Distorted Risk-Free Rates Encourage Irrational Hedonism

Christopher Joye

Coolabah Capital

In The AFR I consider through the prism of a 400 year old perpetual Dutch bond that still pays interest the impact of radical changes in technology and the opportunity cost of consumption on our perceptions of time, and apparent contradictions between distorted estimates of fair value that prevail in the present vis-a-vis those that might assert over the long-run in the absence of unprecedented manipulation of asset prices by central banks and governments: "Throughout history there have been innovations – coffee houses (1600s), railways (1800s), telegraphs (1800s), cars (1900s), telephones (1800s), faxes (1960s), mobile phones (1990s) and that most ubiquitous technology invention, the internet (1990s) – that have radically altered interconnectedness and compressed perceptions of time. Every second we are faced with choices regarding whether we consume resources in the present or save them to facilitate subsequent consumption. And with 10-year global risk-free rates hitting unprecedented lows around the world, governments have artificially debased the opportunity cost of consumption to the cheapest levels ever observed..." Free (VIEW LINK)


Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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