Investors rush to save with the JUUGS

JUUGS Aug11.pngMost of us have now heard of the PIIGS countries (Portugal, Ireland, Italy, Greece, Spain). They are the ones causing the Eurozone debt crisis.

Today, the blog introduces the JUUGS (Japan, UK, USA, Germany, Switzerland). These are the major countries that investors now love.

If you are worried about return of capital, rather than return on capital, these are the countries for you. They have deep and liquid debt markets, are politically stable and highly likely to pay their bills. Importantly, they are not reliant on flows of foreign money to fund government spending. 85% of US Treasuries, for example, are owned by Americans.

This is becoming mission critical for many investors.

The chart above shows the difference between interest rates for 10 year government bonds in the PIIGS countries (left) and the JUUGS (right). It also shows how rates have moved between August 2010 (blue column) and today (red line):

• Rates have shot up in the PIIGS
• Greece is now paying 16%. Even Spain and Italy are paying 5%
• But rates have dropped to historic lows in the JUUGS
• Japan/Switzerland are paying just 1%, and the others only ~2%

This is another clear sign that we are indeed entering the New Normal. It also supports the blog’s argument that changing demographics, particularly the ageing of the Western BabyBoomers, are leading to major changes in global demand patterns.

We explore this argument in more detail in Chapter 2 of our new free eBook, ‘Boom, Gloom and the New Normal’. We believe its argument needs to be better understood and debated, if the chemical industry is to reposition itself successfully for future growth.

Please click here if you would like to download a copy.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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