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Investing/Strategies / Bonds & Fixed Income Investments
|Subject: Re: Your Best Pal, Ben?||Date: 9/16/2012 5:27 AM|
|Author: howardgt||Number: 34384 of 35114|
It’s nice to exchange buy lists with you. Maybe we can both find a few more buy candidate from this. But first a few responses to your responses :)
The bets Taleb makes aren’t ‘highly leveraged’
I understand that Taleb does not risk much of his own capital, but as you say, he uses “out-of-the-money” options to obtain his leverage. I consider options a “highly-leveraged” derivative and this was what I was referring to.
But the problems are fiscal, and until spending is less than revenues, the economy will struggle, if not collapse.
Actually a struggling economy forces the Fed to keep interest rates low and consequently causes upward pressure on most financial markets. This is why I am prepared to follow the “don’t fight the fed” mantra. A collapse is a different story, but I’m betting against it for now.
But ‘everyone’ isn’t worried. Complacency is rampant. Even the gold bugs aren't as panicked as they should be.
I wasn’t talking about everyone. I read lots of doom-and-gloom scenarios... much more than past decades. Gold is close to it’s all time nominal high. I see lots of worry out there (Fiscal cliff, European crises, Iranian attack, etc).
Ok enough prophesying about the future... Here are my YTD purchases and returns so far:
YTD I’ve purchased $59,000 face at a cost of $48,017 (81.38) which is marked today at $50,662 (85.867).
I’m currently showing a 5.5% unrealized gain and a 9.2% total return on my 2012 purchases, CY of 10.3% and YTM of 13.1% on my cost. Weighted average of 7.2 years to maturity and single B rated portfolio.
I think I’m on target to meet my 10% return goal after defaults, calls and maturities (assuming no economic collapse).
In 2013 some of my prior year purchases will begin rolling-off, so I may need to be more aggressive in my purchase program.
But overall, I find Junk Bond investing much easier than equity investing. I think in general, most stocks are priced for an optimistic outcome, while most junk bonds are pricing in negative surprises. I attribute this to the fact that retail buyers are not a big factor in the day-to-day market. I have no problem with the high spreads if this is what is necessary to keep the retail buyers out and prices reasonable.
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