Topic: [2019-10-18] Winklevoss: Buy BTC to Escape Negative Yield Bonds (Read 230 times)
The idea of negative yields for bonds and bank deposits started in Japan, if I am not wrong. But there, the situation is understandable. The Japanese Yen is a unique currency and it is different from all the others, including the USD, EUR and the CNY. The purchasing power of JPY has actually increased over the years and against the USD, its exchange rate has risen by 200%.
November 01, 2019, 01:59:13 PM
I guess people are running out of options to invest their money. Else why should anyone go for negative interest bonds? For the 10-year note, the yield is calculated at 1.694%, which is lower than the inflation rate in the United States. If people are ready to invest in an asset which gives less returns when compared to the inflation rate, that means that they are making a net loss.
October 28, 2019, 03:12:44 AM
Cameron Winklevoss just highlights the fact that there is no need for people to sit on negative yielding Bonds, if they can risk some of that investment in something with a higher risk in the form of Bitcoin.
I think if most people just hoarded their coins for some years, they would see a significant profit, but people tend to panic, when there is a drop in the price and then they lose some money when they sell too early.
Take a chance and invest some of that money into something with a higher risk, but the potential for a much higher profit.
I think if most people just hoarded their coins for some years, they would see a significant profit, but people tend to panic, when there is a drop in the price and then they lose some money when they sell too early.
Take a chance and invest some of that money into something with a higher risk, but the potential for a much higher profit.
October 27, 2019, 03:12:09 AM
With yields so low it's clear as day that capital is going to be getting out of these traditional low risk asset classes once economic growth picks up.
Obviously with economic growth still low right now there isn't a lot of confidence within the marketplace, which I think is a primary reason why BTC right now isn't FOMOing as hard as it should be anyhow.
The Fed will likely continue to lower their funds rate to newer lows, which would stand to benefit any sort of speculative asset in the short term (not saying that BTC is one in the long run).
Obviously with economic growth still low right now there isn't a lot of confidence within the marketplace, which I think is a primary reason why BTC right now isn't FOMOing as hard as it should be anyhow.
The Fed will likely continue to lower their funds rate to newer lows, which would stand to benefit any sort of speculative asset in the short term (not saying that BTC is one in the long run).
October 20, 2019, 07:04:56 AM
As you can see, there are several ways to make a profit with this kind of investment, and that's why investors don't keep money in safes or in bank accounts. The opportunity to make money even exists in something that seems rather illogical to most, this is a classic example of how even one word can mislead people, negative does not necessarily mean unprofitable.
It is still confusing. In the example that you had given, a bond with yield of -0.10% was sold at a premium of more than 6%. So that means that first an investor purchased a $1,000 bond (with -0.10% interest, i.e $999 on maturity) for a premium of 2.6%, i.e $1,026. And then he managed to sell the same bond for $1,069 (at a premium of 6.9%). In the end he was able to make a profit of $43 per $1,000 invested. What I don't understand is why anyone would purchase a bond that yields $999 on maturity for $1,069. That is a $70 loss for anyone who purchased it.
A few reasons, maybe only one good in my opinion:
1. As a safe asset - even if they lose money, people believe they'll lose less than potentially elsewhere.
2. Greater fool theory - that there will be people who will buy it later and become the bag holders.
3. Cross currency hedges, obvious. And perhaps a reasonable one.
4. Rolling down the yield curve. A short term, risky strategy.
October 19, 2019, 11:59:04 PM
As you can see, there are several ways to make a profit with this kind of investment, and that's why investors don't keep money in safes or in bank accounts. The opportunity to make money even exists in something that seems rather illogical to most, this is a classic example of how even one word can mislead people, negative does not necessarily mean unprofitable.
It is still confusing. In the example that you had given, a bond with yield of -0.10% was sold at a premium of more than 6%. So that means that first an investor purchased a $1,000 bond (with -0.10% interest, i.e $999 on maturity) for a premium of 2.6%, i.e $1,026. And then he managed to sell the same bond for $1,069 (at a premium of 6.9%). In the end he was able to make a profit of $43 per $1,000 invested. What I don't understand is why anyone would purchase a bond that yields $999 on maturity for $1,069. That is a $70 loss for anyone who purchased it.
