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Bond Madness or "Chinese Money"

October 10, 1997

Honorable and most polite american economist George Cole call it "Bond Madness," but where sun is born we call it "CHINESE MONEY." Many 1000s YEARS CHINESE HISTORY prove paper money soon lose all value. We first think news is joke of Wall Street - sometimes you awful funnny. But news item 8 October 1997 by Floyd Norris say:

"NEW YORK -- Will Republic National Bank still be around in 2997?

It appears that bond investors are confident it will. Lehman Brothers said Tuesday that it was offering $250 million in 1,000-year bonds for Safra Republic Holdings SA, a European subsidiary of the New York bank holding company."

Shanghai friends still laugh three hours after read news. We not believe innocent american investor child dream of fairy tale, and not believe american S.E.C. so BLIND and american taxman so DUMB. We try explain why 1,000 year bond is "CHINESE MONEY."

Mr Norris say "If all goes well for bondholders, they will get that amount of interest each year for the next 1,000 years, and then will get their money back. Given that no currency in the world has yet endured for 1,000 years, it is not easy to estimate what a dollar will then be worth."

"...then get their money back." We believe So funnny! 1,000 YEARS! 1,000! We explain why so funnny. Here attach american inflation rate (CPI) for only last 170 years. This show inflation rate average 4.4% each year since 1940. Assume inflation same in future as last 56 years. Calculator say $1,000 Bond then have future value of ONLY ONE DOLLAR after ONLY 154 YEARS with 4.4% year inflation. After ONLY 256 YEARS $1,000 BOND HAVE FUTURE VALUE ONE PENNY. So funnny, so funnny.

Mr Norris say "There is no guarantee that the bonds will stay outstanding for anything like as long as that. The bonds can be bought back by Republic at any time, Lehman said."

So funnny. If interest rate go far up, investor suffer twice. Investor still earn low Bond interest while Bond value fall to ground. But when market interest rate fall for example to 3%, Bond issuer buy back Bond and take away high rate from Investor. So funnny. Investor lose when is going and when is coming.

Mr Norris say "...but that call provision is a relatively harsh one, with Republic having to buy back the bonds at a price that would give the investors a yield of 25 basis points -- or hundredths of a percentage point -- more than the yield on the 30-year Treasury bond at the time of the call." How you americans say "BIG DEAL" So funnny.

Taxman is Fool

Mr Norris say "But Republic will be able to deduct the interest payments it makes from its taxable income, as it can deduct any interest payments. Dividend payments on preferred stock are not deductible." This remind of Confucius say "To call cow a donkey, cow not bray like ass." So funnny.

S.E.C. do Job?

Not know what to think here. We always believe american S.E.C. protect ignorant and innocent investor. How S.E.C. know bank exist in 1,000 years? How S.E.C. know dollar value in 1,000 years? How S.E.C. know DOLLAR EXIST IN 1,000 YEARS? Not so funnny.

We believe S.E.C. should make provision to protect very LONG-TERM investor. MAKE REDEMPTION at maturity in 3-ounces of gold (near equal value of $1,000 Bond today). Otherwise, So Funnny. So funnny.

Chinese financial friends agree all together following. We buy stock Safra Republic Holdings SA. It learn way to print "CHINESE MONEY" and no pay TAXMAN and with blessing S.E.C.

The term “carat” comes from “carob seed,” which was standard for weighing small quantities in the Middle East.
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