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  1. #2951
    Legend Balance's Avatar
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    Quote Originally Posted by macduffy View Post
    That's right, GTM. Once Australia had a guarantee the NZ govt had no option but to follow suit to prevent a massive outflow of funds over the Strait. And, of course, the (mainly) banks paid a fee for that, little as it was.

    All water under the bridge - until the next time?
    There's no law against stupidity - as long as investors believe in what the crooks out there tell them, there will be the next time.

    New cases emerge every month of more scams and ponzi schemes out there.

    Meanwhile, the naive and gullible continue to send money overseas in search of love from Nigerians - tens of millions of dollars every year.

  2. #2952
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    Musing regarding 'next time', some of the hybrid debt issues out there are shall we say are a little bit interesting. One hopes the default clauses never operate, though even with my cynical view it is hard to actually envisage these company's defaulting. Just taking as a random example with no slur attached at all , but say, Wellington Airport has a fair bit of debt out there even though the company isn't listed for shares. I mean its a steady business right?. Travellers all the time, including politicians whizzing around everywhere on our expense. But just say something went wrong.... the obvious one is an earthquake and I'm sure there is insurance so its probably something else. But just say something went wrong, theres $400 million of debt out there with hungry coupons.

    WIA Debt 2019-12-11 140132.png

    Debt issues have been the lifestay of the NZX for a while now. Theres quite a few. 144 to be precise. With total capitalisation of $34,000 M so I'll call that 34 billion.
    https://www.nzx.com/markets/NZDX

    They are all rock solid of course though.
    Right?
    For clarity, nothing I say is advice....

  3. #2953
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    Quote Originally Posted by GTM 3442 View Post
    Looking ahead, what do you think will blow up this time round?
    I am not smart enough to know what will blow up but if central banks keep dropping interest rates then maybe all debt will be OK, especially if we get to negative rates, no problems, no need to ever pay it back(even better than inflation but more obvious and still morally and intellectually wrong). No limits on asset prices either. If things get too farcical the concept of money might be questioned and if there is a loss of faith in money it will happen pretty quickly I imagine, but that is unlikely.
    In NZ the finance companies provided finance which helped property development and bridging finance and banks easy lending pushed land prices up. The new higher valuations meant more money could be borrowed which pushed asset prices up further which improved valuations and on and on until the money stopped flowing. Sounds a little bit like Auckland house prices currently but Central Banks seem to be indicating they will drop interest rates as required and won't stop the flow of credit so perhaps we just keep going this time.
    I am wanting to have a small amount of debt rather than savings in the bank but cannot decide on what to invest in as cash might be a good option if the "next thing" blows up. Sadly I still can't see into the future.
    Last edited by Aaron; 11-12-2019 at 02:05 PM.

  4. #2954
    Ignorant. Just ignorant.
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    Default It Will Be Debt. It's Always Debt

    Whatever blows up, it's always something to do with debt that kicks it off. But who knows whose debt it will be - who is getting worried about who else has lent how much, and to whom, and what's that debt worth now?

    As an aside, you don't have to go too far through the alphabet of nations to find some interesting "opportunities"

    https://www.bloomberg.com/opinion/ar...adness-is-this

    https://www.cnbc.com/2017/06/20/arge...year-bond.html

  5. #2955
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    Quote Originally Posted by GTM 3442 View Post
    As an aside, you don't have to go too far through the alphabet of nations to find some interesting "opportunities"

    https://www.bloomberg.com/opinion/ar...adness-is-this

    https://www.cnbc.com/2017/06/20/arge...year-bond.html
    Whoever is buying that debt must think there will be little or no inflation in Austria for the next 100 years and a lot less than there is currently in Argentina.

    More likely though they are waiting for the next round of rate cuts and QE.

    Someone who can value debt might be able to explain just how much the face value of the 2.1% coupon bonds will have increased from the original $1 value in light of the current 1.2% yield only two years later. That would be a significant gain I would imagine. It makes the buyers of the 2.1% bonds look like investment geniuses.
    Last edited by Aaron; 12-12-2019 at 07:54 AM.

  6. #2956
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    I reckon it should be a 75% gain.

    But just remember that there are a whole swag of institutions out there whose asset allocation mix is/are mandated by trust deeds and the like.

    So they have no choice but to buy. . .

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