October 19, 2019, 07:20:58 PM
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Why would anyone invest (or continue holding) in a bond that can make him lose money, in the first place? And in that case, according to Cameron, you should be shifting to Bitcoin and cryptocurrency because, even with its extreme volatility, the yields can be much better. Now, we are hoping many would be listening to this guy as he is surely speaking based on his experience and wisdom as a longtime Bitcoin supporter and billionaire.
People do it all the time. The rates on many bonds are less than the inflation rate so you are guaranteed to lose money on them.
These negative rates only make it worse.
Imagine a 1000 ($, Euro etc) bond. They might've paid 2% per year, so you'd get back 1020 after one year. Inflation ran 3% so your purchasing power is less than 1000.
For a negative rate bond, you'd put in 1000, and get back 990 or something. Inflation again ran 3% so, you lose even more purchasing power.
Plus, unless the bonds are tax exempt, you had to pay taxes on the extra 2% or 20 in the first scenario even though in reality you lost money. It would depend on the jurisdiction as to whether you'd get a deduction for the loss on the second.
For the people who want inflation in bitcoin, go elsewhere.
October 19, 2019, 06:36:37 PM
This a pretty good positive thougths for bitcoin, it's obvious why people continue to invest in the negative yield bond it's simple to elaborate and explain because peole know the positive side of bitcoin if the price goes into bullrun they got a lot of better profits. Investing in bitcoin is a gamble and need a self control and patience.
October 19, 2019, 05:19:17 AM
Who in their right mind will go for the negative yield bonds?
Why don't you read what this is really about, is it so hard to click on link/s? Negative yield bonds do not necessarily cause loss, but they can actually be very profitable in certain cases. Here are some examples from the article above :
Quote from: https://www.marketwatch.com/story/here-are-four-reasons-why-investors-buy-negative-yielding-bonds-2019-08-21
Investors who scoop up negative-yielding bonds are betting on the value of the securities to keep rising, in effect, wagering that there are other “bagholders.”
In July, an auction for €4 billion euros of 10-year German government bonds TMUBMUSD10Y, -0.10% sold at a negative yield of 0.26%, but at a premium price of 102.6 cents to the euro. The benchmark bund is now trading at a price of a 106.9 cents to the euro, meaning that investors who scooped up debt at last month’s auction would have reaped a gain of around 4% from the price increase alone.
Negative yields don’t mean negative income for some.
Unlike European and Japanese investors, U.S. investors are often paid to hedge against fluctuations of foreign currencies because U.S. interest rates are much higher than in other developed markets like Europe and Japan.
Another way investors can make money even in a backdrop of subzero interest rates is to take advantage of the yield curve’s slope, which still can be steep even for negative-yielding bond markets in Germany and Japan.
The yield curve represents the gap between shorter-term yields and longer-term yields, with a steep curve indicating a large difference.
In July, an auction for €4 billion euros of 10-year German government bonds TMUBMUSD10Y, -0.10% sold at a negative yield of 0.26%, but at a premium price of 102.6 cents to the euro. The benchmark bund is now trading at a price of a 106.9 cents to the euro, meaning that investors who scooped up debt at last month’s auction would have reaped a gain of around 4% from the price increase alone.
Negative yields don’t mean negative income for some.
Unlike European and Japanese investors, U.S. investors are often paid to hedge against fluctuations of foreign currencies because U.S. interest rates are much higher than in other developed markets like Europe and Japan.
Another way investors can make money even in a backdrop of subzero interest rates is to take advantage of the yield curve’s slope, which still can be steep even for negative-yielding bond markets in Germany and Japan.
The yield curve represents the gap between shorter-term yields and longer-term yields, with a steep curve indicating a large difference.
As you can see, there are several ways to make a profit with this kind of investment, and that's why investors don't keep money in safes or in bank accounts. The opportunity to make money even exists in something that seems rather illogical to most, this is a classic example of how even one word can mislead people, negative does not necessarily mean unprofitable.
