%% MOST likely. Did a WFC home mortgage refi + paid more upfront so I could avoid a prepay penalty.Also when they used to forgive a mortgage debt-they reported that to IRS+ counted that as income.May not be tax law this year...…………………….
Doubt that. Let's say you buy a $Million worth of bonds. You don't expect to be paid back the $Million principle, you just want to collect the $30,000/yr interest? Can't rinse and repeat that too many times.
"You don't expect to be paid back the $Million principle.you just want to collect the $30,000/yr interest?" your remark is misleading. the name of the game is capital gains. if you buy the bond cheap enough and timely enough you will make a terrific capital gains sans receiving the principle at l00% on the dollar.
The Point with debt is that it is Tax free. You Buy a asset with discount (yielding 18%) using debt paying say 5% and you have a a 13% spread right there without using your money. Fact, You can Buy Debt with 18% yield using a private loan at 10% rate and make lot of money tax free. So, I buy a $100k note for $60k, finance it for $75,000 (pocketing $25K just for buying the distressed asset and tax free) and when it pay off (mature) I make an extra profit of $25,000. On another example I may buy to yield 16% and borrow at 12% – the face rate of the note is at 10%.. Lets say the loan was just created for $100k at 10% for 360 month. that’s $877.57 per month. You buy for $70k and borrow at 12% $75K. You put $5k in your pocket and your payment to the investor on $75k at 12% is $771.46 per month. You get $106.11 cash flow plus the $5k up front and that’s with doing nothing more with the note and letting it go the full term which is unlikely…..and if it pays off early the Yield skyrocket. This happen every single day on wall street/City etc. DEBT is the real money and is tax free. So that rhetoric of taxing the rich base on their income, is utterly bullshit. Most of the Time the Gov pay off their debt issuing new debt.. Actually, We should compare public debt to public revenue. Right now, 18.8% of the country’s GDP is revenue to the US government, which means the Feds are raking in about $3.6 trillion per year from taxes, fines, investments and other sources of income. So the government could pay off its debts in less than six years if it focused all of its income on debt repayment. You hear a lot about the federal debt number, but you almost never hear about the US asset number. Just how much is the entire USA worth? If we sold every asset in the country, how much cash could we raise? Fortunately, the Federal Reserve keeps track. They do it by estimating the total balance sheet of households and nonprofit organizations, as well as the total assets of US banks. Combine those two and you get $128.18 trillion (Bigger than the total wealth of Europe and Asia).. I'm not saying that the US don't have a problem. But most of the time is over exaggerate (usually based on on the author agenda). The USA do have a big problem, but not an immediate one. Is it solvable? It is, but the solution will be painful.
AFAIK, negative yield bonds are usually where the redemption yield is negative. So if the buyer of the bond holds the bond till redemption, he will lose money overall. But the actual coupon i.e. semi annual payments are positive so the buyer still collects the annual interest payments. So he has a positive cash flow each year but takes a hit on his capital when the bond matures. So overall a loss.
you are doing a static analysis based upon an analysis that the bond will be held to maturity. unless you can predict the future you cannot say what the price of the bond between the present and the interim price before maturity, particularly for a long dated bond. for short maturities its price graph is obvious.
Well, first the US gov cannot "focus all of its income on debt repayment" any more than a household can. The real question is how much unallocated income can the Fed free up by cutting public benefits before the recipients of those benefits vote them out of office, or, in some cases, shift critical campaign donations to their opponents? Politically, those vast unfunded liabilities are much harder to default on or inflate away than the public debt. You can cheat the Chinese easier than you can cheat the Social Security and Medicare recipients. Second, if every private and public entity in the US sold off its assets and magnanimously donated the proceeds to bail out the national government, who would buy all that stuff while all the potential buyers are selling? it is just as if everyone in the stock market decided to "cash in their chips" at the same time. They could not really obtain the nominal value of their assets. This is known as the "fallacy of composition." The other problem is that the present value of the Feds' total unfunded liabilities, not just the official national debt, is now in the neighborhood of $200 trillion. In addition, states, counties, cities, firms and other private entities, and households all have substantial debts as well. This problem is not exaggerated. Third, just focusing on the narrow problem of the official Federal "debt held by the public" for a moment, it is a historical fact that countries that accumulate a public debt greater than 90% of their GDP have had a very difficult time avoiding reduced growth rates and financial crises. I highly recommend Kahneman's book "Thinking, Fast and Slow." One issue he deals with is that we all tend to rationalize why we will beat the odds, such as finishing a project much faster than others have finished similar projects, or why real estate prices in our city would not crash even if they did everywhere else, or why we can cope with debt burdens that have crippled others. What we ignore is that others usually had their own reasons why they were exceptions to the rule. This time is not different, we are not exceptional, and people who think this way are usually deluding themselves.