Only if you re-invest the 90%.
And also before I forget, you are also betting that the Kenyan Government will not default on its loans. At least not for the next 10 years.
As buyers of Ukraine’s bonds in 2015, Lebanon’s bonds last year and most famously Greece in 2012 found out, it’s not always a sure bet. I think even Cyprus has defaulted at some point.
Your 50m could very easily evaporate and you’d be entitled to whatever pittance the insurance covers.
Edit: I unfairly took an unnecessary jab at a presidential contender. Edited to remove that unnecessary fluff. Suffice to say, severely looted governments are at high risk of default.
Wacha mambo ya inbox. Weka hapa ndio CSI wafanye kazi ghaseer
Do we have a precedent of inflation fucking bondholders or the government defaulting?
There is always that risk… And trust me, from my observations, that risk is more real now than ever before…
Inflation fucking bond holders has too many examples. Government defaulting is a much smaller club. But it does happen from time to time. Kenya has as of present never defaulted… yet.
When you hear the Government begging donors to defer the payment of loans, is unable pay suppliers on time, KRA is the most active public body, is playing games subsidizing fuel as the taxes are over 50% of the fuel costs,… You know that it is at the risk of defaulting especially after August… UK is managing his legacy…
Especially with the way we have been borrowing without a corresponding increase in productivity.
I think that given time, I can write at least 10 signs showing that we are at the risk of defaulting… Don’t we have economists here?
My training is in Finance, but am not illiterate in economics. And I agree, I too think Kenya is approaching (or could already be in) a sovereign debt cycle that could result in a default. I had to be a lot more cautious in my wording with this one.
It would be nice to read your thoughts.
:D:D:D:D:D…Life is a risk, even swallowing life giving food has inherent risk of choking you to death anyway,by the time government defaults I can bet my balls that tenants wa flat owner ndio watakua hawalipi rent or your flat is empty na kakinuka kama Ukraine, Russia ipige flat yako mbomb nobody pays you,if that mbuloti you bought for speculating purpose itakua useless because iko na land mines,buried bodies or no buyers lakini government bonds can be paid when the country stabilises,you choose which way you are least likely to get fucked and I would rather trust Gok than tenants or private entities.
It is interesting that you give Ukraine as an example why rentals are better than bonds! Real estate is being decimated in Ukraine. The situation in Greece was such that withdrawals were limited, how do you think landlords were doing in an economy where people are losing jobs?
I wouldn’t say bonds are better than rentals and vice versa. It depends on your situation in life and what you want. Each has its own pros and cons
Ooliskia wapi? Kwa zile nimelist hapo juu, ni Greece (retail) Bond holders pekee walilipwa. 25% of their Principal. And they were lucky because Greece is unique. The Euro is backed collectively by much stronger governments and institutions.
I’m not against bonds. I’m just not enthusiastic about KES denominated bonds issued by the Kenya Government.
You are right, there’s no right or wrong investment. Kila mtu na strategy yake na risk appetite yake, na calculations zake.
Afadhali hio 25% ,a bombed flat utalipwa ngapi my fren?
Kenyan economy iko ngangari , default rate is near zero, oligarchs wameinvest hapa Kenya,so Kenya can’t be " allowed" to fail and be a banana republic.
In Real Estate it’s the land that holds the value not the buildings. Buildings depreciate. Even after the war, the land owners will still have some residual value left.
Bond holders on the other hand, could very conceivably end up with zero.
If you have an appetite for Ukraine’s bonds you can try the up coming US dollar denominated “war bonds”.
https://www.reuters.com/world/exclusive-ukraine-mulls-international-bonds-fund-war-defence-effort-2022-04-01/
You can get a 76 % yield on Ukraine’s 10 year Hryvnia Denominated Bond @Karoga. Have a ball with it.
This discussion never ends but just imagine when kibaki took over Power, how many people do you think invested in bonds? Niko sure wengi walisema the economy is gone to the dogs and bonds is not prosperous. Na wachache walijaribu am sure today wako mbali.
You can’t be certain the economy will crumble ten years to come just the same way you can’t be certain your property’s worth will have double the next ten years.
I also do not want to say with certainty that we are likely to default but the probability of default inm,y opinion is much higher than ever before… My opinion is that in terms of economics, this regime is much closer to Moi regime than Kibaki’s… The thinking of economists from 2013 to date shocks me… What informed the Nairobi Expressway whose decision was made during a dinner in China as we are told? How about the SGR? I know we will all say that infrastructure projects are good… but without proper supporting documentation, one has no choice than to conclude that these are simply conduits for corruption, siphoning money from tax payers to thieves…
Any investment is necessarily a risk. The thing with financial instruments is that that risk can be calculated. That’s how a market arrives at the appropriate yield. And that’s why when you check the world government bond yields, Kenya offers some of the highest yields.
Government borrowing is fantastic when it results in an increase in overall productivity, but can have disastrous results when it doesn’t. Generally for knowing when to invest in which financial instruments, it’s prudent to compare three charts against each other, long term debt cycle, short term debt cycle and the productivity growth curve. The most important of these is the productivity curve. As long as it is going up, it can sustain increased borrowing. The moment it plateaus or starts to drop. It’s time to look at other financial health indicators of a country (or business) in more depth. Kenya is at, or approaching that point after 10 years of unforgivable mismanagement.
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