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You are with although the problems in the economy this year our next guest says the biggest fear for investors.
Really should be economic growth which sounds kind of funny as we bring an -- Merck president chief investment officer American -- and so what does -- mean Axel.
-- -- -- it's not not funny you know they should look back at last spring time we had a couple of good economic indicators come out.
And the bond market sold off rather sharply.
You just turned there's a cost of the government spending are currently the government pays only about two per -- of its trillions of debt.
I'm in 2001.
Big government paid an average about 6% I'm not suggesting going up to 6% on the average cost of of government financing -- -- But if we have a bond market selloff which is what's going to happen if we get economic growth.
Then government -- is going to be unsustainable win worse shape than Europe as we getting away with it because the Federal Reserve is doing it's too often because everybody thinks and trusts that somehow.
When it comes to two major reforms that give bring -- -- in debt burden down to make it sustainable but the problem is that -- too much debt in the world is too much debt in the world.
And if we.
Get economic growth is going to matter -- -- -- muddle through economy with -- this -- -- not just on the on the fiscal cliff but.
Let's -- growth happened.
Cannot he cannot mop up as liquidity in fifteen minutes as he -- going to be -- -- to -- and we've been saying here for for a long time that once that does happen that's what might force.
-- you know regular people way to pay attention and be Washington to act sad because up until.
Now they -- just creating one cliff after another but it's more difficult act when interest rates start shooting up do you get any sense of a timetable on matters that just too difficult to predict.
Well I'm Greenspan had as irrational exuberance speech in 96 it took until 2000 put a bubble to burst housing bubble what's private and treasuries -- always upper right what.
But -- and remember what got the housing bubble to burst.
He wasn't -- taken volatility wasn't anything particular -- similarly in the bond market has been so much money chasing yield.
Like you just get better productivity and that means some good economic data some bad economic data that means volatility that means people -- taking money out of the bond market.
That can very quickly snowball into something self fulfilling can what you wanna do of course in that they're going what does it look like we're showing -- what we showed a ten -- noted 187 -- -- a thirty year note now yielding just over 3% once this.
You know event that your -- to occurs whatever it might be that due to those interest rates to shoot up towards a gradual mean.
Well of course you don't -- and and then of course it depends and know enough not everybody it has all their money tight to too short term interest rates north -- particular point in the Yucca.
But it what it does mean if you have a bond portfolio you have to shorten the duration I'm because you can lose significant money if you have all your money piled up in in -- long handled.
Of the -- and selling of course the dollar is -- -- and as that happens because if the bond market turns into a -- market which that is when the bond prices are falling.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Ideally into hot currencies -- -- Dona.
To mitigate these affects you don't -- timing of it but the risk is -- and we don't need to be right but if there's a risk that we have right.
Then you may want to do something about that market analysis Axel mark thanks a lot.
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