They Don’t Know What To Do Or They Don’t Know How To Do It.

[Methinkshe]

Just to be clear where exactly your wrong:

They certainly are not. They are tradable investments. Ask any bond fund manager, any pension fund manager.

Thanks for the clarification; that's what I was trying to get an in an earlier post when I suggested that depositors should be preserved from banks going under in a way that shareholders AND bondholders (now you have clarified)) should not......maybe........

I prevaricate with a "maybe" because I know that my 80 year old mother has deposited about 30K with C & G which she believes represents savings on which she earns a very small income, but which could very well be bonds....oh dear!

Which is why I have to return to my initial post - any action that policy-makers consider will likely hurt the innocent as well as the guilty - or, if not guilty, the trusting.

[Bloo Loo]

Just to be clear where exactly your wrong:

They certainly are not. They are tradable investments. Ask any bond fund manager, any pension fund manager.

i dont think the man on the Clapham omnibus would think a 1 year bond he bought at a high street bank is a tradeable investment. Who with and how can he trade it?

[KingBingo]

nope, he and others on here tell the truth and point out reality and you argue against it because of cognative dissonance.

big difference.

the truth is the biggest ponzi scheme in history is collapsing right in front of our eyes...

i.e. the mountain of debt created post 1971 when nixon severed the final link between money and anything real.....(banker politician combo then went out of control, and are now cashing out)

all ponzi schemes collapse this one is no exception.

Well I say otherwise, and I'm putting my money where my mouth is, buying investments like equities and bonds.

I hope your doing what you think is right with the end of civilisation coming and renting a small cottage in the middle of nowhere with tins of beans piled high in every room. Or did you think the entire financial system could collapse, and your still have your local tescos and the internet wont go out.

Edited February 20, 2009 by KingBingo

[KingBingo]

I prevaricate with a "maybe" because I know that my 80 year old mother has deposited about 30K with C & G which she believes represents savings on which she earns a very small income, but which could very well be bonds....oh dear!

If the name bond appears it will just be a saving product they call a bond to make it sound interesting. Its highly unlikely she used C&G to do an brokered OTC 'over the counter' bond purchase. Perhaps a corporate bond fund, or high yield bond fund, but those would be well diversified with typically 80+ different issues and a dozen different sectors.

[Methinkshe]

Well I say otherwise, and I'm putting my money where my mouth is, buying investments like equities and bonds.

I hope your doing what you think is right with the end of civilisation coming and renting a small cottage in the middle of nowhere with tins of beans piled high in every room. All did you think the entire financial system could collapse, and your still have your local tescos and the internet wont go out.

I believe that that is exactly what many of us on HPC are doing - living in a small cottage or somesuch, cultivating for food whatever land is available, and stockpiling food. We are all too well aware that a financial meltdown will produce food shortages within days and have prepared accordingly. I shall miss the immediacy of the internet, but have taken the precaution of printing useful info against the time when I cannot even power my computer with the generator I have lined up in case of emergencies.

[MSWHPC]

from the OP "very high level of awareness on the part of policy-makers" ? - what gave you that idea?

nationalisation will bring more openness and scrutiny of the banks assetts? - i dont think so. the govt doesnt really like giving out the bad news about its purchases.

[winkie]

This thread made me think of this.

[Extradry Martini]

No I am not wrong. A corporate bond fund is a risky investment. Just like a equity fund. Both are used by pension funds. Are you suggesting that because pension funds invest in Japanese equities that means that Japanese equities cannot be allowed to loose value that is absurd.

Lets pick two simple examples.

SCHRODER CORPORATE BOND FUND

SCHRODER JAPAN ALPHA PLUS

Note the risk warning at the bottom of each:

A tradable bond can and does rise and fall in value just like a equity does, for a number of reasons, sentiment included.

Your only right in so far as they are usually considered 'safer' investments than equities.

