High yield funds

[cute fuzzy bunny]

I was a holder in vanguard high yield. Pretty appealing to get >7% when cash and cd's were paying lousy rates.

Its junk wasnt that junky.

But with an armload of 6.25% 5 and 7 year cd's, I cant see taking on that risk for a percentage point of return.

Anything junkier than vanguards fund? I'd have to head over to home depot and special order a 51 foot pole with an electrically isolated handgrip and a welders mask.

 

[brewer12345]

Brewer, AFN now around $7.80. Good entry point?

Maybe for a small bit. I think it is possible that it gets dragged down significantly further if the market panics enough. They have only a modest piece of their portfolio in mezzanine MBS, but with S&P announcing that they might downgrade a whole bunch of this paper, the market may take it out on the likes of AFN. Book value is a touch over 7 IIRC, so around there I would be a little more aggressive. But this is risky stuff.

 

[Dawg52]

Maybe for a small bit. I think it is possible that it gets dragged down significantly further if the market panics enough. They have only a modest piece of their portfolio in mezzanine MBS, but with S&P announcing that they might downgrade a whole bunch of this paper, the market may take it out on the likes of AFN. Book value is a touch over 7 IIRC, so around there I would be a little more aggressive. But this is risky stuff.

Uhhhh........ your were right. Dropping like a rock.

 

[brewer12345]

Uhhhh........ your were right. Dropping like a rock.

But now sporting an indicated yield of 17+%, assuming they are around to actually pay it. You did say "high" yield, didn't you?

 

[Dawg52]

But now sporting an indicated yield of 17+%, assuming they are around to actually pay it. You did say "high" yield, didn't you?

Yup. Looks like some nibbling took place when it got below $7. Off it's low. I didn't have the b*lls to buy anymore.

 

[haha]

Yup. Looks like some nibbling took place when it got below $7. Off it's low. I didn't have the b*lls to buy anymore.

I wouldn't say this is a gonadal matter- more just capital preservation. We are really in uncharted territory here. Like Soros says, things can happen in markets which change the realities on Main Street on which our original commitments were based.

Ha

 

[brewer12345]

Yup. Looks like some nibbling took place when it got below $7. Off it's low. I didn't have the b*lls to buy anymore.

The funny thing is that their exposure to subprime is pretty limited. The majority of their assets are trust preferreds issued by smallish banks. They also have high grade MBS, high grade mortgages, small commercial loans, and, yes, some subprime. But they have been absolutely crushed by the market. Tempting...

If it dumps under 7 again, I may pick up some call options struck at $7.50.