from Sovereign Man:
Heike Hoffman is a 54-year old fruit merchant in a small town in western Germany.
She has no formal training in finance. She’s not running a multi-billion dollar portfolio.
And yet, as the Wall Street Journal reported on Monday, “[w]hen Ms. Hoffman heard the ECB was knocking rates below zero in June 2014, she considered it ‘madness’ and promptly cut her spending, set aside more money, and bought gold.”
She’s right. It is madness.
There’s $13+ trillion worth of bonds in the world right now have negative yields, much of which is issued by bankrupt governments (like Japan).
Stock markets around the world are at all-time highs even as corporate profits have been in long-term decline.
And in a growing number of countries, even doing absolutely nothing and holding money in the bank means that you’ll be penalized with negative interest.
These risks are even worse for major “institutional” investors like pension funds.
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