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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: A Part-year Portfolio Review Date: 4/27/2012 3:28 PM
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So far this year, I’ve made 42 purchases, which works out to roughly 3 buys per week (once my two-week vacation is set aside), or not a very onerous research pace. (I get up, run some scans, buy or not, and then have breakfast, after which I do my back-office work, and then I’m done for the day.) Below is a more detailed break-down of this year's purchases (so far).

SP Amt CY YTM Paid Value P/L
--------------------------------------------------------
AA- 5000 6.5% 7.7% $3,973 $4,200 6%
A- 1000 8.0% 8.1% $988 $1,008 2%
BBB 1000 12.3% 10.6% $1,111 $1,090 -2%
BBB- 1000 7.0% 8.4% $789 $780 -1%
BBB- 2000 6.3% 8.4% $1,718 $1,704 -1%
BBB- 2000 7.2% 8.5% $1,592 $1,569 -1%
BB+ 1000 5.2% 10.2% $860 $905 5%
BB+ 5000 6.6% 6.0% $5,209 $5,175 -1%
BB 5000 7.4% 7.8% $4,873 $4,812 -1%
BB- 1000 7.9% 8.5% $964 $1,002 4%
B+ 1000 7.8% 9.2% $926 $945 2%
B+ 1000 7.5% 11.6% $795 $927 17%
B+ 1000 7.0% 8.9% $924 $972 5%
B+ 5000 7.5% 7.4% $5,010 $4,937 -1%
B+ 5000 9.0% 10.7% $3,811 $3,875 2%
B+ 1000 10.2% 9.7% $1,026 $1,027 0%
B+ 1000 10.3% 10.1% $1,015 $990 -2%
B+ 2000 7.8% 8.0% $1,968 $1,945 -1%
B 3000 7.8% 8.6% $2,844 $2,835 0%
B 1000 8.8% 7.9% $1,050 $1,014 -3%
B 2000 8.1% 8.0% $2,030 $2,015 -1%
B- 5000 13.1% 20.2% $3,348 $3,325 -1%
B- 1000 10.8% 15.3% $730 $680 -7%
B- 5000 9.8% 12.7% $4,611 $4,625 0%
B- 1000 10.6% 11.2% $965 $947 -2%
B- 1000 10.7% 9.3% $1,070 $1,039 -3%
CCC+ 1000 11.2% 20.0% $615 $742 21%
CCC+ 1000 12.2% 15.7% $555 $467 -16%
CCC+ 2000 8.0% 13.1% $1,698 $1,642 -3%
CCC+ 5000 9.8% 19.9% $2,923 $2,862 -2%
CCC+ 1000 8.0% 9.3% $921 $894 -3%
CCC+ 1000 8.3% 10.1% $891 $880 -1%
CCC 1000 38.6% 68.0% $308 $333 8%
CCC 1000 8.5% 8.5% $1,000 $1,012 1%
CCC 1000 6.8% 16.5% $810 $807 0%
CCC 1000 32.5% 58.6% $365 $333 -9%
NR 5000 11.5% 13.7% $3,686 $3,525 -4%
NR 3000 4.5% 48.9% $1,991 $2,151 8%
NR 1000 9.9% 9.4% $1,013 $987 -3%
NR 5000 7.1% 17.7% $3,517 $3,437 -2%
NR 3000 11.9% 9.9% $3,285 $3,210 -2%
NR 1000 4.2% 51.7% $710 $745 5%
----------------------------------------------------

$93,000 8.8% 13.1% $78,486 $78,370 0%
Amt CY YTM Paid Value P/L

My buying this year has been more heavily toward junk than I’d prefer. But the top-tier and upper-tier invest-grade stuff (Treasuries, Agencies, Munis, or Corporates) just hasn’t been attractively enough priced this year to make a bigger commitment. (Future years and buying will correct that imbalance and get me closer to my preferred 60%/40%, invest-grade to spec-grade weighting.)

