Is it “Late 2007” For the Everything Bubble?
Timing the end of a major bubble is extraordinarily difficult as it entails figuring out when a critical mass of investors shift from greed to fear.
Having said that, we’ve recently seen a number of developments that would suggest we’re near the end of the current Bond Bubble.
Back in June the world saw the unveiling of perhaps the single most insane investment of all time: the 100-year bond.
To make matters more insane, the countries that were issuing these bonds (Argentina and Austria) both have experienced numerous sovereign dent crises in the last 100 years.
More recently, Austria almost went bust in 2015. And Argentina only just resolved issues with debt-holders from its 2001 default last year (2016).
Of course, 100-year bonds are not entirely new: Belgium and Ireland issued 100-year bonds last year (2016).
However, both of these issues were via private placements (meaning the bonds were sold at set prices to a select group of investors).
By way of contrast, both Argentina and Austria issued their 100-year bonds on the open market to anyone and everyone. Even more insane, both debt issues experienced tremendous investor demand!
Argentina sold $2.75 billion of a hotly demanded 100-year bond in U.S. dollars on Monday, just over a year after emerging from its latest default, according to the government.
The South American country received $9.75 billion in orders for the bond, as investors eyed a yield of 7.9 percent in an otherwise low yielding fixed income market where pension funds need to lock in long-term returns.
Austria has sold €3.5bn of 100-year debt in the largest century bond to hit the markets to date, the latest indication of hot investor demand for very long-dated debt. Bids from potential investors reached €11.4bn, dealmakers said.
Source: Financial Times
Let’s put this in very simple terms… two countries, both of which struggled with sovereign debt issues in the last four years, saw investors place between $3 and $4 in bids for every $1 in new debt issuance… on 100-year bonds.
This is beyond insanity. It is the textbook definition of a bubble. And it indicates we are nearing the end of the line for this current bubble.
The time to prepare for this is NOW before the carnage hits.
On that note, we are putting together an Executive Summary outlining all of these issues as well as what’s to come when The Everything Bubble bursts.
It will be available exclusively to our clients. If you’d like to have a copy delivered to your inbox when it’s completed, you can join the wait-list here:
Chief Market Strategist
Phoenix Capital Research