Fixed-income investors are getting more than their fair share of pain in the credit bubble that is sweeping the financial markets. Recently, several large issues from A-rated corporations have produced yields that are so low they threaten to provide investors with negative real returns after inflation.
Several big corporations just released a slew of debt on the short and long end of the yield curve. Johnson and Johnson, for example, sold $4.4 billion of issues with rates at .7%. That’s well under the 3.2% annual rate of inflation..
Even Google, which has more than sufficient cash, decided it would seek out a $3 billion loan from investors. Never mind that the company has $30 billion in cash, and had virtually zero debt before the newest offering.
When it bursts
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Bonds
bond bubble, corporate bond yields, fixed income, inflation
Inflation is a tough subject to handle and everyone has a differing opinion on how it works. The Keynesian theory, used by the government and the Federal Reserve points out that short term inflation can be a way to spur economic growth. On the flipside, it hurts in the long term by rising prices. Read more…
Stocks
inflation
The talk of inflation has never been this high. Bernanke and company are trying very hard to keep the markets up while keeping inflation lower than the key 3%, doing so is problematic. Trying to infuse billions of dollars without making prices rise universally is against the laws of economics. So far, that extra cash has only been seen in products high in demand: sugar, corn, oil, gold, silver. Read more…
Round Up
inflation
China is experiencing the same rate of inflation the United States is seeing due to its currency and its near peg to the US Dollar. Food and energy prices have gone up the at the fastest rate in the last 12 years. The consumer price index rose 8.7% since just last February. Read more…
Forex
China, Dollar, Euro, inflation, Yuan
You would never think that the markets would drop due to worries of inflation, which is one of the biggest reasons we have advances and bubbles on the markets. Today the market suffered a quick loss after worries that inflation might pose a risk to the markets. Read more…
Investing
inflation
