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June 16, 2025

If…

If…

by Burnham Banks / Thursday, 14 July 2016 | 6:11 am / Published in Articles
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If I told you that it was a good idea to buy a negative yielding bond because I thought the yield would get more negative, thus paying for the potential of a future capital gain, you would probably think I was mad. Or seriously dependent on a greater fool. Or bought an option.

If I told you that I would borrow in the bond market to fund dividends which I could not afford to pay out of cash flow or profits, you would probably think me a fool or a fraud.

If I told you I would borrow in the bond market to buy back my shares because funding was cheap and I didn’t know what else to do you might reasonably question my leadership qualities.

If I told you I would borrow to buy out my competitors you might question my judgment, and if you were the regulator you would certainly question the systemic competitive implications.

If I told you that stocks were cheap relative to sovereign bonds and interest rates despite slowing earnings growth and high absolute valuations you might ask how closely I monitored the bond market.

If I told you I would cut rates even into negative territory to spur lending you might reasonably ask me who wanted to borrow.

If I told you I was making banks safer by asking them to hold more capital, and apply better risk models, you might ask me how I expected them to lend.

If I told you I was going to apply more fiscal stimulus to revive our slowing economy you might ask me how I was going to pay for it.

If I told you I would buy more sovereign bonds, you might ask me where I was getting the money. Well, why do you suppose I might need to issue more sovereign bonds?

Ten Seconds Into The Future

“Hello. I’m Burnham Banks and I studied economics in the late 80s and early 90s. I’m still studying economics today and am still no wiser. This blog is a journal, a record of my thoughts and experiences. If we are destined to repeat our mistakes, we should at least repeat them faithfully. If not, then perhaps the past is a mischievous guide and we should try something new.”

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