Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-17-2011, 08:14 PM   #421
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by RustyShackleford View Post
Time for those of us who didn't panic-sell ISM/OSM back when the price was down in the single-digits (in late-2008 and early 2009) to give ourselves a big pat on the back ?

Or a kick in the rear if we didn't buy more ?

(Prices for both are around 21 today).
I'm feeling pretty good. I think I got in for a bit more than $20/sh on 5/6 of my holdings, and I bought another 1/6 of what I own at $13/sh IIRC. Too bad I didn't get a ton more at $8-9 - then again the world was falling apart at the time and who knew if students would ever be able to repay their loans??

I have arbitraged ISM/OSM many many times and made some decent change each time. Now that I have a big ST cap gain if I sell, I may just hold on to it for a while.
__________________

__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO 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!

Old 03-17-2011, 10:51 PM   #422
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
My ISM/OSM has been in my IRA. 3/5 I got at $21 and the remainder at $11, I've sold some along the way. I sold TIPs bonds to buy the darn thing, and since I am still worried about inflation I am planning on holding until maturity. As I know I've said before who knew bonds could be so exciting.
__________________

__________________
clifp is offline   Reply With Quote
Old 03-18-2011, 12:03 PM   #423
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Yep, I hold these in my Rollover IRA, so no tax liability is incurred when "arbing" them. Even at a price of 21, the real YTM is about 5% if inflation averages 2%, and I am fearful that inflation could be considerably higher, so I'm holding on to these with both hands (with fingers still crossed).
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 06-15-2011, 07:58 AM   #424
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Anybody still long these puppies?

The year-over-year change in CPI-U for May (released today) was 3.57%. The current yields (on par) for ISM for the next three months are:

July 4.73%
Aug 5.21%
Sep 5.62%
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 09-12-2011, 12:11 PM   #425
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
For anyone who still holds these, today I was able to sell OSM at the bid and buy ISM at the offer and take out 0.60 per share plus pick up about 20 basis points in YTM.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 09-13-2011, 05:11 AM   #426
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
I am planning on holding to maturity, just like any other bond. The good and bad news is that OSM/ISM are listed like stocks so it is tempting to trade them like stocks.

So far been a good investment especially with fairly generous interest rate payments. Now if the idiot management at Sallie Mae doesn't do anything incredibly stupid in the next 6 or 7 years it will be a great investment.
__________________
clifp is offline   Reply With Quote
Old 09-13-2011, 09:26 AM   #427
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by clifp View Post
I am planning on holding to maturity, just like any other bond. The good and bad news is that OSM/ISM are listed like stocks so it is tempting to trade them like stocks.
So am I, but I look at it as giving the little guy a chance to swap essentially perfectly-correlated bonds (without changing exposure) for a yield pickup, for a commission of $2 per side.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 09-13-2011, 12:14 PM   #428
Full time employment: Posting here.
Coolius's Avatar
 
Join Date: May 2010
Posts: 682
Quote:
Originally Posted by clifp View Post
I am planning on holding to maturity, just like any other bond. The good and bad news is that OSM/ISM are listed like stocks so it is tempting to trade them like stocks.

So far been a good investment especially with fairly generous interest rate payments. Now if the idiot management at Sallie Mae doesn't do anything incredibly stupid in the next 6 or 7 years it will be a great investment.

What are your thoughts on the risks of Sallie Mae? I am kind of tempted to pick up some, but it's hard to find any kind of reasoned dialog on the risks of the parent company.
__________________
Coolius is offline   Reply With Quote
Old 09-13-2011, 05:15 PM   #429
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by Coolius View Post
What are your thoughts on the risks of Sallie Mae? I am kind of tempted to pick up some, but it's hard to find any kind of reasoned dialog on the risks of the parent company.
I studied the company prior buying the bonds, and the collapse of OSM/ISM from $20 to $10 had me look at again, but I haven't looked at it all in the last couple of years.

