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Germany for First Time Sells 30-Year Bonds Offering Negative Yields

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Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#91

Post by llcoolv »

Jabbles wrote: post #63
TheSoftwareGuy wrote: post #53

Earlier quoted context omitted.

Why would a derivatives exchange not accept cash? what are people buying those derivatives with? Furthermore, how could any bond (or anything at all for that matter) be less risky than cash? the market value of a bond may change over time but $1 will always be worth $1. Inflation may change the purchasing power of that dollar but then the exact same mechanism will effect the bonds as well.

A large amount of cash is expensive to store safely (fire) and securely (theft).

Not only - AFAIR the Colombian Steve Jobs had problems with humidity too - 2.1 billion 80s' USD lost to flooding and rotting is what I would call real liquidity :D And also rats I think.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#92

Post by paulpauper »

RockIslandLine wrote: post #70
gzu wrote: post #27

I’m starting to entertain the idea of a massive bubble in bonds. Is inflation really never going to show again? I can’t understand why anyone would want to hold a fiat currency for 30 years for no return. Is it due to portfolio theory where the assumption is stocks and bonds yields have inverse correlation and the way to manage risk is to have a correct ratio? Due to global QE there is too much money floating without…

"Is inflation really never going to show again?" What causes inflation? Inflation is too much money chasing too few goods and services. When populations are growing, you need to expand the money supply to avoid deflation. What happens when populations stop growing?

Turkey and other economically weak countries have high pop growth and high inflation and high bond yields, so that is not the answer. it has more to do with flight to safety. Countries that are perceived as economically strong and geopolitically stable have low yields, countries that are weak have high yields ,regardless of pop growth.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#93

Post by mrfredward »

sunseb wrote: post #38

Do you think it's a good idea to put some savings in gold?

I used to be against having any significant amount of gold in a portfolio because it's not a "productive" asset. Companies earn profit, bonds pay interest, and real estate gets rent checks, but gold costs money to store. "Productive" assets get you price appreciation + income. Even companies that don't pay a dividend are investing trying to grow, hence your profit comes partly from economic activity, not just a bet that people will pay more money for the exact same thing tomorrow.

Now that many bonds aren't necessarily meeting my definition of a productive asset (small or negative yields for the safest bonds in Europe), I'm backtracking on my stance. The zero-interest rate world is weird.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#94

Post by hsk823 »

pfortuny wrote: post #61
TheSoftwareGuy wrote: post #2

I feel like I still don't understand negative yields, despite really trying to. Negative yields means that I put in $X (or euro/whatever germany is using) and I later am guarenteed no more than $Y out of the exchange, where Y < X. I am literally guaranteed to lose money. I could just hold on to my money, "keep it under my mattress" and still make a better ROI than bonds with negative yields. Why would anybody buy the…

Well, bonds are easier to deal with than cash AND you do not run the risk of binge-spending them. In some sense, bonds “do not burn” whereas your house may, or tour bank account may collapse, etc. The premium is the guarantee.

Assuming the sovereign debt is actually still good. Countries do default on their debts

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#95

Post by f00zz »

rchaud wrote: post #89
fourstar wrote: post #3

Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm? Feels like we’re in the doom and gloom media phase. I suspect lots of people will start forgetting within the next 6 months in which the stock market will go sideways, until the next catalyst which is the US election cycle.

Look at the S&P 500 index from early 2008 to say 2012. Governments will enact policies to prop up the stock and bond markets, as they always have. Our entire civilization is held up on the promise that financial market indices go up over time, except for temporary recessionary periods. We just accept that retirees cashing out at the wrong time will be victims of 'collateral damage' during these 'market corrections'.…

People who bought the Nikkei index in the early 1990s are still waiting for the correction to end...

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#96

Post by dageshi »

SilasX wrote: post #54
dcolkitt wrote: post #30

Earlier quoted context omitted.

A lot of financial transactions and central clearinghouses require participants to post collateral. For example if an insurance company enters into an interest rate swap with a bank, both sides will have to post some percent of the contract's notional value in escrow. This protects both sides from counterparty risk (i.e. what if the insurance company goes out of business and can't pay its side of the swap). The colla…

There's no electronic cash account they can put up? If not, why not, and why can't we enable something like that so people aren't forced to buy bonds in order to hold cash?

It would be counter productive to society. Put money in a bank, the bank lends it out, the money serves society buy financing a new business or perhaps consumption but either way it is doing something. Lend it to the government in the form of bonds and they'll spend it on something.

If it just goes into the cash account you're describing, it does nothing but exist, in the event of recessions this would be severely dangerous to a countries financial system because it would be the safest place to store your money, safer even than bonds, so at the exact time when the economy needs cheap credit, interest rates would rise as money drains into these electronic cash accounts.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#97

Post by bduerst »

fourstar wrote: post #3

Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm? Feels like we’re in the doom and gloom media phase. I suspect lots of people will start forgetting within the next 6 months in which the stock market will go sideways, until the next catalyst which is the US election cycle.

I've been trimming positions to increase cash on hand, as much as possible these past three months. I'll likely put it in some of the more stable industry ETFs moving forward, and won't bother with shorting index funds since we don't know exactly when/where the major hits will come.

My take is that this trade war is irrationally based on animosity (even if the sentiment behind it is rational) so my hypothesis is when the tariffs are finally enacted you'll start to see a bigger shift as fund managers figure out that yes, the trade war is here.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#98

Post by astura »

twoheadedboy wrote: post #62
rifung wrote: post #21

Earlier quoted context omitted.

> Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm I follow the traditional advice of doing nothing and not trying to time the market.

Yeah I get that. What about for people like me who are trying to enter the market? I'm wondering if it's worth it to wait and see, or if I should just not worry too much and invest now anyway.

No, its absolutely not "worth" it to "wait and see" unless you have proven clairvoyance. Just invest for the future when you have the money to invest - stock market should be for the long term.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#99

Post by seandhi »

llcoolv wrote: post #91
Jabbles wrote: post #63

Earlier quoted context omitted.

A large amount of cash is expensive to store safely (fire) and securely (theft).

Not only - AFAIR the Colombian Steve Jobs had problems with humidity too - 2.1 billion 80s' USD lost to flooding and rotting is what I would call real liquidity :D And also rats I think.

It’s extremely insulting to refer to Escobar as the Colombian Steve Jobs, if that is the connection you are making.

Re: Germany for First Time Sells 30-Year Bonds Offering Negative Yields

#100

Post by rchaud »

misiti3780 wrote: post #56
fourstar wrote: post #3

Those of you (US) with large stock/cash positions: what are you doing to weather the (inevitable) storm? Feels like we’re in the doom and gloom media phase. I suspect lots of people will start forgetting within the next 6 months in which the stock market will go sideways, until the next catalyst which is the US election cycle.

continue to put x% of my salary into vanguard ETFs, and store the rest in cash. you cannot time the market.

I'm using Questrade, and because I have a self-directed account, I need to put in a buy order manually 1x/month. Is that the way it's normally done?

I used to have a mutual fund through my bank, where I'd set a monthly amount and they'd automatically deposit that into the fund from my chequing account. I decided to try something different since the reporting tools available through the online banking system were very basic.

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