Precisely – because they are at the same level as deposits – and that is why pension fund managers and little old ladies, among many others, invest in them. If the deposits are wiped out, then so are these. If not, then neither are these.

However, if you think bonds cannot lose value you simply wrong. Furthermore no bond fund on earth invests solely in bank shares. They do diversify. the reason being is they know that bonds can default.

No of course I don’t think they can’t lose value – I’ve been trading the things for 20 years, but that is by the by. Absolutely issuers can default, but with senior debt it is on a pari passu basis with other senior debt. Again, this is why it is considered suitable for pension funds.

Actually the Schroder bond fund is a good example. The manager Adam Cordery foresaw a problem with financials and sold out of the sector. He did his job properly and saw risk and repositioned the fund as heavily into cash as he could. This is exactly what your paying a fund manager for. He was right, mid 2008 the risk premium demanded for investment grade corporate bonds went from around 1% to 7%. Or to put it another way the tradeable value of the bonds fell significantly. Why? because the assumed default rate increased.

Of course.

Compare that to walking into a high street branch and investing into a saving product. Are you presented with a disclaimer saying that "the value of your savings can go down as well as up", of course not, because one is saving the former at the top of the post is investment.

I know your intelligent I know your financially literate so if you continue to deny any distinction between saving and investment and its impossible to tell them apart than I can only conclude your arguing for the pure fun of it, the way Injin does.

No, really, I am not arguing for the sake of it. You make a good point here, but I still don’t think it’s enough: If you hold a transferable bond issued by the bank to maturity and the bank does not go bust, it is exactly the same as having a fixed-rate term deposit. The only difference (and I know this having spent some time reading t&c of fixed term deposits) is that you get charged a fee – often 3 months interest for withdrawing money.

People do make the distinction between saving and investment – but this is the difference between bonds and equities – one you take a coupon on, which reflects interest rate expectations as well as credit risk and the other you take direct ownership and therefore a share in the fortunes of the company. The other distinction commonly made is between investment being direct investment – e.g. start-up capital - in companies, and savings being all that which is lent. I have never once heard anyone make the distinction between near-identical kinds of lending at the same point in the capital structure.

The major problem with this idea is that what you and the other poster are doing is saying “we want to save those who were more innocent than others”. This is fine (sort-of, but there is also a responsibility/paternalist issue there, but there’s no point getting into that right now), but then you trying to find something to fit that. In other words, you are doing it backwards. The point I am making is that no matter how much you want the distinction between bonds and savings accounts to fit the distinction between savers and speculators or whatever, it doesn’t and it can’t – the two products are nearly identical and the cross-over is huge and blows out of the water any of the distinctions you are trying to give to them.

[MSWHPC]

Watching CNBC the Americans seem to be terrifed that they are turning into Sweden (Apparently their worst case scenario of a socialist state )

It seems bizzare to me, watching this pundit guy called Reilly agonizing about wether the US is turning into a socialist state, whilst sitting in a bankrupt country being propped up by the Chinese???

To what degree do you think this pathological aversion to 'socialisem' is staying the government's hand over there?

It is certainly driving the markets. every announcement that is deemed socialist bring a wave of selling.

I dont think the govt is too bothered by it though. they just do what they do.

[Extradry Martini]

No, you just remove the bank of englands monopoly on printing it.

It'll swiftly become available at cost as printers up and down the country churn it out, allowing everyone to clear their debts in short order.

Ah, ok, and what happens to savings?

[Extradry Martini]

Just to be clear where exactly your wrong:

They certainly are not. They are tradable investments. Ask any bond fund manager, any pension fund manager.

Come on. "Bonds are not saving products". Really? Please think about this. Why do you think people buy them? Saving is the rationale for the bond market. I'm also amazed you think that "tradeable investments" cannot be savings products. Why - because they are transferable? That seems a pretty arbitrary reason. You mention pension funds - you have just described the ultimate savings product - why do you think pension funds buy so many bonds and hold them to maturity?