Also, as you can see, my P/L is flat with no huge winners or losers as is characteristic of a trading-range market in which prices drift up a bit, or go down a bit, but are mostly directionless as traders await the outcome of Nov’s election or, maybe Godot, or whatever motivates bond traders to do the things they do, because it sure isn't Austrian School economics, otherwise they'd be selling this market short, instead of treading water.
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Author: altstrat91 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34021 of 35387
Subject: Re: A Part-year Portfolio Review Date: 4/27/2012 3:50 PM
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you dont have to disclose the specific holdings, but i am venturing a guess that your AA- & A- holdings are not corp bonds based on their yields vs. what you paid - no? that BBB pick up does not look too shabby either with double digit current yield.

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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34022 of 35387
Subject: Re: A Part-year Portfolio Review Date: 4/27/2012 4:37 PM
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Not necessarily. I just did very a quick search and found some Morgan Stanley's rated A- with a YTM of 7-8%. Even some non-callable YTM/YTW at 8.9%.

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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: 34023 of 35387
Subject: Re: A Part-year Portfolio Review Date: 4/27/2012 8:18 PM
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alstrat91,

The problem with naming names are multiple:

(1) The bond might have been bought months ago, and the opportunity no longer exists.

(2) The bond might be a current offering, but now the min purchase size is beyond the average account.

(3) Even if the bond is still being offered, it might not be appropriate for the account considering it.

(4) The bond might be an issue for which I haven't finished my own buying.

So my rule of thumb is that I never discuss specific issues until I've closed the position. But doesn't mean that the list cannot be reverse-engineered to see what's available, which was really the point of the post.

Making interest-rate bets as an investor (as opposed to a trader) has been a pointless game for several years now. But the credit-risk market is still viable, and it still offers a lot of opportunities, some of which have been mentioned in this forum, e.g., coal bonds, natural gas bonds, solar energy bonds, shipping bonds, and, of course, the banksters' bonds. All of them offer fat yields. All of them carry huge risks. Not not everyone of them is going to fail, and some of them really do need to be bought (in judicious amounts) if one is serious about running a properly-diversified, fixed-income portfolio that might actually have a chance of offering a real-rate of return after taxes and inflation, which brings us to some perennial dividing points in this forum.

OTOH, there are those who think bonds are sort of like cash-equivalents and who want to focus mainly on the interest-rate game. (Let's call them the CD and TIPS crowd.) OTO, there are those who regard bond-investing as the classic value gig that it is and who make the bulk of their money by pricing risk and then buying it at a discount. (Let's call them the junk bond crowd.) Lastly, there are those who alternately play whichever game makes the most sense at the time. (Let's call them the multi-sector crowd.) The three each think the others are fools for the risks they do (or don't) accept, and they all make different money as markets and conditions change. Not morally better money (or morally worse money.) Just different money. But name any bond, and the three will each frame the discussion in value-laden terms, because they aren't looking at the same thing from the same framework. So I avoid a lot of unnecessary arguing by being vague about some of the specifics of what I do.

Charlie

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Author: howardgt One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34027 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 4:40 AM
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Charlie,

Just did my month-end marks, so thought I would add my YTD list to this thread. March was my busiest month this year but by April I was starting to have trouble finding new purchases (2 buys in Jan, 5 buys in Feb, 8 buys in Mar, then down to 2 buys in Apr). Probably it's because I had already bought up most of the issues that interested me. Maybe it's time to take a rest and wait for some new stuff to show up (companies getting in trouble).

I seem to be attracted to the single B rated stuff and I usually end up with an average portfolio CY of around 10% and YTM in the 12 to 13% range. That is my target and it has worked out this way for a few years now.

I keep buying this Junky stuff because I'm betting on a "muddle-through" economy for quite a few years. I think it’s the U.S's turn for a "Japan-like" series of lost decades. If I'm wrong and we go over the cliff (like you predict) then my junk portfolio will take a big hit. I wouldn't be buying this stuff if I thought a recession was around the corner.

What I find puzzling is that you have said that you expect the U.S. to experience severe economic problems fairly soon (I interpret this to mean recession or depression). Yet you are still buying lots of lower rated junk. Isn’t there an inconsistency in this strategy? Or is this just insurance, in case you are wrong?

Anyway, my 10% bond CY sure beats the 1% interest I'm getting in my money-market account. I sometimes wonder if this is "savvy" investing or "reckless" investing. I guess only time will tell...

