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Old 01-02-2009, 02:11 PM   #21
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I am aware of that. My comment was made to the original investors only.

Yield hogs generally get slaughtered.
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Old 01-02-2009, 03:00 PM   #22
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Well if I was a vampire, a 100 year bond might make sense, since I could actually hold it to maturity. For us mere humans it seems like I am taking all off the risk (interest, inflation, default) and for a very modest upside. At the current pricing levels it looks more interesting. Although, I would point out that one of the lessons I've learned the hard one durning this market is that material improvements in a companies/securities prospects aren't necessarily reflected in the prices. Especially when the situation goes from very bad to simply bad.

So even though the company is being acquired by a AAA company perhaps the market still has doubts that debt will be paid. For instance when BAC of Countrywide, BAC said that wouldn't be taking over all of Countrywide's debt. I am not sure what actually happened but Countrywide debt didn't rally.
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Old 01-02-2009, 03:14 PM   #23
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"Very modest upside"? I can't say I would be eager to buy these bonds, but there is upside if things go well. 20% or so cash on cash yield plus potential appreciation of 100% or more sounds pretty good to me. I have recently bought some bonds that offer similar potential returns.
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Old 01-02-2009, 03:17 PM   #24
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Well if I was a vampire, a 100 year bond might make sense, since I could actually hold it to maturity. For us mere humans it seems like I am taking all off the risk (interest, inflation, default) and for a very modest upside.
Giving weight to the very high current yield, it seems that the main risk here is credit, not interest rates. While the maturity is long, duration is much less so. If this bond holds together it has less interest rate/deflation risk than a 20 year treasury at current quotes.

Ha
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Old 01-02-2009, 03:44 PM   #25
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Sorry I wasn't clear I was talking about the individuals who bought the 100 year bonds when they were initially offered, presumably near par. I don't understand why anybody would buy a 100 year bond, stock also has no maturity but you share in the upside...

At current yield these bonds clearly have a excellent upside. In fact despite the low stock market levels I think there are a lot of debt out there that is offering 15-25% yields that looks more interesting than stocks. In a couple of case I sold stock and bought debt of these companies.

I wish I had Brewer's knowledge of how credit markets work. I think you could end up with a high (say 20-40%) default rate and still make on an excellent return on debt of the companies that manage to get through the recession.
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Old 01-02-2009, 05:45 PM   #26
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Hi Ha,

FSE, the security I bought today (1000 shares) increased from $7.75 to
$9.55 at the close. Is that a big enough nibble for you?. Unfortunately,
I paid $9.40 after dithering around doing mas research.

Obviously, you have to treat this as a speculation.

Hopefully, the sale will be consumated and all will end well.

Cheers,

charlie
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Old 01-02-2009, 05:49 PM   #27
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Hi Ha,

FSE, the security I bought today (1000 shares) increased from $7.75 to
$9.55 at the close. Is that a big enough nibble for you?. Unfortunately,
I paid $9.40 after dithering around doing mas research.

Obviously, you have to treat this as a speculation.

Hopefully, the sale will be consumated and all will end well.

Cheers,

charlie
Charlie,

Don't pay any attention to me. I'm just an old man truckin' along as best I can.

Good luck!

Ha
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Old 01-03-2009, 03:24 PM   #28
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For instance when BAC of Countrywide, BAC said that wouldn't be taking over all of Countrywide's debt. I am not sure what actually happened but Countrywide debt didn't rally.

BAC took over all of the Countrywide debt that I am aware of. They rattled their saber a little to push the price down and I wouldn't be surprised if they bought a bunch of it before they took over. I don't know if that would have even been legal.

I personally own a small amount of CFC.pr.b. I bought it last February. It is the only preferred I have and it currently is above my cost. I've also been getting a nice ~9.5% dividend. It has been a wild ride but it seems to be working out.

My 9 closed end preferred funds are between 35% and 70% below my original cost basis. Some have reduced their dividends. Some deferred their dividends for a few months because of a drop in capital. They have all "caught up" with their declared dividends but two months have been missed for one fund. Most have deleveraged a good bit which accounts for the lower dividend payments. Overall, I'm getting a nominal 9% average yield on the funds even though their market value has fallen. Based on their current market value, the funds are yielding 12 to 23%.

I am glad I limited my exposure to 5% of my portfolio. I don't plan on reducing my holdings although I might move some of the money around. I won't be increasing my holdings.
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Old 01-04-2009, 08:29 AM   #29
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Well, one of the things I've learned from my Advisor firm when evaluating Funds? Go back to the last Bear and Ck how they did, to help you determine your Real Risk Tolerance and then? cut another 25% off those apy Rtns..as margin of safety for FP.

Also, Any Fund that has a Sigificant Risk for loss and is Unsecured? Is a Equity Investment.. ie: Corporate BBB/Junk bonds are Unsecured and depend on rating services that have proven to be UnReliable as well..( Think Arthur Anderson Days )

They aren't having to pay Higher Rates/Divs because they are so Good with Their Business,,just like anyone else wanting to make a loan with "questionable" credit history.. Don't care who they are..or who says they are a Good Investment..

Hyld Junk Bonds? Took a Big Hit in 08' and a larger % stand to Go bust yet this yr.. and I think if one is HNW and should be needing to take such higher risk in such investments..Historically? Compared to More Safer Bonds? HYld is marginal IMO and just not worth it.. Maybe a VBLTX ( AAA) but not much anyone else..

It's like those Advocating LSBRX ( Loomis Sayles Bonds).. Is another Hyld/Global Firm with alot of risk tied to it.. and it Blew up this past yr..If one looked at it in 00-02', they could plainly see it was a Underperforming "Bond Fund" vs it's much safer Peers in a Bear market..
of course, I don't invest into Bonds For anything much else than B. Grahms attitude of " For Preservation of Capital" comes first.. if I want more than the average safer Bonds Provide? Own Equities and pay alot less in taxes as well..

Or Just buy Balanced Funds instead..of Higher risk and Lower Rtn HYld Bonds..
Might want to go to the > Bond Squad Message board for More Infro and advice..

'Don't try to force your Lower Amt. of savings and Income to try to make up for your shortcomings, either Work and Save More or Accept to Live on Less " ...
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