[Methinkshe]

The major problem with this idea is that what you and the other poster are doing is saying “we want to save those who were more innocent than others”. This is fine (sort-of, but there is also a responsibility/paternalist issue there, but there’s no point getting into that right now), but then you trying to find something to fit that. In other words, you are doing it backwards. The point I am making is that no matter how much you want the distinction between bonds and savings accounts to fit the distinction between savers and speculators or whatever, it doesn’t and it can’t – the two products are nearly identical and the cross-over is huge and blows out of the water any of the distinctions you are trying to give to them.

With this, I have to agree - which is why I keep drawing a blank in terms of any practical solutions.

Of course we would all like the innocent to be saved and the guilty to be punished, but making that distinction is next to impossible.

And that was the thrust of my first post in reply to your OP.

And also why I think that we have woven a web that cannot be untangled and therefore we will probably have to start again.

So, moving on...

Will we start again only from the ashes of an imploded global financial system....?

Or will some bright spark suggest a new global currency to run parallel with, in the first instance, the presently imploding multiple-currency, globally traded system?

That is what I think will happen, and I don't think that it will ultimately be to the benefit of the average Joe, although it could at the time offered appear better than sticking with the imploding system.

Edited for typos and for clarity.

Edited February 20, 2009 by Methinkshe

[KingBingo]

i dont think the man on the Clapham omnibus would think a 1 year bond he bought at a high street bank is a tradeable investment. Who with and how can he trade it?

Because it isn't a bond, its just called that. Its a saving product.

[Extradry Martini]

-

gosh you really are stupid aren't you.

I'm sorry?

what possible special knowledge or qualifications do you think the Fed people have to command an economy?

If you read my post, you'll see that I was talking about the measures they had taken...

they're ripping us off and socialising bankster losses. it's a massive scam also happening in the UK where taxpayers are being saddled with 2 trillion pounds of worthless Banks debt.

No, they know exactly what they're doing and that is scamming and saddling populations with massive bankster losses to rip us off. only a revolt will stop them and their destructive policies, their time will come

Is this it? Call someone stupid and this is your contribution?

[Extradry Martini]

nope, he and others on here tell the truth and point out reality and you argue against it because of cognative dissonance.

big difference.

the truth is the biggest ponzi scheme in history is collapsing right in front of our eyes...

i.e. the mountain of debt created post 1971 when nixon severed the final link between money and anything real.....(banker politician combo then went out of control, and are now cashing out)

all ponzi schemes collapse this one is no exception.

Hey come on - did I say it wasn't one?

[KingBingo]

Come on. "Bonds are not saving products". Really? Please think about this. Why do you think people buy them? Saving is the rationale for the bond market. I'm also amazed you think that "tradeable investments" cannot be savings products. Why - because they are transferable? That seems a pretty arbitrary reason. You mention pension funds - you have just described the ultimate savings product - why do you think pension funds buy so many bonds and hold them to maturity?

The answer you want is because you can match your liabilities with your investments. You know you have to pay out X in benefits in Y years, so if you invest in bond Z and hold to maturity you get X.

But the more interesting point is the bit I made bold. You hold so many because the risk of default! Otherwise you would only bother buying one issue.

[Extradry Martini]

Thanks for the clarification; that's what I was trying to get an in an earlier post when I suggested that depositors should be preserved from banks going under in a way that shareholders AND bondholders (now you have clarified)) should not......maybe........

I prevaricate with a "maybe" because I know that my 80 year old mother has deposited about 30K with C & G which she believes represents savings on which she earns a very small income, but which could very well be bonds....oh dear!

Which is why I have to return to my initial post - any action that policy-makers consider will likely hurt the innocent as well as the guilty - or, if not guilty, the trusting.

No, his clarification was wong, I'm afraid. Bonds are there - they only exist as far as the bond buyer is concerned - as a vehicle for savings.

