![\"\"](\"http:\/\/blog.bcaresearch.com\/wp-content\/uploads\/2013\/01\/Debt-Supercycle.jpg\")
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The zero-interest-rate policies that have been maintained by central banks in the most developed parts of the world to prevent a debt crisis have completely distorted the financial system. The side effects of giving away the cost of borrowing and providing an open-ended lifeline to prevent the heavily indebted (the entire developed world) from going bankrupt are devastating for those who need to generate income. It is a scenario that is favourable to those who are insolvent but very hostile to investors<\/strong>, who find themselves forced to lend their money in exchange for the meagre returns offered by increasingly risky and insolvent issuers.<\/p>\n As investors\u2019 money shifts towards the most insolvent debt in a desperate search for a few basis points of yield, the bubble in the prices of all debt \u2013 both developed and emerging, and across the entire yield curve \u2013 is swelling ever further. The most creditworthy issuers \u2013 or those with central banks willing to buy up everything \u2013 already have a large part of their yield curves in negative territory, meaning that investors have to pay to lend them their money. Similarly, less creditworthy issuers are basking in a sea of liquidity that allows them to take on more and more debt whilst paying interest rates as if they were large, creditworthy multinational corporations.<\/p>\n The danger this all poses is obvious, isn\u2019t it? Yet despite this, the needs of pension funds, insurance companies and other investors \u00abforce\u00bb them to turn a blind eye, hold their noses and swallow this stinking debt at bond prices Pata Negra<\/em> such as Apple or Coca-Cola. And as we all know, the higher the demand, the longer the price bubble keeps on inflating\u2026 At present, we\u2019re already at 1.44 quadrillion (US quadrillion) in sovereign debt paying negative interest rates; even Slovakia has now entered negative territory\u2026 This implies that investors expect the bubble to keep growing so they can sell them at a higher price before maturity, as otherwise it\u2019s impossible not to lose money. And yet they keep buying! And the potential losses could be colossal: for example, if the German bond maturing in 2044, with a current yield of 0.59%, were to see an increase of just half a point, in other words, if its yield rose to 1.09 (which would be more than reasonable for a bond maturing in almost 30 years\u2026), investors would suffer instant losses of 10%! Just imagine the losses that would be incurred on other, far more dubious issuers\u2026<\/p>\n Faced with this scenario, what should the average investor do? Follow in the footsteps of institutional investors and buy junk bonds at exorbitant prices until the party comes to an end? And how much will the fallout from that party cost? The problem is that the more the bubble inflates, the more costly its bursting will be for long-suffering fixed-income investors, who have unwittingly been turned into junk bond speculators and distressed debt<\/em>. Some seek solutions by generating income through share dividends, but it should not be forgotten that, at the end of the day, share prices remain variable, and as such will cause irreparable disappointment to those seeking stability and growing returns. The answer to the need for returns lies in the alternative income generation<\/strong><\/a>\u00a0far removed from the volatile bond prices, as we have already explained in previous articles, and accessible via investment vehicles starting from 250,000 euros at banks such as those in Luxembourg, for example.<\/p>\n Debt prices in the US, whilst also excessive, are somewhat more reasonable than in Europe, as the market there is already pricing in robust growth, rising interest rates and the beginning of the end<\/em> of the distortion caused by the Fed. As a result, many US companies are issuing debt in Europe in droves at interest rates almost half those charged on the US market. \u00abLet\u2019s get into debt there, because thanks to the ECB, they\u2019ll snap up your bonds<\/em>\u00ab\u2026\u2019 they seem to say. And, recklessly enough, that is indeed the case\u2026<\/p>\n The traditional fixed-income market is taking on more risk every day than it ever has before. And like all bubbles, there comes a day when the party turns into a hangover \u2013 or, worse still, ends in tragedy. What\u2019s more, this time the crash will not affect greedy stock market speculators, as is usually the case, but rather investors who are speculating in insolvent debt without even realising it, thinking they are still generating the conservative returns they have always relied on. Nothing could be further from the truth. A word of warning.<\/p>","protected":false},"excerpt":{"rendered":" Las pol\u00edticas de tipos cero que se han venido sosteniendo desde los Bancos Centrales del mundo m\u00e1s desarrollado para evitar el colapso de la deuda, han distorsionado por completo el sistema financiero. Los efectos colaterales de regalar el precio del dinero y la barra libre para evitar que los hiperendeudados (todo el mundo desarrollado) quiebren, […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38,51,45,41,42,39,40,52,37,48],"tags":[],"class_list":["post-4028","post","type-post","status-publish","format-standard","hentry","category-actualidad","category-banca","category-asesoramiento-deportistas-artistas","category-economia-y-finanzas","category-estrategia","category-crear-mi-propio-family-offices","category-gestion-financiera","category-asesoramiento-patrimonial-multi-family-office","category-reflexion","category-asesoramiento-patrimonial-multi-family-office-crear-mi-propio-family-offices"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/4028","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=4028"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/4028\/revisions"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=4028"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=4028"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=4028"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}