Five years ago Sallie Mae had a very sweet business model where it loan money to students, the loans weren't discharged under bankruptcy, and the government repayed 95% of the principal if they defaulted. It was such a nice model that any idiot could run it, which is fortunate because CEO Lords is in the running for the title. It is worth looking at the thread to see the very unfavorable comments that were made about the guy a few years ago. First the company made a disastrous attempt to loan money to students without government backing a lost their shirt. Next the financial crisis hit. Then finally in an attempt to pay for Obamacare, Congress wiped out all of subsidize for Sallie Mae and the Federal government started making student loans directly to students.

Beside the obvious risks of having a CEO who curses at analysts pissing off Wall St, the biggest risk I see to Sallie Mae, is increasing pressure for student loan modification, like we see for mortgages. This could easily wipe out the company. So to be honest, SLM falls into the too hard category as a stock investment. FWIW, Morningstar rates SLM at 3 stars with fair value of $14.
__________________
clifp is offline   Reply With Quote
Old 09-15-2011, 07:56 AM   #430
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
The year-over-year CPI-U for August (released today) was 3.77%, the highest it's been in three years.

For the next three months the current yields on par for ISM are:

Oct 5.61%
Nov 5.68%
Dec 5.82%

OSM is 5 bp less.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 09-15-2011, 06:16 PM   #431
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by FIRE'd@51 View Post
The year-over-year CPI-U for August (released today) was 3.77%, the highest it's been in three years.

For the next three months the current yields on par for ISM are:

Oct 5.61%
Nov 5.68%
Dec 5.82%

OSM is 5 bp less.
Thanks for cranking the numbers FIRE'd. I did that pencil pushing faithfully for a couple of years but finally tired of it.

In the five or so years I've owned ISM and OSM, it's been both a roller coaster and a learning experience. Now that I'm back in the black vs my acquisition price, and with moderate inflation (IMHO) likely to be present going forward, I'm planning on holding to maturity. I think there is some risk (there's a reason they are rated BBB-) but alternative interest bearing investments don't seem all that attractive.

ISM/OSM is about 2.5% of my FIRE portfolio.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 10-14-2011, 12:11 PM   #432
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 401
Quote:
Originally Posted by FIRE'd@51 View Post
For anyone who still holds these, today I was able to sell OSM at the bid and buy ISM at the offer and take out 0.60 per share plus pick up about 20 basis points in YTM.
I did the same thing just now today. But is the YTM of ISM really higher ? I can't reproduce the numbers now, but someone cranked out (early in this massive thread, post #185), that OSM is worth about 40 cents more per share - the fact that it matures almost a year earlier more than makes up for the difference in coupon (2.05% vs. 2% IIRC). That was 3 yrs ago and the price was quite a bit lower so dunno if that's quite true today.

Quote:
Thanks for cranking the numbers FIRE'd. I did that pencil pushing faithfully for a couple of years but finally tired of it.
I made a pretty cool spreadsheet to verify my ISM/OSM dividend payments and the payments on my TIPs. You just have to update the CPI-U column every so often. If anyone's interested ...
__________________
RustyShackleford is offline   Reply With Quote
Old 10-14-2011, 01:13 PM   #433
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by RustyShackleford View Post
I did the same thing just now today. But is the YTM of ISM really higher ? I can't reproduce the numbers now, but someone cranked out (early in this massive thread, post #185), that OSM is worth about 40 cents more per share - the fact that it matures almost a year earlier more than makes up for the difference in coupon (2.05% vs. 2% IIRC). That was 3 yrs ago and the price was quite a bit lower so dunno if that's quite true today.
According to my spreadsheet, it's still about 40 cents if you assume an annual inflation rate of 3% going forward. At 0% inflation I compute the fair value of the spread to be about 45 cents. The higher the assumed inflation rate, the smaller the fair value of the spread.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 10-14-2011, 01:41 PM   #434
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by FIRE'd@51 View Post
According to my spreadsheet, it's still about 40 cents if you assume an annual inflation rate of 3% going forward. At 0% inflation I compute the fair value of the spread to be about 45 cents. The higher the assumed inflation rate, the smaller the fair value of the spread.
I think I came up with the 40 cents spread from that post #185 (haha's post, but referring to my post). Now I am getting roughly 55 cents for a spread. What I am looking at is when OSM costs $20.90 (current quote), what would ISM have to cost to enjoy the same yield to maturity? I get ISM = ~$20.35. Assuming 3% inflation.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 10-14-2011, 02:04 PM   #435
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by FUEGO View Post
I think I came up with the 40 cents spread from that post #185 (haha's post, but referring to my post). Now I am getting roughly 55 cents for a spread. What I am looking at is when OSM costs $20.90 (current quote), what would ISM have to cost to enjoy the same yield to maturity? I get ISM = ~$20.35. Assuming 3% inflation.
Interesting. What are your YTM numbers?

