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BONDS: Korea versus India.

February 22, 2011

No, it’s not a game of sport, it’s more like a game of culture. Koreans love to sell their savings in the bond market while Indians like to sell their savings in the stock market. Why? Korean life is predictable, safe, entrepreneurial: exchanging your money for bonds to be paid back with fixed interest after fixed time is security for the long run. Indian life is unpredictable, not safe, bureaucratic: exchanging your money for bonds to be paid back with fixed interest after 10 years is insecurity for the long run. Indians go for all-or-none in the stock market. They gamble much more than Koreans.

This psychological analysis is about bonds, not stocks, so I don’t really care about the gap between Korea and india over attraction to bonds. My job is to enlighten you about bonds per se, especially if you are a bond trader or investor. You already know that the bond is the backbone of the economy. What you don’t know is the psychology of it: A BOND IS A TWO EDGED SWORD! If you buy US Bonds, you are 100% safe to get your expected return albeit probably in inflated dollars, if you buy a Municipal Bond you are not guaranteed a 100% return. In both cases you are screwed as a tax payer (with municipal bonds you may be screwed twice). Your federal government will take your bond money and waste it unproductive in Iraq, Afghanistan or even on mismanaged projects at home. A municipality may use your bond money to build low-rent housing, parks or schools that will be used by drug dealers, park rapists or schools to train drop-outs. The municipality goes bankrupt and you lose – twice!

Here is the simple solution that no one seem to be capable of doing:  DO NOT EXCHANGE YOUR MONEY FOR A BOND ISSUE FROM ANY PUBLIC OR PRIVATE AUTHORITY, EVEN CORPORATIONS, UNLESS YOU GET IN WRITING A PLAN OF ACTION THAT GUARANTEES RESULTS. IT IS CALLED IN PSYCHOLOGY THE C-MOR PLAN, MEANING THAT THOSE WHO GET YOUR MONEY AND GIVE YOU A BOND CERTIFICATE WILL BE OUT OF A JOB IF THEY DON’T DELIVER EXACTLY AS SPECIFIED IN THE WRITTEN PLAN HOW TO USE THE MONEY (CONTINGENCY MANAGEMENT OF RESOURCES). YOU WILL NOT LOSE, BECAUSE SOONER OR LATER THE PEOPLE WHO GET YOUR BOND MONEY WILL BE CONSCIENTIOUS ENOUGH (SCARED) AND USE EVERY PENNY OF YOUR LOAN TO THEM PRODUCTIVELY!

Korea is a great economy because 99% of the bond money issued is used effectively to advance Korea’s GDP. If India tomorrow issues a 20 billion dollars government bond and use every penny of this public loan to build infrastructure, great agriculture and a tourism industry, India may beat Korea in GDP. Will it happen? No, because Indians do not feel culturally as secure as Koreans. If you are a Korean – celebrate. If you are Indian – get to work!

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3 Comments leave one →
  1. February 25, 2011 2:23 am

    Excellent blog. I was checking continuously this blog and I am impressed! Extremely helpful information specially the first part. I care for such info a lot. I was looking for this particular information for a long time. Thank you and best of luck.

  2. February 27, 2011 5:45 pm

    Excellent post. I was checking continuously this blog and I am impressed! Extremely helpful info particularly the last part. I care for such information a lot. I was looking for this certain information for a very long time. Thank you and best of luck.

  3. March 13, 2011 1:22 am

    Great post. I was checking continuously this blog and I’m impressed! Extremely helpful information specially the last part. I care for such information a lot. I was seeking this certain info for a very long time. Thank you and good luck.

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