Howard


Yrs to Mat price face CY YTM rating p/l tot return

9.2 78.417 3000 9.5% 9.96% Ba1 4.3% 6.3%
9.2 78.467 3000 9.2% 9.40% Ba1 0.7% 2.5%
7.3 65.400 2000 8.1% 9.98% Ba3 -10.9% -9.1%
7.2 83.585 2000 10.0% 12.50% B2 -17.2% -14.5%
10.6 93.525 2000 8.4% 10.11% B2 -5.8% -4.5%
6.0 71.800 2000 10.5% 13.16% B2 -0.6% 0.8%
7.1 96.775 2000 10.4% 12.86% B3 13.2% 16.1%
19.3 91.400 2000 10.0% 10.15% B3 -4.3% -2.6%
5.9 76.400 2000 10.7% 11.24% B3 -1.3% 0.3%
8.4 73.650 2000 9.3% 9.93% B3 -2.7% -1.5%
6.7 95.850 2000 8.7% 10.58% B3 -0.8% -0.5%
4.4 81.775 2000 11.1% 12.34% B3 -0.8% -0.8%
13.9 92.725 2000 10.4% 11.43% Caa1 7.7% 8.8%
2.2 76.150 2000 15.7% 34.79% Caa2 25.8% 29.2%
2.2 85.900 2000 13.9% 28.22% Caa2 11.7% 13.7%
16.1 93.775 2000 9.4% 10.38% Wr 11.8% 13.7%

YTD Tots
8.4 83.179 34000 10.2% 13.06% B2/B+ 1.2% 2.9%



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Author: howardgt One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34028 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 5:12 AM
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OK, I screwed up the price column of my previous post.
Here is my corrected YTD purchase list:


Yrs to Mat price face CY YTM rating p/l tot return

9.2 93.525 3000 9.5% 9.96% Ba1 4.3% 6.3%
9.2 96.775 3000 9.2% 9.40% Ba1 0.7% 2.5%
7.3 83.585 2000 8.1% 9.98% Ba3 -10.9% -9.1%
7.2 78.467 2000 10.0% 12.50% B2 -17.2% -14.5%
10.6 76.400 2000 8.4% 10.11% B2 -5.8% -4.5%
6.0 81.775 2000 10.5% 13.16% B2 -0.6% 0.8%
7.1 78.417 2000 10.4% 12.86% B3 13.2% 16.1%
19.3 91.400 2000 10.0% 10.15% B3 -4.3% -2.6%
5.9 95.850 2000 10.7% 11.24% B3 -1.3% 0.3%
8.4 92.725 2000 9.3% 9.93% B3 -2.7% -1.5%
6.7 85.900 2000 8.7% 10.58% B3 -0.8% -0.5%
4.4 93.775 2000 11.1% 12.34% B3 -0.8% -0.8%
13.9 76.150 2000 10.4% 11.43% Caa1 7.7% 8.8%
2.2 65.400 2000 15.7% 34.79% Caa2 25.8% 29.2%
2.2 73.650 2000 13.9% 28.22% Caa2 11.7% 13.7%
16.1 71.800 2000 9.4% 10.38% Wr 11.8% 13.7%

YTD Tots
8.4 83.179 34000 10.2% 13.06% B2/B+ 1.2% 2.9%


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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: 34029 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 2:11 PM
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What I find puzzling is that you have said that you expect the U.S. to experience severe economic problems fairly soon (I interpret this to mean recession or depression). Yet you are still buying lots of lower rated junk. Isn’t there an inconsistency in this strategy? Or is this just insurance, in case you are wrong?

Howard,

The US is already in a recession/depression. There are too many people in the bread and soup lines to conclude otherwise. Federal tax receipts cover only 60% of Federal spending. The rest is coming from borrowing. That isn’t sustainable. The US cannot grow its way out of debt by going deeper into debt. Sooner or later, markets will ask that the bill be paid, and the US will default on its obligations, as it has done so in the past. When markets crash, I’ll take a hit, maybe as much as 60%-80% of AUM. But enough will remain that my life style will be unaffected. Food will still go on the table. The taxes will be paid. Books, beer, and bait will still be bought.

