From Tom Dyson, publisher, the Palm Beach Research Group: Money lenders are going crazy in Europe. They’re agreeing to some insane deals…
I just read the Mexican government borrowed 1.5 billion euros at 4.2%… and it doesn’t have to pay back the money for 100 years.
It’s a great deal for the Mexican government. It’s a terrible deal for the lenders.
Who in their right minds would lend money to the Mexican government for 100 years at such a low interest rate? What if Mexico can’t pay it back? Or what if the euro turns out to be a junk currency because of a war or something else unforeseen? You get back junk.
So many risks in return for such a low interest rate…
I also read the Swiss government just did a deal to borrow—in the form of bond issuance—400 million Swiss francs for 10 years at an interest rate that’s below zero.
In other words, lenders (bond buyers) are agreeing to pay a fee to the Swiss government for taking their money for 10 years. (Normally, you receive interest when you lend money.)
This is the first time in history any country has sold 10-year bonds with a negative yield.
Or how about this: A French utility company just borrowed money from investors without having to make any guaranteed regular interest payments at all.
I’m amazed by these stories. They’re the sign of a money-lending mania in Europe.
Why is this happening? I don’t know. I suppose people have so many freshly printed euros, Swiss francs, and British pounds, they don’t know what else to do with them. Or maybe they’re afraid of something and they’re desperately looking for shelter. (Although personally, I wouldn’t consider the Mexican government a safe haven.)
I guarantee it’ll end badly…
So, what should you do?
For a start, don’t lend money by buying bonds. Period. Just don’t do it.
You’ll get a terrible deal. Your money is better off under the mattress. Or in gold. Gold pays nothing. But, that’s better than paying a fee, as savers now must do in Switzerland… or locking it up for 100 years in Mexico.
Or you could put your money in Cisco stock. The world’s largest Internet router and switch maker pays a 3% dividend. And it’s raised its dividend 250% in the last three years. It also has $53 billion in cash… about one-third of its market cap.
Just don’t buy bonds… it won’t end well.