Comments (3)
No. 1-3
thimk
thimk

pension funds are open season . well additionally 100 billion of stock buybacks did not help matters either

Herkie
Herkie

You might be surprised at how much of our economy can't exist without the interest earned from lending/buying debt. For example, all forms of insurance are going to skyrocket over the next few years and some insurers will go out of business/merge.

The insurance industry works because they have vast pools of assets that are the main source of income for the firms in the industry, your premiums are only a relatively small part of the operating profits, companies like Mutual of Omaha have hundreds of billions in assets that earn the lion's share of the costs of the payouts.

The longer this NIRP environment goes on the slimmer interest income will be and the larger the share of payouts will have to be in order to cover insured losses. Debt investing makes up many parts of our economy, together we could think of all kinds of business that is going to get slammed. On the other hand, utilities and other dividend shares can operate by issuing far lower cost debt, so they should be able to enhance their payouts.

Sechel
Sechel

Low interest rates are probably why Chubb agreed to be bought out. This low interest environment is tough on insurance companies. The interest rate previously could help subsidize the cost of insuring. Now more of those costs are transferred to the entity getting insurance. There's just no spread available on the underlying investment