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Subject:  The Stock vs. the Bond? Date:  1/11/2013  12:57 PM
Author:  globalist2013 Number:  34654 of 35834

“When (or whether) to buy the stock versus the bond?”

That's an interesting question, right? So let’s use Nokia as an example and look at charts. Their 5.375’s of ’19 are currently offered at 98 x 322 (10). The stock is at $4.53. As you can see (if you’re running a multi-monitor setup, as you should be, so you can put each chart on its own screen), prices for the debt and the common parallel each other. The bottom for the stock, and the bottom for the bond-- which was a good time to be buying either-- were the same time.

Now comes the” narrative fallacy”. In retrospect, everything looks obvious. So, of course, it’s easy to look back and said what shoulda/coulda been done. But is there some way someone could have done reasonable entries into either? Yeah, “averaging in” could have put you into a favorable position. Last year, when the news hit, the stock price fell, as did the bond price. As the news spread and got worse, prices went lower. But at some point, any one following markets should have said to themselves, “The selling is overdone. Maybe it’s become time to put on a position. Not a big position, but an opening position, no more than I’d be willing to lose if I’m wrong about the direction of prices."

So, that’s what I did. My preference would have been to go a single. But the min was two. So, 04/24/12, I went two of the 5.375’s of ’19 at 85.875. Predictable, I was early, and the selling continued, creating a loss for me. So I had a choice. I could review and determine if I was wrong. If so, I should cut my losses and get out. OTOH, if a review suggested