October 9, 2015 at 12:52 am #44351
You read that right. Less than nine years ago, yields were still just over 5% on 3-month treasury bills. And on Monday (5 Oct 2015) the US Treasury sold $21 billion dollars worth of 0% interest 3-month treasuries. The US is not permitted to go negative. One might ask why that’s even a significant statement – unless they’re aware that Finland, Germany, France, Switzerland and Japan are all already selling five-year debt at negative yields. Not only that, according to the same article, Switzerland has already sold a TEN year debt offering at a negative yield.
“Hey, Mr. Investor. You have some money we’d like you to loan us, for which we will give you the privilege of paying US a nominal fee to take and hold your money for a period of time. We guarantee to give it back to you at the end of the holding period. We’re the government, so you can trust us, and it won’t cost you much at all.”
So as shocking as it is to ask us to loan the US Government $21 Billion for three months, and we receive ZERO in return for that loan, other governments are getting people to bite on 10-YEAR negative yields?
What do they know that we don’t? And what do the big money people that are PAYING that “money” know that induces them to pay some government just to hold their “money” for them? We know that the “money” is fake anyway. But if it’s safer to take your “money” out of the bank and put it in the US Treasury for 3 months for zero return, than it is to keep it in a bank at a minuscule return, what’s going on? (Or more importantly, what’s GOING to be going on shortly?) And extending that out to 10 years, paying the Swiss government to hold on to money for that long, or otherwise figuring you can sell that 10 year bond early for a profit (meaning “interest rates” – i.e. NEGATIVE ones – are going to go even further “down”) – what in the world does that even mean?!?
This is the first time in history that the US has ever sold treasuries at 0%. I confess, I cannot get my brain around that. The fractional interest rates up to this point were tough enough, but ZERO?
It used to be that the insurance companies held a massive amount of political clout because of their massive holdings in the various financial markets. But thinking about the fact that they offer low interest rates wrapped up within their various products, and have to earn higher rates than those they guarantee, what happens when they can’t even buy highly rated debt instruments that pay THEM interest? There are so many facets to this that interlink that it’s mind boggling – to me at least. Obviously, SOMEbody thinks they have this all figured out. And it’s those people I worry about….
"Ye hear of wars in far countries, and you say that there will soon be great wars in far countries, but ye know not the hearts of men in your own land."October 9, 2015 at 12:59 am #44352
……..and gold is at $1140. Down about 5%.
RobinOctober 9, 2015 at 3:11 am #44355
Yes, and that seems to make no sense at all – unless one considers big manipulation at a scale almost unfathomable to us mere mortals. Gold used to be a measure of what was on or just over the horizon. According to gold currently, we should be believing that nothing at all is coming – just business as usual, a continuing somewhat limping recovery, nothing major to worry about. If it was a strong recovery I’d expect to see gold heading down into triple digits, but that isn’t happening either – just a fairly narrow channel over 1100 but well below 1200.
I don’t trust what we’re being told at all. The less-public information simply does not compute with what we’re being told in the popular media. And the very large accumulation of gold by many countries, including the encouragement by the Chinese government for citizens to buy gold, seems to be yet another whispering voice that says somebody knows something most of us don’t, and certainly aren’t being told (except by actors that played presidents on TV that are now hawking gold).
"Ye hear of wars in far countries, and you say that there will soon be great wars in far countries, but ye know not the hearts of men in your own land."October 9, 2015 at 10:28 am #44358
We live in the greatest country on earth. It’s a wonderful privilege to give our money away for free.
Don’t you know. Moral reparations.October 9, 2015 at 12:40 pm #44361
The only reason to buy 0% interest Treasury Bills, or worse negative interest rate bills, would be because you think the alternatives are even worse. I can understand the Treasury Bills being seen as a safe harbor against an expected stock market collapse, but as low as the interest rates may be, putting money into Federally insured bank accounts ($250K individual, $500K on joint accounts) will earn you something, especially if you go with longer term CD’s. If you trust the govt to pay you back on the Treasury Bills you can trust them to make good on the federal deposit insurance should the bank fail. My guess is that it isn’t individual investors buying the 0% interest Treasury Bills however but rather institutional investors with amounts that normal bank accounts just don’t work for. Even for mega wealthy individuals, trying to put it in $250,000 or $500,000 chunks in individual banks is not practical due to how many banks they’d need to deal with.October 9, 2015 at 3:22 pm #44371
Oh certainly these are not typically going to be small individual investors. But the point is exactly what you stated: “because you think the alternatives are even worse.” And if large institutional investors are willing to purchase 5- and even 10-year bonds at negative yields, they’re not just hedging against the next market correction.
There was some interesting research done years ago by Dick Fabian (the old “Telephone Switch Newsletter”), showing that during virtually any 5-year period, using the 200-day moving average (then 39 week average), one could make considerable money by simply buying into or selling out of mutual funds that tracked the broad market. That type of strategy has been refined substantially with modern computers and instantaneous tracking of markets 24/7, but the basic principle is still the same – that over 5-year periods, normal fluctuations will provide substantial gains with relatively minimal switching in and out of investments.
So if sophisticated (?) institutional investors tie up their money for 5 to 10 year period, and interest rates go substantially up, they’ll lose huge amounts if/when they go to sell these zero to negative yield instruments. It concerns me more than a little bit that I just can’t wrap my head around a 10-year commitment of money that is actually guaranteed to depreciate. What scenario are they trying to guard against? Seems like the answer to that question may be: TEOTWAWKI. But then what government will still be around to pay back that promised “investment?”
"Ye hear of wars in far countries, and you say that there will soon be great wars in far countries, but ye know not the hearts of men in your own land."October 9, 2015 at 5:13 pm #44372
I suspect that the money is going to the safest possible investment. With China quickly becoming a mess financially, and the Euro crumbling, the 0% 3 month T bills are relatively attractive.
What I find interestng concerning the precious metal markets is the difference between price vs demand. Even thought demand of gold and silver is way up, the pricing does not reflect it. A classic symptom of manipulation on a large scale. The banksters have become so blatant that they do not even try to hide the manipulation anymore.October 9, 2015 at 8:00 pm #44376
It’s hard to understand conceptually investing in a manner that guaranties a loss. However if as Roadracer commented if this was your safest move after evaluating all the available options then it would make sense. I could see insurance companies making this move to protect their reserves. That way no matter what happens in the normal investment market they still have a certain amount to work with. The basis of this is, you can’t sell more insurance then you have reserves to pay claims. They could have millions or billions in other investments but hold these in case of a crash.October 9, 2015 at 10:27 pm #44379
In 2009 when the wheels were falling off of everything I had a talk with a very money savvy friend. He told me he had taken all his investments and bought 1 year cds. Only getting .35 percent. He said it was to protect his principal. He bought the cd’s from a local bank that has been under local control since it opened in 1880’s.
He retired and moved. I wonder what he is doing this year.
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