February 2nd, 2016
Good Morning Everyone,
This morning we take a break from technology and commodities and focus on a macro issue:
the implications of negative interest rates.
It is widely acknowledged that credit is the lifeblood of an economy. It provides the leverage for growth. The interest rate assigned to a fixed income security can then be thought of as the “cost” or “price” of the credit.
This makes sense as lenders want to ensure their assets (cash, typically) earn a return above the risk free rate. To be clear, there is much more to determining an interest rate, but this is the basic premise.
What happens, though, when that rate goes negative? Our interest in the topic was piqued by the surprise announcement by the Bank of Japan last week to “go negative”. As the Wall Street Journal shows, almost 25% of global GDP is operating under a negative interest rate environment.
This morning’s note examines the implications here across various sectors of the economy.
As always, thank you for taking the time to consider our thoughts.
Chris
Click Here to Read the Complete Note
Upcoming Speaking Engagements:
PDAC: Early March 2016
Chris will be speaking at the valueforum.com InvestFest in San Antonio, Texas in April on Disruptive Innovation and Energy – March 31 – April 3, 2016
Mike will be speaking at Mines & Money Hong Kong – April 5 – 7, 2016
Chris and Mike will be speaking at the SME Current Trends in Mining Finance Conference: Beyond Survival – Prosperity with the New Normal of Risk and Uncertainty in New York – April 24 – 27, 2016
Recent Articles and Media Appearances:
Recent video and audio interviews are archived and can be found here.
