According to the Wall Street Journal, there are now some JUNK BONDS in Europe that have negative yields.
Think about this: a junk bond is basically debt issued by a company with financials so risky that analysts expect there’s a good chance the company won’t pay its debts.
Hell, the company might not even be in business by the time the debt matures.
And yet, despite these substantial risks, investors are willing to loan money to these companies… at NEGATIVE rates of return.
Seriously?? You take all that risk and then GUARANTEE that you’ll lose money.
Honestly I’m not a pessimistic person. But this sort of absurdity makes me pause and consider what might happen next.
The global economic expansion is one of the longest on record, ever. Financial markets around the world are soaring at all-time highs. Stocks. Bonds. Real Estate.
One of the only things we know for sure about financial markets is that they are ALWAYS cyclical. Up/Down, Boom/Bust. These cycles have been with us forever.
It’s impossible to predict exactly WHEN the decline will occur. But when you see JUNK bonds with NEGATIVE yields, it’s likely that we’re probably close to the end of the boom phase.
It’s possible this madness could continue for a while longer. Or it could end tomorrow.
No one has a crystal ball… but the important fact is to realize that at some point, this trend has got to correct.
All the trillions of dollars printed out of thin air to buy securities that yield negative interest rates will eventually have consequences.
That’s why I think makes sense to take sensible steps to protect yourself… no matter what happens next.
That’s why I own gold.
Gold is still one of the only asset classes in the world that’s not anywhere near an all-time high (unlike stocks, bonds and real estate).
In fact, relative to what’s going on in the world, gold is downright cheap.
Gold is something people tend to buy in times of uncertainty… and right now, there is a lot of uncertainty.
Between trade disputes, financial madness, and the Bolsheviks coming to power, I see a lot of reasons to own gold.
Gold is also at an interest tipping point: gold supplies around the world are falling, and that could be a major catalyst for much higher gold prices in the future.
It’s never a good idea to dump all your life savings into any one thing. But at a time when central banks are printing more money out of thin air, and the bull market is long in the tooth, allocating a portion of your savings to gold can make a lot of sense.
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