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Redrick Terry:
Now it’s time for 4 Your Money. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson:
Thanks, Redrick.
Redrick Terry:
Thank you. And so we’ve mentioned the concept of negative interest rates before on the show, and we’re hearing it mentioned more and more. What are your thoughts on them?
David Nelson:
So it’s kind of shocking, when we stop and think about it, as far as what’s taken place, In the olden days, several years ago, you’d pay… the government would pay you, as far as to take money from you. And today what we find is that people are paying money to let the government take their money. Makes zero sense as far as in my mind. But that’s how crazy things have gotten. There’s $17 trillion, and that’s with a T, trillion dollars, of negative yielding bonds that are issued out there, primarily from Europe and Japan. It’s just absolutely stunning, as far as what’s taken place.
Redrick Terry:
Yeah, it’s really incredible. So what’s an example, a recent example, at least, of this happening.
David Nelson:
So I’ve got the slide here that will visually show us here. This is Greece. This is an 18-month period that we’re looking at here. And what we see is that Greece has gone from essentially zero to 7%. This is just shocking, again, when we stop and look at this, that people would lend their money to the Greece government at 0%. It’s just stunning. And here’s the best example, as far as for individuals to look at, as far as again, how crazy things have gotten.
Redrick Terry:
Why Greece in particular? Why are they a particular interest?
David Nelson:
So Greece was the epicenter, as far as of the past crises. And what we found, as far as with Greece in slide two here that we have, is that the yields just absolutely went off the charts. If I would’ve asked individuals out there, “Would you be interested in a bond that pays 160%, back in the year 2011, would you be interested?” Most people would probably take them up on it. It was a Greece bond, literally yielding 161%.
David Nelson:
Now the way bonds work, just a little refresher course from before that we talked about, when interest rates go up, as far as in the bonds, like a teeter totter, the value goes down and vice versa. So we saw interest rates peak at 161%, they’re now at 0%. It’s just stunning, as far as what’s taken place. The economies, as far as in Europe and Japan, are such that individuals are willing to accept getting 0% or less. If you look at the rest of Europe, most of the countries today are negative, not at zero. They’re literally at negative returns.
David Nelson:
Again, you’ve got to be careful, as far as on stuff like this, and certainly in your budgeting, as far as from the rate of return that you’re going to get and doing the calculations for retirement. It’s hard to say as far as what’s a good rate of return to you. So 3%, 4%, kind of the good old days. Today, we’re at zero. It’s shocking.
Redrick Terry:
Not so much anymore. All right, David, thanks so much.
David Nelson:
Thank you, Redrick.
Redrick Terry:
And if you missed any part of our discussion, we’ll make it available for you on OurQuadCities.com.
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