Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
GMAC Smartnotes
Old 02-18-2005, 03:43 PM   #1
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
GMAC Smartnotes

What a great rate and mighty tempting to put some small change into a bond like this.

Too bad the risk is so high, but I guess that's why they are offered at such a high rate. I have noticed rates are s...l...o...w...l...y creeping up.

Does anyone know how long these Smartnotes have been around and if any of them have ever defaulted?

CUSIP: 3704A0XR8

Coupon: 7.250%
Maturity: 3/15/25
Callable: 3/15/10
Yield: 7.360%
Moody Rating: Baa1
S & P Rating: BBB-
__________________

__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: GMAC Smartnotes
Old 02-18-2005, 03:56 PM   #2
 
Posts: n/a
Re: GMAC Smartnotes

I heard a guy call in on Public Radio the other day, that was in the auto parts business. He said the rumors were rampant in the industry that GM would declare Bankruptcy before this year end. The caller went on to explain that the ramifications of this were huge in the U.S. economy; as he said that 70% of all U.S. Manufacturers were connected to the Auto Industry!

So how's that for doom and gloom?
__________________
  Reply With Quote
Re: GMAC Smartnotes
Old 02-18-2005, 04:43 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: GMAC Smartnotes

Smartnotes are just like any other bond: look to the credit of the specific issuer. In the case of GM, run!
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: GMAC Smartnotes
Old 02-19-2005, 05:55 AM   #4
 
Posts: n/a
Re: GMAC Smartnotes

Well, I must weigh in. I am loaded with Smartnotes
and can tell you none has defaulted. Of course they could default even without Cut-Throat's nightmare scenario, which I do not expect but will allow is not outside of the realm of possibility. OTOH, I believe that I read where GMAC had their biggest profit ever in 2004
(forget the numbers). I was wondering the exact
relationship between GM and GMAC. If GM did file
for chapter 11 protection (an event which I view as a
million to one shot) perhaps GMAC could just continue on without a ripple. I am not sure and not interested
enough to check. In the meantime, I am staying the course with GMAC.

JG
__________________
  Reply With Quote
Re: GMAC Smartnotes
Old 04-01-2005, 03:35 PM   #5
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: GMAC Smartnotes

And the rates keep rising!!!

GMAC SmartNotes

CUSIP: 3704A0YW6

Coupon: 8.400%
Maturity: 4/15/10
Callable: NO
Yield: 8.488%
Moody Rating: Baa1
S & P Rating: BBB-
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: GMAC Smartnotes
Old 04-01-2005, 07:17 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: GMAC Smartnotes

Pretty junky junk.

You want to see about 6% over 'safe haven' money to want to take on that amount of risk.

At 8.4%, they're offering a little better than 3% over intermediate treasuries and 5 year CD's.

Not enough.

Good luck John, I'll say a prayer for ya.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: GMAC Smartnotes
Old 04-01-2005, 09:42 PM   #7
Thinks s/he gets paid by the post
retire@40's Avatar
 
Join Date: Feb 2004
Posts: 2,670
Re: GMAC Smartnotes

Quote:
You want to see about 6% over 'safe haven' money to want to take on that amount of risk.

At 8.4%, they're offering a little better than 3% over intermediate treasuries and 5 year CD's.

Not enough.
Where do you get the 6% over rule? Are you saying it would make more sense to invest in that bond if the yield were 11 or 12 percent? If so, wouldn't the default risk be even higher at that rate making it even more risky?
__________________
No man is free who is not master of himself. --- Epictetus
Enjoy Yourself (It's Later Than You Think). --- Guy Lombardo
retire@40 is offline   Reply With Quote
Re: GMAC Smartnotes
Old 04-02-2005, 02:31 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: GMAC Smartnotes

I am not too sure about this one. But, if I wasn't so heavy already I would buy the 8.4% 5 year notes.
Even today.

JG
__________________
MRGALT2U is offline   Reply With Quote
Re: GMAC Smartnotes
Old 04-02-2005, 05:29 AM   #9
Thinks s/he gets paid by the post
charlie's Avatar
 
Join Date: Mar 2004
Location: Dallas
Posts: 1,211
Re: GMAC Smartnotes

JG, you shun market risk yet welcome credit risk.
To each his own, I guess. :

Cheers,

Charlie
__________________
charlie is offline   Reply With Quote
Re: GMAC Smartnotes
Old 04-02-2005, 12:34 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: GMAC Smartnotes

Quote:
Where do you get the 6% over rule? Are you saying it would make more sense to invest in that bond if the yield were 11 or 12 percent? If so, wouldn't the default risk be even higher at that rate making it even more risky?
One of those "old time" rules. I think Bernstein mentioned it a couple of times in his books and its why he recommends short term bonds as the only bond holding. We havent had that 6% cushion for "high yield" bonds in a long time.

The historical 'spread' between zero/low risk bonds and these near junk offerings needs to be high enough to absorb the prospect of default. 3% (a ~50% higher rate than a safe instrument) doesnt cut it.

I saw something on one of the vanguard forums that said the vanguard high yield bond fund was seeing 25% default rates on their fund...and theirs holds a lot of nearly investment grade stuff...its one of the 'least junky' high yield funds. Is the 6% yield thats paying worth the risk of 1% over a 5 year CD? Ick.

Is 3% worth a default of your capital? Uh uh...
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
GMAC Bonds. Maximillion FIRE and Money 34 04-04-2006 05:54 PM
GMAC Smartnotes at 9% retire@40 FIRE and Money 13 08-14-2005 07:58 AM
How people find us... asian carp?? dory36 Forum Admin 4 05-27-2005 01:07 PM
GMAC Smart Notes - What do you think KB FIRE and Money 4 10-01-2004 08:11 PM

 

 
All times are GMT -6. The time now is 09:33 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.