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Tuesday, September 6, 2011

Greece bonds, a great buy at 88% ROI for 1 year?

The US 1 year US treasury bonds pay 0.005%, yes, you read that correctly, essentially zero.

For baby boomers in search of fan-tastic rates of return, one has to look no further than Greece.  Greece 1 year bonds are now offering OVER 88% interest rates.

Basically a 1 year investment in a Greece 1 year bond, your ROI will far exceed any other investment offered in the world.  The currency, the Euro, is currently relatively strong compared to US dollars.  Germany and France keep throwing billions at Greece, Italy, Spain, Portugal, and any other country in the European union facing challenges in the bond market.

So if you have faith that the European union will NOT be dissolved in the next year, and the Euro value will be maintained, look no further buy Greek 1 year bonds.

I for one, do believe the European union is headed for a cataclysmic disruption, that will result in either a Euro fractional-zation or economic implosion by all its members.  I have no idea about timeline or depth that the debt defaults will come.

But quite obviously, people living IN Greece and Europe do not have faith that Greece will be around in a year as part of the euro.  For if they did, they would be buying 1 year Greek bonds and driving rates below 88%.

Now imagine, if you are a retiree in Greece, and you purchased long term fixed income assets, like US retirees are doing in droves right now, a year or two ago.

What would those long term fixed assets be worth, when the 1 year rate is 88%?  Answer is simple, a complete routing of your retirement savings locked in at a much lower lower rate.  Those retirees would be dumping longer term debt notes at huge losses just to "get out" of their lower rate lock in.

Greece serves as an example of what retirees are facing in the USA.  High risk investments for mediocre returns, or near zero rates (US 30 year at 3.75%).  For those locking in a great 3.75% rate for 30 years, the warning of unseen dangers can be illustrated by Greek bonds.

In honor of this post, I added a US Government bond rate link on the right, reflecting current bond rates for future reference.

NOTE: I don't believe US debt will have significant rate issues probably until 2013-2020?  (I suspect 2014).

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