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Subject:  ATTN: Guys and Gals Date:  1/24/2013  9:38 PM
Author:  globalist2013 Number:  34721 of 35909

Guys, and Gals,

My quick, off-the-cuff slam of Ducommun’s 9.75’s of ’18 in another thread does NOT deserve four recommendations for “Best Post”. It was a cheap shot at a very amateurish bond-picker. And I say that deliberately, because he introduced the bond to you without the least bit of evidence or argument that it might (or might not) make a good (or bad) investment. Instead, his post was a typical whine that, “Gees, things aren’t as easy as they used to be, and here’s a randomly chosen example of what I mean.” so, let’s dig into DCO's 9.75's of '18 a bit, and let’s see if we could use this bond to establish a process by which any bond could be evaluated. That’s the project that Blacktree should have undertaken for you, and that would be a post worth recommending.

With any bond you’re considering buying as a new investment, you need to forget about what anyone else has said about the issuer by way of a credit-rating, a stock report, etc. They aren’t buying the bond. You are, and you’re putting your own assets on the line. If you buy on their recommendation and the bond crashes, they aren’t going to call you up, say they’re sorry, and make good your losses. Your own due-diligence is what you will live by, or die by, in this investing business. So it’s up to you to determine the facts and their meaning. And this applies to *both* bonds and bond funds. An investment is an investment, no matter its structure, and you’re only going to get paid if you’ve gotten the facts right.

As one place to begin your due-diligence, any time you look at a bond, especially a bond with a high coupon (such as Ducommun has), you need to look at when the bond was issued and think back in your mind to what interest-rates prevailed at the time. In the case of DCO, the bond came to market 01/15/2012, or just over a year ago, meaning, this isn’t a classic, Ben Graham-style value play. It’s a f*ckin’ new-issue high-yield. That alone should scream a warning sign