Sahil Bloom

Sahil Bloom

@SahilBloom

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Following79

Investor & Storyteller | @Stanford @StanfordBSB Alum | Board @FoxRacing @BrixtonMfg | I gave up a grand slam on ESPN in 2012 and am still waiting for it to land

San Francisco, CA
Joined on June 07, 2011
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We looked inside some of the tweets by @SahilBloom and here's what we found interesting.

Inside 100 Tweets

Time between tweets:
3 hours
Average replies
2
Average retweets
3
Average likes
29
Tweets with photos
11 / 100
Tweets with videos
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Tweets with links
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9/ We will see more of this globally in the years to come (hint: buy gold!). While far from comprehensive, I hope this was a helpful primer on the concept of Yield to Maturity and how negative yields may arise in this environment. Stay tuned for more in this series...

8/ So negative yields arise when an investor is receiving less money by holding the bond than they paid to purchase it. An investor is PAYING for the right to loan money - weird! Why might this happen? ▪️ Flight to safety ▪️ Central Bank "yield curve control" ▪️ Deflation risk

7/ How do negative yields work? Let's slightly modify our example to illustrate. You buy a US Treasury bond (safe!) that matures in 1 year and has a 1% coupon rate and a $1,000 par value. You pay $1,100 for the bond. YTM = ($10+$1000) / $1,100 - 1 YTM = -8.2% Negative yield!

6/ Note that the equation becomes more complicated when looking at longer maturities, as you have to discount the future cash flows. We can save that for another thread! Now that we have the basics down, let's take a look at a very relevant (and weird) topic: negative yields.

5/ An example: Say you buy a Hertz bond (don't do this!) that matures in 1 year and has a 10% coupon rate and a $1,000 par value. You pay $800 for the bond. Current Yield = $100 / $800 = 12.5% YTM = (Interest+Principal) / Price - 1 YTM = ($100+$1000) / $800 - 1 YTM = 37.5%

4/ Yield to Maturity ("YTM") is the annual return an investor would earn if she purchased a bond and held it until maturity (when the principal is paid back in full). At issuance, the Current Yield and Yield to Maturity are equal, but they deviate over time.

3/ Let's talk about Yield to Maturity. In Bonds & Yields 101, we covered the concept of Yield in its most basic form: Current Yield. Current Yield is just the return an investor would earn if she purchased a bond and held it for a year. Current Yield = Annual Coupon / Price

Quoted @SahilBloom

1/ Bonds & Yields 101 If you follow the financial news, you see and hear a lot of talk about bonds and bond yields. But what are they and how do they work? Here’s Bonds & Yields 101! https://t.co/THTc1JRyho

1/ Bonds & Yields 101

If you follow the financial news, you see and hear a lot of talk about bonds and bond yields.

But what are they and how do they work?

Here’s Bonds & Yields 101! https://t.co/THTc1JRyho

2/ First off, make sure you follow the basics. Check out my thread - Bonds & Yields 101 - to get a quick primer on the topic. https://t.co/Y8RJ5XnejE

1/ Bonds & Yields 102

This week, I posted a thread laying out the basics of bonds and yields - Bonds & Yields 101.

I got a lot of questions on more advanced topics - yield to maturity, negative yields - so I'll continue with the series.

Here's Bonds & Yields 102! https://t.co/31wKCMH0W6

1/ Bonds & Yields 102 This week, I posted a thread laying out the basics of bonds and yields - Bonds & Yields 101. I got a lot of questions on more advanced topics - yield to maturity, negative yields - so I'll continue with the series. Here's Bonds & Yields 102! https://t.co/31wKCMH0W6

6/ So to recap, we have an Italian mafia family, extorted invoices, creative securitization, and greedy investors chasing yield. Ah, the joys of modern finance! Here’s the link to the article. Kudos to @FT @MilesMJohnson for uncovering the amazing story! https://t.co/tjUj2nG2Ly

5/ The bankers tout the “asymmetric risk reward profile” of these Mafia-backed bonds to investors. They sell the bonds, landing you a nice lump sum (and clipping themselves a hearty fee, of course!). “Finance is wild LMAO,” you laugh, while lounging on your brand new yacht.

4/ These invoices have expected cash flows, you reason, so there must be a market for them. As it turns out, there are enterprising investment bankers packaging up pools of these late government invoices, issuing bonds backed by their future cash flows. “Lol finance!” you say.

3/ But you’re a mafia, you have to have some fun! So you also do some extortion and fraud in these billing practices. The invoices are extorted. Mafia fun! The government, unsurprisingly, was slow or late in paying these invoices. So you decide to get mafia creative!

2/ Imagine you are the don of a nice, upstanding (and financially-savvy!) Italian mafia family. Like all good mafias, you operate a wide array of businesses, including several that provide “legitimate” services to the government. You bill the government for these services.

1/ Mafia Bonds 101

The @FT (h/t @MilesMJohnson) published an amazing story this week on bonds backed by the cash flows from Italian mafia operations.

It’s a hilarious story of financial chicanery, so is the subject of this week’s Friday Funny thread.

Here’s Mafia Bonds 101! https://t.co/IXJHUocIYc

1/ Mafia Bonds 101 The @FT (h/t @MilesMJohnson) published an amazing story this week on bonds backed by the cash flows from Italian mafia operations. It’s a hilarious story of financial chicanery, so is the subject of this week’s Friday Funny thread. Here’s Mafia Bonds 101! https://t.co/IXJHUocIYc

8/ Why should you care? Well, we can learn a lot from the bond market. Treasury bond yields at historic lows? Investors are buying and flocking to safety... Hertz bond yields spiking? It may be in financial trouble... That’s Bonds & Yields 101. Stay tuned for more!

7/ Bond prices move based on supply and demand. More demand increases the price of the bond, and thus drives down yield (and vice versa). Yields ⬇️ = Demand ⬆️ Yields ⬆️ = Demand ⬇️

6/ Bonds are tradeable instruments whose prices fluctuate in the open market due to various factors (issuer risk profile, interest rates). As such, bond yields are dynamic. If I sell that same bond from above for $500, the yield to the new investor would be 20% ($100 / $500).

5/ The bond “yield” is just the expected return of owning the bond. Yield = Coupon Amount / Price Simple Example: If I pay $1000 for a bond with a $100 annual coupon, that would be a 10% yield ($100 / $1000).

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