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Old 05-15-2013, 02:12 PM   #41
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I'm guessing that if the high yield bonds in the 2017/2018 portfolios are maturing in 2017/2018 then they were probably issued before the recent covenant weakening that Brewer seems to be concerned about in the high yield market. Make sense?
The problem is that high yield bonds are generally callable by the issuer at a set price, so when the credit markets get stupid the issuers call the older, more conservatively structured bonds and issue new crap.
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Old 05-15-2013, 02:23 PM   #42
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The problem is that high yield bonds are generally callable by the issuer at a set price, so when the credit markets get stupid the issuers call the older, more conservatively structured bonds and issue new crap.
Got it. So presuming that the new crap has a different maturity, the Bulletshare fund would get called on the old bond, be unable to buy the new crap and the fund shareholders would get their principal back earlier than maturity and have to find a place to reinvest it but at least I would avoid owning the new crap.

I guess there is an outside chance that the maturity date is the same year and the fund buys into the new crap but it doesn't seem a high likelihood to me.
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Old 05-15-2013, 02:28 PM   #43
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Got it. So presuming that the new crap has a different maturity, the Bulletshare fund would get called on the old bond, be unable to buy the new crap and the fund shareholders would get their principal back earlier than maturity and have to find a place to reinvest it but at least I would avoid owning the new crap.

I guess there is an outside chance that the maturity date is the same year and the fund buys into the new crap but it doesn't seem a high likelihood to me.
I don't know what they do if they can't find junk that will match the original maturities promised since I have not bothered to look at these types of funds. However, before you invest I would make sure you know what happens in that case.

Hahahaha, the new maturities on the crap are always farther out than the better quality stuff they replaced. That is the game in the high yield world.
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