They've got skin in the game but even so their argument that a $20 trillion debt is going to feck the US one way or another has a ring of truth about it. I've often felt that the situation is now basically out of control and the economists talk of solutions and polices, austerity and growth, bonds and yields etc is little more than fiddling while the flames are licking at the walls of Rome.This may be part of the equation.
So the performance of the bond market and the equity market are perfectly correlated? News to me but what would I know...The correlation of rising yields is falling bond prices.
Why would bond prices fall? Bond prices could be falling because too many investors are seeking to get rid of the bonds that they hold. It basically means that investor demand for debt has fallen. And any bond debt that there is out there becomes more expensive (hence the rise in yields).
But the really important point is that every other market (stock, futures, options) are predicated on the fortunes of the bond market.
If the bond market cracks every other market will crack.
No one suggested that there is a perfect correlation.So the performance of the bond market and the equity market are perfectly correlated? News to me but what would I know...
And futures and options are derivatives, not first order instruments.
Apart from that, you got the inverse relationship between price and yield correct.
What if people are selling bonds in order to buy equities?No one suggested that there is a perfect correlation.
All that is suggested is because (sovereign) bonds are considered to be the safest of safe investments. Therefore a crash in the bond market would indicate that that safety sentiment had dissipated.
With that dissipation in sentiment, markets with more risky investment classes relative to bond market such as equity markets would also be adversely affected.
It can't be rolled over ultimately.The question is that with so much new debt having been issued in the last decade, what happens when it all gets rolled over at higher yields.
Also, if this is reflected in rising interest rates on consumer debt and the ability of companies to invest, then what does this mean for demand?
I'm afraid the UK has a couple of weeks ago again changed the Pension rules which now means that once again you cant take your Pension in cash and instead have to buy an annuity.Have zero faith that money in pension schemes will remain there........................... what is actually backing up assets in pension funds ?
From working in UK in 80's /90's built up an ok pension pot with number of different companies.
When reach age I can remove it then will do so in cash, use that to repay some of buy to let loans.
Need to find a Pension vehicle that will enable me to do all of that.
Plan to hold UK BTLs free of debt, well pension plan may charge 10% int a year on the loans
If there's too much debt in the world, central banks print more money, devaluating currencies and making this debt sustainable. This can go forever and ever, similarly to inflation where goods prices increase but inline with the buying power.It can't be rolled over ultimately.
Someone has to be repaid and at this rate no one will be.
Given that their debt is denominated in the national currency (the US dollar), they could just pay it off by printing loads and loads of greenbacks.....This may be part of the equation.
WrongI'm afraid the UK has a couple of weeks ago again changed the Pension rules which now means that once again you cant take your Pension in cash and instead have to buy an annuity.
On the upside annuity rates will go up as per the contents of this thread.
Pension blow for 5m as Treasury U-turn means retirees are stuck with rip-off annuities