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Author: trader2012 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: ‘Twas Another Good Year Date: 12/6/2012 11:03 AM
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All,

It’s unlikely that I’ll be able to put more money to work in bonds this year, and I need to get my 2013 investment plan written up before houseguests arrive and the New Year begins. So I’m going to close my books early.

In 2012, I spent $164,442 to buy $193,000 face, having an average CY of 8.8%, and an average YTM of 11.1%. In other words, most of my buying was spec-grade. Of them, a couple have already defaulted. OTOH, on a position I put on in the Spring and then got kicked out 7 months later on a call, I made 522%. So, clearly, my winners are more than offsetting my losses, as has always been the case since 1999 when I began rotating money out of stocks and into bonds.

On a 5-year look-back, my numbers are decent, averaging 10.8% per year, or a slight premium to what any multi-sector bond investor could have achieved for her or himself over that same time-frame provided they had a decent investment plan and the discipline to stick to it. Specifically, like nearly everyone, I lost money in 2008, but then I more than recovered in 2009 with a 33.6% gain. 2010 offered 19.9%. 2011 offered 10.2%. And it looks as if my numbers for 2012 will be around 11.5%. So, I’m content. After taxes and inflation, I preserved my purchasing-power and moved a few bucks forward to the future. As one of my foreman used to say, “That’s good enough for the girls I go dancing with.”

Whether Congress caves in to the White House on the fiscal shenanigans won’t much matter. Bond prices will stay high, because that’s where the Fed wants them to be, and my guess is that it’s going to be tough to put money to work in bonds in 2013 responsibly and certainly not very profitably. So, after much thought and with some regret --because the bond market has been more than kind to me-- I’ve decided that 2013 will be the year that I rotate my efforts and capital into a new, already-chosen gig.

Season’s Best to You.

Charlie
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