Edit: And saying that a savings product cannot be transferable is obviously wrong.

Edited February 20, 2009 by Extradry Martini

[MSWHPC]

A bond is a loan.

[R K]

Even I'm in general agreement with EDM today. I feel a bit like I did when I first thought Injin was talking sense. It can't possibly continue.

[Methinkshe]

No, his clarification was wong, I'm afraid. Bonds are there - they only exist as far as the bond buyer is concerned - as a vehicle for savings.

Edit: And saying that a savings product cannot be transferable is obviously wrong.

Then that only reinforces my initial contention - that sorting the sheep from the goats is the work of angels - not men! (Although I phrased it differently - but it boils down to the same thing - there is no practical way that I can see to separate the innocent from the guilty savers/bond-holders/share-holders/depositors.)

[Extradry Martini]

With this, I have to agree - which is why I keep drawing a blank in terms of any practical solutions.

Of course we would all like the innocent to be saved and the guilty to be punished, but making that distinction is next to impossible.

And that was the thrust of my first post in reply to your OP.

And also why I think that we have woven a web that cannot be untangled and therefore we will probably have to start again.

So, moving on...

Will we start again only from the ashes of an imploded global financial system....?

Or will some bright spark suggest a new global currency to run parallel with, in the first instance, the presently imploding multiple-currency, globally traded system?

That is what I think will happen, and I don't think that it will ultimately be to the benefit of the average Joe, although it could at the time offered appear better than sticking with the imploding system.

Edited for typos and for clarity.

Yes, much better discussion. I will respond properly after the w/e if that's ok.

[Extradry Martini]

Because it isn't a bond, its just called that. Its a saving product.

It is a bond - just because it is not transeferable in the same way does not change that! It is also a savings vehicle. They are the same thing.

[lowrentyieldmakessense(honest!)]

The problem is debt.

I have seen no evidence of any govt / central bank addressing this issue.

Until they do we increasing the crash factor speed.

If you where an investor why would you want to reposses? The likely outcome is that you would realise big losses. Instead of getting all your money back you might get 50% back.

If you are a pension fund this is going to be a bit of a problem, stretching out the time of the loan may be very beneficial to you in the long term. However I accept you might increase your losses. But this is the catch 22 scenario you need to avoid at all costs but yet the policy makers have got here.

yep this is the problem - aint no sustainable earnings coming until this is either written off, paid back or inflated away

will probably be a combination of 1 and 3

and this is going to 1

edited to add

hyperinflation will be a currency event - not caused by increase in confidence and increase in trade

still the velocity of money will pick up when it happens - that should please the deflationists

Edited February 20, 2009 by lowrentyieldmakessense(honest!)

[uncle rogi]

Well I say otherwise, and I'm putting my money where my mouth is, buying investments like equities and bonds.

with your own money or other peoples ?

I hope your doing what you think is right with the end of civilisation coming

er when did say that mate ? i said the monetary system will collapse i think civilisation will carry on just fine infact after a period of adjustment better for not having the banking system parasite on it neck...

and renting a small cottage in the middle of nowhere with tins of beans piled high in every room.

probably the worst thing you could do humans work best in small groups 40-200 individuals.

Or did you think the entire financial system could collapse, and your still have your local tescos and the internet wont go out.

try reading my posts instead of making assertions with no backing in reality, i am more than ready for local disruptions like that and could even render assitance to my vunerable neighbours....

proper preparation prevents pi$$ poor performance as my grandad was fond of saying.

[Extradry Martini]

The answer you want is because you can match your liabilities with your investments. You know you have to pay out X in benefits in Y years, so if you invest in bond Z and hold to maturity you get X.

But the more interesting point is the bit I made bold. You hold so many because the risk of default! Otherwise you would only bother buying one issue.

Really, now who is arguing for the sake of it - you know I didn't mean that. As for pension funds matching liabilities with investments, well there we go - both are savings in nature.