitt was a Keynesian (apparently)
Stuff you learn only on ZH..
All Major Bond yields across the world have moved up this morning, with both US and German moving up 5 basis points...on no news...has someone decided to bolt for the door early before the end of QE in October?
"has someone decided to bolt for the door early before the end of QE in October?" -
LMFAO!!! No, with money still essentially "free" thanks to ZIRP (NIRP in real terms), the answer is simply no. Those liabilities must get funded, period.
Unsustainable debt leads to war and default to the loser... perhaps it's just the "smart money" is decinding the bonds denominated in currencies that start with an "R" (and no sparky, not the Rand) are a better bet to play this end-game.
I think it is insanity. Would you give up all control of all the assets in your checking and savings accounts for the next 12 months an interest rate that is effectively negative?
One day, we will look back at this time frame, and no with absolute certainty that mass hysteria can take root in many ways and amongst people who otherwise could have been considered rational.
Are there supposed to be better investment options a year from now? Two years?
Generation Waste comes to my mind.
I call bullshit. Show me a chart for the cost of living over the same time period. There is plenty of inflation in Spain.
Exactly. Using government statistics to describe government financial confiscation and repression is to play a fool's game.
Look at entities with government-baqcked pricing power; education, medicine, public sector compensation. Inflation is hard at work.
Countries NEVER pay their bills.
Their businesses are earned by tax, not by contract sign, fulfillment, confirmation, invoicing and finally money recieving (if agreement).
Only people that never passed through the cycle above for earning a living ask for more government and believe in magic.
The "big switch" to come will be another deceit. I'm sure. Not only many of us, many of them too, will need "HARD assets"...
We gotta take the power back.
The "new normal" definition of what is, is, makes "inflation" impossible... We got that going for us, whatever it is we know what it ain't.
Inflation is low my ass. Tell that to the people trying to feed their families, idiot. One more thing, hope is not an investment strategy. The idiots in this country voted for hope and look what that brought them.
So you have large bond holdings yielding 3%, what are you risking exactly by selling now? This discussion is more relevant for non-govt bonds.
Yeah, danger.
Risk of selling now is about the same as in Black Jack.
House isn't operating at a loss.
Look, maybe the bond markets are actually right, and are trying to tell us something, that growth is a mirage, at best, a fraud at worst and the only gains in GDP are via inflation.
That being said, it would appear that the end is coming, so that the 4%, 50-year Spanish note looks like a good deal. Prices can revert to the mean, population may begin declining, mad money printing will end in default.
A deflationary depression is what the Fed and other central banks fear most, because their precious money - and especially that of which is in the hands of the plebes - will gain purchasing power. A collapse of the fraudulent, rigged, 0.01% system is what smells like freedom for the masses. It won't certainly be pretty (and actually hasn't been, despite CB meddling), but it's where we were in '08 and a resumption of that trend is long overdue.
While I am acutely aware that increasing money supply is supposed to be, by definition, inflationary, the mal-investments of the past six years may be rendering that argument a moot point.
Take a look around the developed nations. Anybody starving? Nope. Anybody even hurting badly? Not really, thanks to various governments' unrelenting social programming. There's plenty of arable land, despite the California debacle (who thought growing 1/4 of the nation's vegetables in a desert was a good idea), jobs for mooks, it's just getting the governments and central banks out of the way that is really impeding progress, but, I think there are inroads being made by independent-minded folks around the world.
I am long black markets, unreported income, cash transactions, cheaper prices for everything and much, much smaller government. Thus, 4% yield is pretty tempting because, like the Bernank said recently, he does not expect to see a "normal" interest rate in his lifetime. Considering the SOB was born about a week after me, I wish him a long, ZIRPy retirement.
"Thus, 4% yield is pretty tempting"
Yeah, if the bonds don't get haircut by 80 to 100% in a couple years - how tempting is that?
And, BTW, anybody gauging inflation by prices at restaurants doesn't know the first thing about head-count and food cost control. Fewer and fewer people are going to McDonald's, Applebees, etc. and it's across the board, so, with food costs rising only marginally on some items (OK, take beef out of the equation for a minute, please), restaurant chains have to raise prices to keep profits up. They also benefit from having a very malleable workforce, so they can cut hours as they please.
Inflation, my arse. Try looking at some coupons and buying accordingly. Sure, the big companies are cutting package sizes, but for the same reasons the restaurants are raising prices or cutting down portions. LOWER TRAFFIC, LOWER SALES. With all the wealth in the hands of the top 20, 10, 5 or 1%, the rest of the populace is being decimated. It's simply unsustainable, and once one company makes a break, looking for competitive advantage by lowering prices, it's all-out war. Look at the battle over Family Dollar. It's all about the last marginal buck, now, and that can't last indefinitely.
Grow Your Own.
Good points, Energy.
It's a tug-of-war between the dumping of money into the debt hole, but the debt eating it at a faster rate than it can be created.
50/50 is the best one can do here.
The headline to this article lead me to believe it to contain a video by Reggie. What ever happened to him and his Indian developer who were to turn finance upside down with their coins?
Exactly.....They cannot "Inflate their Way Out".........
FNE you're on to it........Higher Prices without Higher Wages = Demand Destruction........
= Slow Strangulation of the Economies..........
= "Zugzwang"
http://www.talentseekscapital.com/uploads/3/2/6/9/3269986/zugzwang.pdf
We are in the Endgame Right Now......