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Old 04-02-2008, 11:37 AM   #41
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yup, you got it. and that was just the fee at my price point, on the lower range of what was for sale there. it ran a lot higher for others. they tried convincing me that they were spending $1mm on advertising but i hardly saw any of that in local media. they insisted the advertising was international; but, um, isn't that why i'm with a pricey international realtor in the first place?

even if they did spend $1mm on advertising and adding the rental on that tent, i would not be surprised to learn that the auctioneer walked away netting about $1/2mm or more for his two-hour day.
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Old 04-02-2008, 11:44 AM   #42
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thanx for the post. was curious to what happened there as that is the very auction i opted out of. at first when they tried to get me to participate they said there would be a 10% commission which i thought high but what the heck. turns out the 10% is payed by the buyer (as if) so of course i would have had to factor that into the price. plus the auctioneer wanted $15k from me up front just to participate.

when i refused to pay their cost of doing business (what's up with that?), they said they'd work with me. someone would call me back. i told them to tell the person who was to call me back that i'd only consider the auction on condition that they only get their fee upon closing and not before. needless to say, i never got a return call. what a scam.
Fascinating story. Thanks for the post.
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Old 04-02-2008, 12:18 PM   #43
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it gets even better. here ya go...

wcbstv.com - N.J. Woman Raffling Home Off On eBay For $100
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Old 04-02-2008, 06:50 PM   #44
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Rockon -

This is one way to think of bonds:

Suppose I think I have a way of generating a good return on capital in my business. I've got my own money in the business, but I want some additional capital. I could do that by selling shares or by borrowing.

People who might supply the captital understand the tradeoffs. With equity, they participate in all the upside, but they take downside risk. If they lend, their upside is fixed, but they greatly reduce the risk.

If I want to keep the upside for myself (borrow instead of selling shares), then I have to make an offer to the lenders that they percieve as a good deal vs. stock (because they could always buy stock in some other business). Since stock is likely to generate real returns, they will insist on bonds that are "as good, considering the different guarantees" as stock.

i.e. The actual yields on bonds will be whatever it takes to get a mix of equity and debt financing which appears "most attractive" to the stockholders (since they are owners), given the fact that the potential bond buyers could also buy stock somewhere.
I don't see any mechanism that would make the yields equal to the CPI (or whatever you mean by "inflation").

Historically, we see that bonds in the US really have had yields in excess of the CPI, so my theory isn't contradicted by experience.

I could also talk about "bonds" that finance consumer spending instead of business capital, but that would make for a long post.
I think the point you are getting at is that bonds should have a real return. I agree, just not a very high one. After all, if bonds have much lower risk as you said, they should also have a lower expected real return, correct?

Stocks historically, I don't like using that word since history is longer than the 100 years we usually tend to assume captures everything, have had a real return of 7%.

On bonds the real return is less. It has been around 3% historically, I think. Right now a top quality bond corporate pays about 5.5% or likely a 0.5% to 3.5% real return depending on what inflation does. Greenspan said to expect 5% going forward for inflation.

I will agree that I would expect some real return, I think 3% is a high expectation if buying into the bond market today, which is at very low yields due to a 28 year bond bubble. Look at TIPS, some have a negative real yield if bought today.
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Old 04-02-2008, 09:52 PM   #45
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I think the point you are getting at is that bonds should have a real return. I agree, just not a very high one. After all, if bonds have much lower risk as you said, they should also have a lower expected real return, correct?

...
On bonds the real return is less. It has been around 3% historically, I think. Right now a top quality bond corporate pays about 5.5% or likely a 0.5% to 3.5% real return depending on what inflation does. Greenspan said to expect 5% going forward for inflation.

I will agree that I would expect some real return, I think 3% is a high expectation if buying into the bond market today, which is at very low yields due to a 28 year bond bubble. ...
IMHO bonds have very real risks, default is a big one.
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Old 04-03-2008, 09:06 AM   #46
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I think the point you are getting at is that bonds should have a real return. I agree, just not a very high one. After all, if bonds have much lower risk as you said, they should also have a lower expected real return, correct?

Stocks historically, I don't like using that word since history is longer than the 100 years we usually tend to assume captures everything, have had a real return of 7%.

On bonds the real return is less. It has been around 3% historically, I think. Right now a top quality bond corporate pays about 5.5% or likely a 0.5% to 3.5% real return depending on what inflation does. Greenspan said to expect 5% going forward for inflation.

I will agree that I would expect some real return, I think 3% is a high expectation if buying into the bond market today, which is at very low yields due to a 28 year bond bubble. Look at TIPS, some have a negative real yield if bought today.
I apparantly mis-read your earlier post.

Yes, I intended to say that the "most likely" yield on bonds should be lower than stocks, but that doesn't mean it should be equal to inflation, or even inflation plus the most likely default losses.

Note that I was talking about corporate bonds, though gov't bonds need yields that are reasonably related to corporates.
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Old 04-03-2008, 12:56 PM   #47
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Let me add that in addition to default, there are liquidity issues and transaction costs should you need to redeem prior to maturity.

IMHO Unless you are confident that you will hold until maturity a bond mutual fund is probably a better choice for most investors.
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