23 January 2015

The only way to hold Euro-denominated Bonds

Whatever you make of the latest measures taken by the ECB to 'boost the economies' of the Euro-zone do keep in mind one key rule for your financial survival: Do not hold any bonds denominated in Euros unless they are backed by the full-faith and credit of Germany. As the interest rate on many of those bonds is now turning negative it probably is advisable to give them a miss as well and stick to cash. At some stage some members of the Euro-zone may default or leave the Euro-zone and the value of their obligations will nose-dive. So buying Italian or French bonds just because they return a measly 1.5 percent is akin to picking up pennies in front of a steamroller. Index-hugging fund managers playing with other people's money in the big investment institutions will continue to play this game of Russian Roulette and you should make sure that you avoid them if they play this dangerous game.