Tuesday, April 5, 2011

Time To Buy Irish Bonds?

Brett Arends makes a compelling case for Bonds from the Emerald Isle.

In short, 10-year bond rates for Ireland are about 10%, while the U.S. is 3.5%. U.S. Bonds are considered "safe" while Ireland is considered a high risk venture. But Arends' makes the point that unlike a junk corporate bond, Ireland can raise taxes and it's in the EU's best interest to do whatever it takes to keep one of its members from default.

Ireland would have to negotiate with its creditors to get its debt down by over 30% before an investor's return would drop below that of a U.S. 10-year bond (3.5%).

Basically, Ireland is going to suffer for it's reckless spending and debt binge, but U.S. investors can profit from Irish Misery.

I'm not sure how I feel about that, but I know I wouldn't put that much in a bond from Ireland right now. But I am considering adding some of that exposure to my portfolio along with precious metals.


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