|
04-11-2014, 02:37 PM
|
#1
|
Recycles dryer sheets
Join Date: Jan 2013
Location: Miami
Posts: 76
|
Puerto Rico zeros
Anyone knowledgeable on muni's? Why not buy deep discounted dollar price PR muni's zeros. They now trade at an implied 15+% taxable yield. North of 8.5% after tax. Got to be worth a shot. I looked at one today. 125k invested gets you 750k back on 2036. Cofinas. What am I missing? I know there are risks but even if PR defaulted I would think they would get back more
Than 16 cents on the dollar? Jmo
|
|
|
|
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!
|
04-11-2014, 02:51 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 3,361
|
Quote:
Originally Posted by Jmo1969
Anyone knowledgeable on muni's? Why not buy deep discounted dollar price PR muni's zeros. They now trade at an implied 15+% taxable yield. North of 8.5% after tax. Got to be worth a shot. I looked at one today. 125k invested gets you 750k back on 2036. Cofinas. What am I missing? I know there are risks but even if PR defaulted I would think they would get back more
Than 16 cents on the dollar? Jmo
|
Puerto Rico is up there with Detroit in the possiblity of defaulting. It has a very bad set of financials, which is why the interest rate is so high. Worst case look at what Detroit bondholders will get or what some of the Ca cities will get. (Of course its not clear if PR can file BK under the laws, states can not as the Federal BK law does not allow it, Now it is not clear if PR law allows for a resolution mechanism either.
If this is gambling money then go ahead.
|
|
|
04-11-2014, 05:42 PM
|
#3
|
Recycles dryer sheets
Join Date: Jul 2013
Posts: 385
|
About 40% of my investable assets are in in individual muni bonds and I have been buying them for my personal account for 20 years. My portfolio has more than 100 individual bonds which I have researched myself. I bought California GOs when everyone said California was going bust, I bought Illinois GOs when everyone said Illinois was going bust-- and did very well.
However, PR scares me. It has more debt per person than Detroit with a declining population. As stated, it is somewhat unclear whether PR can file under Article 9 for Bankruptcy. There is an older case I think involving Guam that says it cannot -- but I am not comfortable with that. Not only that, the zeroes are the scariest of them all because they balloon in full at the end.
My contrarian core would normally say buy some but the fear side is winning that argument. I buy bonds for safety and stocks for appreciation. PR bonds do not fall into the safety category for me. Good Luck.
|
|
|
04-11-2014, 09:28 PM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 6,023
|
Jeez, I would go on margin to get more yield in my stock account rather than spend $125K on PR bonds. Probably a lower risk with the margin.
|
|
|
04-11-2014, 10:07 PM
|
#6
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
Quote:
Originally Posted by Fermion
|
From the linked article:
Boxer Felix "Tito" Trinidad, who grossed nearly $90 million during his championship career in the ring, is in economic ruin...
Nearly all of Trinidad's net worth was invested in Puerto Rico government bond funds...
I guess some people do not believe in diversification.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
04-12-2014, 04:28 AM
|
#7
|
Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,703
|
Quote:
Originally Posted by meierlde
Puerto Rico is up there with Detroit in the possiblity of defaulting. It has a very bad set of financials, which is why the interest rate is so high.
|
+1
These are even worse than most because they're zeros, so you don't get any interim cash back.
__________________
In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.”
― Rudiger Dornbusch
|
|
|
04-18-2014, 08:04 PM
|
#8
|
Confused about dryer sheets
Join Date: Apr 2014
Posts: 8
|
2036 zeros from PR are junk- literally. No coupon, just a hope you get par in 20+ years? No coupon, just a an IOU until 2036? Nah.
Sent from my iPhone using Tapatalk
|
|
|
04-18-2014, 09:50 PM
|
#9
|
Thinks s/he gets paid by the post
Join Date: Sep 2012
Posts: 1,570
|
Quote:
Originally Posted by Jmo1969
Anyone knowledgeable on muni's? Why not buy deep discounted dollar price PR muni's zeros. They now trade at an implied 15+% taxable yield. North of 8.5% after tax. Got to be worth a shot. I looked at one today. 125k invested gets you 750k back on 2036. Cofinas. What am I missing? I know there are risks but even if PR defaulted I would think they would get back more
Than 16 cents on the dollar? Jmo
|
What you are missing is the very real possibility of getting nothing in default.
I don't know why you assume you'd get back more than 16 cents on the dollar in the event of default. Could you provide info on why you think this?
I suppose they could become the 51st state, and the Feds would pay you off.
I'd rather take the $125k to Vegas. At least I'd get lots of comps.
__________________
You know that suit they burying you in? Thar ain’t no pockets in that suit, boy.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|