Saturday, May 9, 2015

Ponzi Bond Massacre: Ponzi Schemes Don't Go In Reverse

The Global Risk-Off Rout Monkey Hammered Sovereign Ponzi Bonds. History's largest Ponzi momentum trade

May 9, 2015
"French, Italian, Spanish, and Portuguese bonds have all sold off sharply over the past two weeks, obliterating the gains in yield compression since the European Central Bank unveiled a bond purchase programme of euros 60-billion a month in January."

Ponzi Bonds trade based upon the Greater Fool theory aka. Greater Tool Theory
Speculators buy the ludicrously overvalued bonds assuming that an even bigger tool will pay more for them. According to this article, there are three "buyers" of negative yielding Ponzi bonds - those who are betting on currency appreciation, those who are betting on deflation, and those who have no choice i.e. due to negative deposit rates in Europe.

Don't everyone shit their pants at the same time, but...
Below, (Currency Neutral) Global Sovereign Bonds (BNDX) with U.S. Dollar
Weakness in the dollar is of course attributable to the missing economy, which just became even more elusive as of yesterday's jobless report:

The Shanghai Composite was monkey hammered 8.5% this week
Shanghai Comp. with U.S. dollar:

Extreme Pain Visualized
The below small back-up in German 10 year bunds caused a roughly -4.67% loss in two weeks. That doesn't sound like much, however, compounded annually it's -227%. Moreover, at the recent low yield of .07%, it would take 65 years to recoup the two week loss. For negative yielding bonds (Japanese) of course it takes forever.

It turns out that a lot was hinging on the bogus U.S. wreckovery, which has now been postponed until never. A bad time for the Globalized Ponzi Scheme to run out of greater tools.