Friday, May 8, 2015

Would you pay back ¥1,053,357,200,000,000?

Since NOBODY except Japanese people can think in Yen, let me help you out.

Their debt owing is almost $9 trillion USD.

Their entire GDP output for a year is about $5 trillion USD.

Gotta love ZH for reporting things like this, which are actually publicly released by Japan's Ministry of Finace, but no one gives a shit about.

Again, I take this opportunity to say that anyone that owns any JGBs (or worse still - any of the 9 countries with negative yield bonds) has to be slightly mad, because their genius is definitely uncommon.

I really don't understand government bond investors. What is the long term upside? When is it finally time to stop buying? Or are bonds like stocks and real estate too? "There is never a bad time to buy if you are a long term investor." There is a breaking point of negative yields, which happens when it is more worth it to hire a private army to sit around and guard a lump of cash.

The only way that such low yields makes sense is if the global economy turns to shit and remains that way over the next 10 years, doesn't it? (Which probably might happen. If you believe in EMH, you should know that the bond market is twice the size of the stock market. Who would you believe?)

In the last 75 quarters, Japan has only reduced their debt 5 times. Do you think you're going to get your money back?

There's only 3 ways for a country to get out of debt:
  1. Repay it back (LOL)
  2. Inflate it away (isn't Deflation synonymous with Japan?)
  3. Default
Hmmm. Is there another way that I missed out?

I would suggest to avoid debt from bad countries, just like you would avoid debt issued by bad stocks.

My mouth, your money.

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