Monday, November 1, 2010

Bonds are great, until you get a 75% haricut

Read this.   It is of UTMOST IMPORTANCE

This is how the bond game plays out.

25% on the dollar paid in cash.  

The rest is in a note, that you can cash in 2020.   Earning 5.1% interest.   Amazing!   No one can get anywhere near that type of interest rate.

It is a teaser to not just keep you in the game (as opposed to attack and file lawsuits), but it also lets all that "liquidity" aka funny money in the "system".   Not only that, the funny money can increase at 5% per year, and you can probably borrow against it if anyone will take it as an "asset".

So this is how the game will be played.

http://www.insurancejournal.com/news/midwest/2010/10/12/113945.htm

3 comments:

  1. oh, i bet the government is watching that closely and thinking...hmmmmm....

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  2. I bet gov is controlling the process of negotiation....that is why they are going to buy the long bond....so their buddies can sell it to the taxpayers. Can't drain the swamp completely....in fact, keep all that liquidity and add more. Plus they don't want all the bonds to crash at once....that would ruin their "investment" in POMO and TARP. OK enough for tonight, rant over.

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  3. you're allowed, steveo, you're allowed. rant away.

    govt bonds will flop around a while, but I think they're pretty close to toasted. something else to look forward to....

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Insightful and Useful Comment!