October 19, 2019, 01:55:59 AM
Who in their right mind will go for the negative yield bonds? Rather than going for negative yield, I can simply keep my money in a bank account. What's preventing me from doing that? If I don't want to do that, then I can simply stash the banknotes inside a locker or a safe. I don't really get the logic in investing in these negative yield bonds.
A few days back, William Eigen (Asset Management fund manager with JPMorgan-Chase) also came out heavily against these type of bonds. This is what he said regarding this topic:
A few days back, William Eigen (Asset Management fund manager with JPMorgan-Chase) also came out heavily against these type of bonds. This is what he said regarding this topic:
Quote
“The whole concept of negative yields, of people paying for the privilege of lending money, is insane behavior to me,” Eigen, a 29-year industry veteran who oversees the $12.4 billion JPMorgan Strategic Income Opportunities Fund, said in an interview from Boston. “I do not pay to lend money. That’s not fixed-income investing, that’s fixed-loss investing.”
October 18, 2019, 08:27:24 AM
error08 posted a link to a very interesting article which explains very well why some may earn even on negative yield bonds, and we can clearly see that the word "negative" when it comes to bonds does not have to mean loss. Of course, there is a reason why investors invest in such bonds, it would be foolish to expect $15 trillion to be thrown into the wind.
For me personally it is not realistic to expect that these investors suddenly begin to invest in Bitcoin, and there are several reasons for that. As much as it seems that investing in Bitcoin is better (in terms of profit), government bonds are still a whole other level of investment, incomparably less volatile and have a government guarantee. Bitcoin is still too risky, for many still technically demanding and incredibly volatile.
For me personally it is not realistic to expect that these investors suddenly begin to invest in Bitcoin, and there are several reasons for that. As much as it seems that investing in Bitcoin is better (in terms of profit), government bonds are still a whole other level of investment, incomparably less volatile and have a government guarantee. Bitcoin is still too risky, for many still technically demanding and incredibly volatile.
October 18, 2019, 06:19:35 AM
I never believed the brothers, and I will not begin to believe them
October 18, 2019, 04:26:17 AM
There are several reasons why people invest in negative yields bonds; the main reason because they expect the bond will eventually rise to get profits, it's better than have cash, and negative doesn't mean negative income for some. Because central banks will keep buying to stimulate economies through bond purchases. If $17 Trillion shifting to bitcoin, imagine how much the price could be, instant pump and then massive cash out.
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October 17, 2019, 11:39:22 PM
Bitcoin (BTC) bull and co-founder of Gemini crypto exchange Cameron Winklevoss has noted that the volume of negative interest bonds accounts for $17 trillion and has urged the public to buy Bitcoin.
Earlier in October, Tone Vays, a veteran trader and Bitcoin expert, expressed a stance similar to Winklevoss’ saying: “As more and more Developed nations try to eliminate cash and implement negative interest rates, this can drive many people into Bitcoin.”
In mid-August, Deutsche Bank reported that 27% of global bonds traded were negative yield at the time, so expected to pay out less than their initial cost. This represented $15 trillion worth of debt, or as VanEck digital asset director, Gabor Gurbacs, commented, that was 75 times the total Bitcoin market cap. “It’s time for Plan ₿!” Gurbacs added.
Read more here...
I am not an expert on "negative interest bonds" so this definition can help us understand: "Bonds have a negative yield when the total amount of interest an investor receives over the life of the bond is less than the premium they paid for it. Investors who purchase bonds with a negative yield and hold them to maturity end up losing money on their investment." In essence, if your investment is classified as a negative interest bond then you are essentially losing money.
Why would anyone invest (or continue holding) in a bond that can make him lose money, in the first place? And in that case, according to Cameron, you should be shifting to Bitcoin and cryptocurrency because, even with its extreme volatility, the yields can be much better. Now, we are hoping many would be listening to this guy as he is surely speaking based on his experience and wisdom as a longtime Bitcoin supporter and billionaire.
Assuming that you are holding "negative interest bonds," will you consider this suggestion pushed by this man?
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