Where is the US economy headed?

@Irishk,

Irishk, Thanks for sharing that article on France's negative interest on their bonds. When any country's economy falls into a deep recession, and there's no way to dig out of that hole, they seem to offer negative bonds that sells.

I'm still not able to grasp the logic in why people would pay to buy bonds that returns less money upon maturity.

Maybe, somebody can explain this phenomenon.

1 Reply

@cicerone imposter,

Investors are paying Switzerland for the privelege of lending the country money. Their 2-year bonds are currently yielding a negative interest.

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@cicerone imposter,

cicerone imposter wrote:

I believe some time ago, Japan had negative interest rates on bonds. My memory is vague, so don't expect any more than what's posted here.

Since you can always get a zero interest rate, just by stuffing cash under your mattress, nominal interest rates can never go negative by any substantial amount. Maybe a tenth of a percent or two or three because of storage costs of some kind, but no more.

EDIT: I just saw IrishK's article about France. Notice they're talking about percents of a percent. That's a just rounding error less than zero.

SECOND EDIT: On checking Irishk's point about Switzerland, Bloomberg informs me that their interest rate on 2-year bonds is currently -0.3% I'm surprised to see such a low figure, and would be stunned if it lasted.

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@Thomas,

That's based on the assumption that there are no other investment vehicles that "might" provide some appreciation over time. But there are - based on historical records.

I believe JNJ is one of those.

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@cicerone imposter,

cicerone imposter wrote:

That's based on the assumption that there are no other investment vehicles that "might" provide some appreciation over time. But there are - based on historical records.

Like what?

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@Thomas,

I think McDonalds is another one.

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@Thomas,

Thomas wrote:

...Bloomberg informs me that their interest rate on 2-year bonds is currently -0.3% I'm surprised to see such a low figure, and would be stunned if it lasted.

Some interesting comments from zerohedge...

Quote:

At the current rate, Swiss debt, which is quite negative, with 2 year bonds now trading at record NEGATIVE rates, will repay itself quietly in a few short decades: ahhh the benefits of compounding.

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@cicerone imposter,

Huh? How does that justify buying bonds at a negative yield? Remember: when Bloomberg says the interest rate on Swiss 2-year bonds is -0.3%, they're talking about the yield, not just the coupon. Those 0.3% include any future appreciation of the bond's price.

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@Thomas,

I'm not talking about bonds; I'm talking about other investments that will show more appreciation than negative interest bonds.

I wrote earlier on this page,

Quote:

That's based on the assumption that there are no other investment vehicles that "might" provide some appreciation over time. But there are - based on historical records.

I believe JNJ is one of those.

1 Reply

@cicerone imposter,

cicerone imposter wrote:

That's based on the assumption that there are no other investment vehicles that "might" provide some appreciation over time.

And I don't understand why you believe that this assumption makes any difference. How does the possibility of investing in Mac Donald's or Johnson & Johnson affect anything I said about negative interest rates? Or in other words, when you say "that's based. . .", what does the word "that" refer to?

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@hawkeye10,

I never said the Ausie economy sucked. You're a ****'g liar and ignoramus!

Also, I've already posted Australia's standing on GDP as 12 - 14 depending on the source.

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@cicerone imposter,

You wrote,

Quote:

Since you can always get a zero interest rate, just by stuffing cash under your mattress, nominal interest rates can never go negative by any substantial amount. Maybe a tenth of a percent or two or three because of storage costs of some kind, but no more.

EDIT: I just saw IrishK's article about France. Notice they're talking about percents of a percent. That's a just rounding error less than zero.

SECOND EDIT: On checking Irishk's point about Switzerland, Bloomberg informs me that their interest rate on 2-year bonds is currently -0.3% I'm surprised to see such a low figure, and would be stunned if it lasted.

What I'm trying to explain is that there are other investments that will do better than "stuffing cash under your mattress."

1 Reply

@cicerone imposter,

If it's under the mattress, you have to worry about fire, rot, crooks, and inflation. Other investments carry their own risks.

I keep what I call the 'coffee can' around the house somewhere, but there is a maximum amount that I'm willing to subject to those particular risks.

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@Builder,

Builder, I've done more research on Australia's economy, and found some interesting information. The average pay for similar skills pay more in Australia than does the US, and the majority of people prefer to retire in Australia for their climate and standard of living. The funny irony is that many Australians prefer to retire in New Zealand.

There are many preferences in Australia when it comes to working and living that I have overlooked in my search only about the "largest economies in the world," and now look at what I wrote on this thread as somewhat lacking in the over-all perspective.

