Tuesday 10 January 2012

Negative Yield for German Treasury Bonds!

Negative Yield for German Treasury Bonds!

This one truly takes the cake (and perhaps the bakery):

To top it off, the demand for those bonds was for twice the total quantity being offered.

Please note, my dear readers, these bonds are not subscribed to by ordinary blokes like you and me. They are typically bought by savvy insitutional players who've got ivy-league professionals macro and micro "ground realities" before deciding where to park their funds.

This implies that:

  • Players who are far more savvy than most of our retail investors are so paranoid that they consider it better to lose a little bit of money by accepting negative yields in search of safety than to look for ANY other asset classes. That's the extent to which they have confidence in the short-term performance of ALL other asset classes.
  • All the talk by the political bosses about the European crisis nearing a solution is just a lot of hot air and nothing more.
  • If Europe is in such doldrums, can equity markets around the world outperform on a sustainable basis around the world?

My own suggestions for Indian equity investors remains unchanged:

  • Capital preservation should be of utmost importance
  • Any rallies should be used to regularly exit trading long positions
  • Any purchases must be made with very strict stop losses unless your time horizon happens to be at least 3-5 years
  • Even for your "long-term" portfolio, be prepared to use my old "Free shares" trading strategy (Accumulate Free Shares) to enhance your wealth.

Regards,

N


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