Friday, 8 July 2016

Bonds: has the World gone mad?

First there was the news that the yield on the 50-year Swiss bonds has turned negative.

In plain English: you put your money away, and get 50 years later less money than you put in.

What happens in those 50 years, who knows? There might be a time of raging inflation, which means that the money at the end of the 50 years might be worth peanuts (literally).

It could also be that bond yields turn double digit, if one is forced to sell those bonds at that moment, good luck, a huge loss will be your result.

Now the news came out that Uber has issued a leveraged loan yielding only 5% interest per year. This company has never seen a profit in its existence (it is burning through billions of USD), something that is likely to continue for the foreseeable future.

Is that the new definition of "junk bonds"? Where are the times when junk bonds were yielding double digit interest rates, as they should, to compensate for the high risk of not getting back ones principle?

Central bankers who have caused the huge distortions might be euphoric about all these events. But do they really know what the future will bring, in what is probably the largest monetary experiment ever created?

The 10-year yield on the US Government bonds, the lowest ever:


  1. Hi CG,

    Good that u highlighted this. Thank you.

    Indeed, the world has gone kind of mad. It's beyond imagination that a 50 yr bond has gone negative return. Financial, political and terroristic problems further reinforce each other n kind of worrying for the roads ahead.

  2. Hi! What would you consider safe investment for the years ahead?

  3. Thanks Rolf!

    Hi "Anonymous", I think there is no safe investment. So what I would recommend is to spread your investments (shares, bonds, property, currencies, some precious metals).

    Re shares, there are many good quality ones, paying very decent dividends, and with sufficient upside if things turn normal again. When I have time I will try to highlight some.