My apologies for my tone and tenor of my posts. My impressions were influenced by what my last Tour Director in Australia told me that was supported by our bus driver in Sydney.

I enjoyed my second visit to Australia last August, and enjoyed my visits to Melbourne, Adelaide (Cleland Park and Barossa wine country), Uluru, Alice Springs, Cairns, Port Douglas, Cape Tribulation, and Sydney. Ausies have nothing to be ashamed of as a people and country based on my world travels.

G'day.

1 Reply

@roger,

roger wrote:

If it's under the mattress, you have to worry about fire, rot, crooks, and inflation. Other investments carry their own risks.

I keep what I call the 'coffee can' around the house somewhere, but there is a maximum amount that I'm willing to subject to those particular risks.

Exactly! I think what we're seeing here is all about safety. Investors in this financial climate are more concerned with return of investment than return on investment and they're willing to look at negative rate bonds to keep their money safe.

Compared to other investment choices out there, Treasuries are relatively safe, and better to risk just a little than a lot. Gotta park it somewhere (not under the mattress).

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@cicerone imposter,

Quote:

Builder, I've done more research on Australia's economy, and found some interesting information.

Oh, really. Do tell.

Quote:

The average pay for similar skills pay more in Australia than does the US,

Like that was ever in question? Your system is currently undergoing what is commonly known as a backdoor intrusion.

Quote:

and the majority of people prefer to retire in Australia for their climate and standard of living.

Most Australians are intrepid and mobile. Having this place as a base suits us down to the ground.

Quote:

The funny irony is that many Australians prefer to retire in New Zealand.

It's not a "funny irony" at all. New Zealanders (Kiwis) have been coming over here since we opened the gates in the fifties. This mass movement west has left a huge gap in their economy, and our dollar buys a lot more over there, and prices for houses, land,(not cars) and food are much cheaper . NZ might be your equivalent in Mexico.

Quote:

There are many preferences in Australia when it comes to working and living that I have overlooked in my search only about the "largest economies in the world,"

Crap searches yield crap results. What were you expecting to find?

Quote:

and now look at what I wrote on this thread as somewhat lacking in the over-all perspective.

Your nose was clearly out of joint, and you were on the attack. Your admission is accepted.

Quote:

My apologies for my tone and tenor of my posts.

Accepted.

Quote:

My impressions were influenced by what my last Tour Director in Australia told me that was supported by our bus driver in Sydney.

Was your tour director American? Sydney has been over-run by immigrants. Even the locals I know there feel like they are strangers in their own country.

Quote:

I enjoyed my second visit to Australia last August, and enjoyed my visits to Melbourne, Adelaide (Cleland Park and Barossa wine country), Uluru, Alice Springs, Cairns, Port Douglas, Cape Tribulation, and Sydney.

Gawd, I hope that wasn't all a bus trip from hell.

Quote:

Ausies have nothing to be ashamed of as a people and country based on my world travels.

Patronising bullshit like that sentence will see you ostracised in every country I have ever had the pleasure of visiting.

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@Builder,

Do you always get out of bed in the morning with the intent of argument? You're a loser in every way.

I don't "patronize" when I visit foreign countries like Australia where they have people like you living there.

I invited a a2k member to dinner in Sydney, and treated her to her favorite dish and wine. When she was driving me back to my hotel, I told her to drop me off at a corner not far from our hotel, and I removed my seatbelt. She said, "don't remove your seatbelt, because my car wouldn't like it!" Holy ****, I said to myself, I just spend $150 bucks for dinner, and this woman is telling me her car doesn't like it.

End of patronizing; you're a ******* bore, and on Ignore.

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@cicerone imposter,

JP Morgan really screwed up! Here's the latest media report.

Quote:

DealBook: JPMorgan Trading Loss Has Reached $5.8 Billion

The bank reported a second-quarter profit of $5 billion, down 9 percent, and said it would restate its first-quarter earnings.

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@cicerone imposter,

Who got the $5.8 billion?

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@spendius,

spendius wrote:

Who got the $5.8 billion?

It is reported that it is hedge funds which have figered out the banks bet, and so are now betting against the bank, which increases the cost of the bank getting out of its positions. This could end up as over $20 billion loss before it is done.

The idiocy of this bank is spellbinding....one never should take over such a huge chunk of a thinly traded market. The bank was found out, and now the hedge funds have them by the balls and are squeezing hard.

1 Reply

Where is the US economy headed?

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