The flows into risk-free assets by central banks and private investors has plunged returns on these assets into negative territory, and pushed investors out along the risk curve into assets that are close substitutes to risk-free assets (such as investment grade U.S. corporate bonds).
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First, we know that to reduce risk you need to combine assets that have a low positive correlation or, ideally, a negative correlation with other assets.
It doesn't feel good to be borrowing at 6% while holding assets with negative returns.
With CPI inflation of 3 percent in 2011, the real rate on those assets is negative.
The last ten years have shown a negative correlation between risk assets, and equities in particular, and the greenback.
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Which would really be quite extraordinary: it would require that most of the top 1% actually have negative wealth, debts larger than their assets, for this to be true.
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In a report which went to Tuesday's meeting of the city council's development management committee, planners said the benefits of the plan outweighed any negative impact on the city's heritage assets.
In fact, any asset class with risk directly tied to developed economies has generally been forgotten in favor of hard assets or fixed income instruments with negative real rates but an abundance of safety.
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Three years of negative stock market returns, coupled with limitations on how the assets can be moved around, have taken so much off principal that it may be all but impossible for the funds to even match the total contributions, let alone show significant appreciation.
In this negative real interest rate environment, it is best to focus on assets that will stand to benefit, such as dividend paying large cap equities.
Global equity markets are up year-to-date and most risk assets and currencies have fared reasonably well so far this year in spite of the negative news flow.
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With fiat currencies being printed, short-term interest rates near the zero-bound, and real interest rates providing negative expected returns, investors have been incentivized to chase higher returns on equities and invest in real assets.
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Thus, the balance sheet looks like this: 850 of assets (after a 150 loss), 900 of liabilities in the form of borrowed money, and negative equity of 50.
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Although oil cognoscenti applaud Aubrey for his acquisition prowess, assembling one of the great troves of natural gas assets, second in size only to EXXON (XOM), the fact remains that CHK has had negative cash flow every single year they have been in existence.
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