10 Minute Read

Tackle Today: Money for Nothing

September 12, 2019

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Tackle Today: Money for Nothing (image by Peter Hirschberg)

≈ And Gold for free. ≈

Two things are constantly fighting for my attention every single day: the truths about Life & Universe and bills to pay.

Recently, though, there is one other topic that wants to make it to the list: negative yields.

We all know that the major central banks have been flooding the markets with easy money for over a decade, expanding their balance sheets from a mere $5 trillion to something around $22 trillion. However, sovereign bonds with negative yields are stealing the thunder.

Last time I’ve heard, something like 20% of the total sovereign bonds issued around the world (≈$ 12.5 trillion) is in negative yield territory. Such a phenomenon is becoming mainstream in the corporate world too. On Q1 2019, LVMH Moët Hennessy – Louis Vuitton issued bonds yielding –0.17%.

Take a quick look at this data here, fresh from Bloomberg’s website (Bond | Yield):

  • Germany Bund 2 Year Yield | –0.86%
  • Germany Bund 5 Year Yield | –0.85%
  • Germany Bund 10 Year Yield | –0.59%
  • Germany Bund 30 Year Yield | –0.01%

Three years ago, James Rickards released the book “The New Case For Gold”. Right in the first pages, he lays out the case against Gold in six bullet points. Number five reads “Gold has no yield”. That is a true statement. Gold is money and money has no yield.

Sometimes truth is stranger than fiction, I guess. Now that bond yields are starting to dabble into the realms of negative numerals, Gold is almost becoming a natural carry trade against them. Its zero yield looks profitable from this perspective.

With all that said, I can only leave you with this quick “Thought Of The Day”:

  • Buy a vault.
  • Buy Gold.

Chart of the Day

Money for Nothing

Chart of the Day: Cumulative Central Bank Balance Sheets

Let’s talk about printing money for a second.

Video of the day

Dire Straits – Money For Nothing

Lemme tell ya, them guys ain’t dumb.

Today’s line up

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2 Replies to “Tackle Today: Money for Nothing”

  1. CalebGriffin says:

    Most of that went over my head, but I think I have gleaned an extra nugget of reassurance in the “gold is and always will be a safe haven investment.” In addition, it would seem the coming years may see another gold rush.

  2. LandonKesler says:

    Eu nao entendi muito bem, mas espero que no futuro posso entender melhor! Valeu, Obrigado!

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