My parents survived their depression, just as their grandparents survived theirs, just as I’ll survive the one now facing us, whose worst days are yet to come. For the US to follow Japan's multi-decades, deflationary path would be a best case scenario. But it won't happen here due to our differing demographics and differing foreign policies. The Japanese were/are savers. The US is not. The Japanese were/are mercantilists. The US are neo-colonists, still dreaming of empire. Guns or butter? The US wants both, but can afford neither. So the 21st Century will belong to the BRICs.

The hard times never last, just as don’t the easy times. What matters to me isn't capital (which can always be found) but market skills. That's why I'm keeping my hand in the bond game, as well as scrambling to find new ones of a more traderly sort. I'd like to report substantial progress, but I can't. Finding/creating viable investing/trading gigs isn't an easy thing. Also, it's hard to be as motivated as I should be to find them when markets are presently so complacent. But Fear and Terror will return sooner enough, and then I do whatever I have to in order to pull more money out of markets than I bring to them. That sort of a workday will cut into my fishing and boat-building time. But that, too, is just how life is. So one enjoys the moment, and then deals with the future as it happens.

Charlie

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Author: voiceinthedin Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34030 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 3:02 PM
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The rest is coming from borrowing. That isn’t sustainable.

The statement made above is not an educated opinion.

Japan currently has far more debt and after WW II the US had far more debt in relative terms.

The above statement is popular in some quarters and easy pickings for the press to misinform the populace, but it is wrong.

We need to cut taxes over time on work done by anyone from the doctors to the dishwashers. This form of demand side econ would cut the welfare pool of recipients and see greater productivity out of US workers.

Workers in this country are far under paid and over taxed.

What causes inflation out of such policies is not the workers being very well paid, but the workers borrowing money at the same time.

Back in the 60s with the Vietman war raging the govt and the working folks were borrowing en mas....that is what caused the super spikes in inflation which were self feeding all the way into 1980.

ofw,

Dave

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Author: howardgt One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34031 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 5:29 PM
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The US is already in a recession/depression. There are too many people in the bread and soup lines to conclude otherwise.

Charlie,

Fair enough... you call it a depression and I call it a "muddle-through" economy. But we still currently run a 2%+ real GDP growth rate and that should be enough to support the corporate bond market.

Sure, Japanese culture and demographics are quite different than American, but the ending outcome can be similar if nobody wants to borrow the printed money and "velocity" just adjusts accordingly. But I'm not smart enough to predict the future (above my pay grade)... maybe we will have inflation some day... maybe a deflationary depression. Who knows what will happen when? I'm just a trend following long term value investor. I try to ignore predictions and to base my investment decisions on current and past historical data. I also try to be diversified enough so that I can ride out any cyclical troughs if and when they occur.

Yeah, the trading game is a tough gig (been there, done that). You’re competing against high-frequency traders and investors privy to inside information. On the other hand, I find "long-term buy-and-hold investing" much easier, enjoyable and also more rewarding.

But in the end, no matter what investment philosophy one practices, I agree with your final statement when you wrote: "So one enjoys the moment, and then deals with the future as it happens."

Howard

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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: 34032 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/1/2012 7:50 PM
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Howard,

I can't predict the future, either. But I can do contingent planning of the sort "if a bear market happens, e.g., a 20%-40% decline from present prices such as did happen in 2008-2009, how adversely would I be affected? If a 60% decline happens, such as happened in '73-74, how adversely would I be affected?" Basically, it would make no difference to my life-style. I'd have fewer pieces of paper, but needs and reasonable wants could still be met from remaining resources. So I'm fairly indifferent as to what will happen. However, those kinds of prices declines would represent too good an investing/trading opportunity to ignore, and since I'm relatively sure they will happen --and soon-- I'm scrambling to position myself to be ready for them. Should I be wrong and they not happen, then my investment gains will continue to be what they presently are (net-positive after taxes and inflation,) and all is just as well. So it's a win-win scenario *provided* I do my prep-work.

Yeah, the trading game is a tough gig (been there, done that). You’re competing against high-frequency traders and investors privy to inside information. On the other hand, I find "long-term buy-and-hold investing" much easier, enjoyable and also more rewarding.

