- The magic of compounding interest is truly the eighth wonder of the world.
- Albert Einstein
Bonds
This is something that we, at Evolution rarely discuss, investing in bonds. We have mentioned them briefly. The most recent is from Brazil with their environmental idea to back trees. They eat CO2. Their bond is devoted to the preservation of forests. Good idea.
There are many types of bonds: national government, corporate and even local and state issues. Bonds are a conservative investment. Generally, they are safe, but greed as weakened the borders of safety. We have "junk" bonds that pay a great yield, but a mishap can give you nothing or pennies after years of litigation. We got stocks for gambling. You want a safe paying investment that compounds your money. with that said, the landscape is constantly changing. We looked at two that we like.
One of the other, new ventures is from Fermat Capital Management. The company believes a market for catastrophe bonds (cats) will grow 20% this year with future growth almost ensured. John Seo, managing director is convinced that inflation will be the catalyst. Destruction by nature and the rebuilding will face higher prices for materials, not to mention, insurance. His bond is an aid for insurance firms and investors. He sees $60 billion in need for 2025. His firm also offers an exchange-traded fund based on cat bonds. In addition, the bonds are structured to US Treasury yields. If they rise, so does his cat bonds. His firm has attracted big players in reinsurance. Swiss Re insures bonds. They are working with the firm to offer new, innovative products for growth in this arena.
I-Bonds
This is what we like because they can explode in yield when inflation appears. They are backed by the US. We also like the ability to track information that effects bonds. The problem with foreign bonds is data is not always accurate. Here, in the US, we can receive and verify info. Now, I-Bonds do not pay a high interest rate, especially when inflation is low, but people do not understand one important aspect. The rate is adjusted twice a year. This acts like a CD or short term bond. So, if inflation picks up, you get rewarded. This can be explosive. When inflation appeared during the Biden administration, the rate jumped to 9.6%. Wow! Yay! ...Peace.