For OSM = 20.90, I get 8.82% nominal and 5.65% real

For ISM = 20.35, I get 8.94% nominal and 5.77% real
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 10-14-2011, 02:39 PM   #436
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,526
Quote:
Originally Posted by FIRE'd@51 View Post
Interesting. What are your YTM numbers?

For OSM = 20.90, I get 8.82% nominal and 5.65% real

For ISM = 20.35, I get 8.94% nominal and 5.77% real
I was using a calculator that rounds the number of years to maturity to a whole number - that is probably why I was getting an inaccurate spread greater than 40 cents. Looks like it is 35-40 cents from using a calculator here: Bond Yield to Maturity Calculator

Although I get YTMs closer to 8.3% nominal with OSM at 20.9 and ISM at 20.55 (setting the price to "clean" since it just went ex-div a couple days ago). Using the "dirty" setting, it gives me YTMs closer to what you are getting.
__________________
Retired in 2013 at age 33. Keeping busy reading, blogging, relaxing, gaming, and enjoying the outdoors with my wife and 3 kids (5, 11, and 12).
FUEGO is offline   Reply With Quote
Old 10-15-2011, 05:04 PM   #437
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 401
Quote:
Originally Posted by FIRE'd@51 View Post
An
The year-over-year change in CPI-U for May (released today) was 3.57%. The current yields (on par) for ISM for the next three months are:

July 4.73%
Aug 5.21%
Sep 5.62%
I suppose an "adventurous" investor could put a PILE of money into these and then pull out when the payments shrink back. Betting any default won't happen in the next few months; of course, perhaps that's a bad bet, if default were triggered by inability to make the big coupon payment.
__________________
RustyShackleford is offline   Reply With Quote
Old 10-17-2011, 01:08 PM   #438
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 401
Quote:
Originally Posted by RustyShackleford View Post
I suppose an "adventurous" investor could put a PILE of money into these and then pull out when the payments shrink back. Betting any default won't happen in the next few months; of course, perhaps that's a bad bet, if default were triggered by inability to make the big coupon payment.
Wow, not sure what I was smoking when I wrote this; thanks all, for being gentle and not pointing out what a moron I am.

Ergo, the large dividend payments of the next few months might amount to a percent or two of the investment, and the price could easily go down by that much by the time one is ready to pull out.
__________________
RustyShackleford is offline   Reply With Quote
Old 10-17-2011, 01:17 PM   #439
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,078
Quote:
Originally Posted by RustyShackleford View Post
Wow, not sure what I was smoking when I wrote this; thanks all, for being gentle and not pointing out what a moron I am.
Congratulations on sobering up recognizing reality.

As to being gentle, I'm afraid my thinking was something along the lines of, "If he doesn't understand how painfully wrong that statement is, I'm not sure there is anything I can do to help him."
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 11-11-2011, 01:57 PM   #440
Recycles dryer sheets
 
Join Date: Jul 2008
Posts: 401
DAMN you, efficient markets. I want to go back to OSM, from my recent cash-generating move to ISM. But the price of OSM faithfully stays 60 cents or more higher. Oh well, I know they'll get very close at some point soon.
__________________

__________________
RustyShackleford 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
Heh, ISM/OSM again brewer12345 FIRE and Money 157 06-20-2007 02:34 PM
TIPS versus ISM/OSM JohnEyles FIRE and Money 2 06-12-2007 02:46 PM

 

 
All times are GMT -6. The time now is 07:00 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.