For the most part, I disagree. An investor's (or trader's) worst enemy isn't his or her counterpart to the trade, but her or himself. That's who screws up profits. That's who creates losses. It's not the high freq boys, nor the "insiders", nor anyone else. It's one's willingness to deceive oneself as to what is really happening and to let Fear and Greed, Hope and Despair, do one's decision-making instead of rational, systematic action. Markets aren't a level playing field. Never have been; never will be. But a determined individual can always pull more money out of them than he/she brings to them. Not on every trade, and not on every market day, but on average and over the long haul, one's purchasing-power can be preserved or appreciated *provided* the planning is sound and the effort is systematic.

You can call that 'investing' or 'trading' as you choose. But I see no material difference between the two, because market time is fractal. In both cases, the intention is to profit from price differences, not from the supposed "organic growth" that supposedly creates the upward bias for equity markets that the B&H'ers piously appeal to to bail them out of their mistakes. Markets are a less than zero-sum game that less than 15% of participants win. The trick is to figure out how not to be one of the losing 85%. Against all odds and advice to the contrary, I did it with bonds. Whether I can do it again with another asset-class remains to be seen. I think so, because I'm betting that the opportunities on the short side will soon be as obviously as the pink and white cherry blossoms that litter the landscape on a windy April day. How could they not be seen and enjoyed?

Charlie

PS There's a much-told econ joke that goes like this. "A recession is when your neighbor loses his job. A depression is when you lose one." What, really, is the present unemployment rate? Probably somewhere around 23%. But that is being papered over, literally, by the Gov't's printing presses and its ministries of economic propaganda. 2% GDP? How much of that is real economic activity as opposed to the spending of publicly or privately borrowed money? When the US dollar loses its reserve status, which will happen in our lifetime, the charade is over that the US economy is viable. Martial law will be imposed, and the US will use its troops to suppress rebellion, as has happened many times before in this country. But trout will still rise to a fly, books will still circulate, and markets will still trade. So the essentials of life will endure and, eventually, it can be hoped that the needed reforms (now being kicked down the road) will be enacted because, finally, there will be no other choice. American "exceptionalism" will finally be seen to be the foolish self-deception it is, and economic realities will replace them (at least for a while). Is that a dark grim vision or a hopeful one? The proper answer is "Yes", and it's John Mauldin's "Yes", not my own. "Pain now, or pain latter?, he and his dozens of macro-econ charts ask, none of which I contest. Things really are bad, and papering them over, as the Fed/Treasury cartel has been doing, is only postponing the inevitable reckoning. One could fear that reckoning and hope it never comes, or one could say that it has already begun and begin to get in synch with it, looking for ways to profit.

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Author: howardgt One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34034 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/2/2012 4:08 AM
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Charlie,

For me, short-term trading (or investing as you call it) is a "tough and stressful" way to make a buck.
I think one needs a certain personality type to be successful at it. Maybe you have it?
I'll stick to the slow and sometimes not-so-steady easy money.

I wish you the best of luck at your new endeavor.

Howard

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34075 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/12/2012 10:05 PM
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Japan currently has far more debt and after WW II the US had far more debt in relative terms.

And Japan may be disappearing, it possibly has 7 to 10 generations remaining. It's "eating it's own" because most of its debt is internal, AND Japanese aren't having children to replenish the tax-paying workforce. Thus they are aging, and more people die than are born each year.

And while debt spiked during WWII to a little over 100% of GDP, it came right back down below 100% by 1949-50 and then continued down until it hit 32% in 1974. One of the primary reasons was that USA GDP growth was high due to things like favorable demographics and the destruction of most of the production ability in the rest of the first world.

Today we are just over 100% of GDP and budgets for the next few years seem to be pushing it even higher and faster. Meanwhile, the rest of the world has its production capability intact, and some countries are growing their economy (and production capability) much faster than we are. That's not a recipe for rapidly declining debt.

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Author: markr33 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 34076 of 35387
Subject: Re: A Part-year Portfolio Review Date: 5/12/2012 10:08 PM
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2% GDP? How much of that is real economic activity as opposed to the spending of publicly or privately borrowed money?

I read that GDP went up by ~$600B last year. Of course we borrowed ~$1.4T that year.

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