{"id":48764,"date":"2018-05-12T04:15:53","date_gmt":"2018-05-12T11:15:53","guid":{"rendered":"https:\/\/lenpenzo.com\/blog\/?p=48764"},"modified":"2025-01-01T10:14:42","modified_gmt":"2025-01-01T18:14:42","slug":"black-coffee-12-may-2018","status":"publish","type":"post","link":"https:\/\/lenpenzo.com\/blog\/id48764-black-coffee-12-may-2018.html","title":{"rendered":"Black Coffee: Acme Financial Securities Inc."},"content":{"rendered":"

\"\"<\/a>It’s time to sit back, relax and enjoy a little joe …<\/em><\/p>\n

Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of what’s been going on in the world of money and personal finance.<\/p>\n

There’s a lot to cover so let’s dig in and get right to it this week …<\/p>\n

“The one aim of these financiers is world control by the creation of inextinguishable debt.” <\/em><\/p><\/blockquote>\n

— Henry Ford<\/strong><\/p>\n

“You have to know what you own. You have to really do your homework in terms of knowing what supports your bonds.”<\/em><\/p><\/blockquote>\n

— Meredith Whitney<\/strong><\/p>\n

Credits and Debits<\/strong><\/p>\n

Debit:<\/strong><\/span> The fuse on the US debt bomb<\/a> is growing alarmingly short. It is projected that by 2020 — just two short years from now — rising interest rates will result in more than half of all US personal income taxes being used to service the national debt. That’s bad news for a nation that depends on an ever-increasing debt load just to maintain its current standard of living.<\/p>\n

Debit:<\/strong><\/span> Of course, nations fund their debts with bonds; and as a bond’s duration increases, so does its yield to compensate for higher investor risk. The longest US bond is 30 years. But last year Argentina issued a 100-year bond (!) with a 7.9% yield that was so popular it was over-subscribed by 3.5 times. Yes, that<\/em> Argentina; the one that has defaulted on its debt seven separate times<\/a> during the past 200 years.<\/p>\n

Credit:<\/strong><\/span> Despite Argentina’s poor track record of sound fiscal management, the unabashed enthusiasm for Argentine 100-year bonds has Egon Von Greyerz wondering, “(Who) buys a 100-year bond<\/a> issued by a country that (repeatedly) defaults on its debt and devalues its currency?” The answer: “Super genius” investors who believe the potential for explosive returns outweigh the risks.<\/p>\n

Debit:<\/strong><\/span> The bad news is Argentina’s central bank recently raised its benchmark interest rate to 40%<\/a>! No, I didn’t forget a decimal point. Remember, bond prices fall with rising bond yields — which means those 100-year bond holders looking to add a little nitroglycerine to their portfolio have lost a good chunk of their “investment.” And if you think that’s<\/em> bad, just wait until Argentina defaults again:<\/p>\n