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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: Re: Since You Asked Date: 2/16/2012 11:51 PM
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After something of a lull, I am again facing calls. So I'm back looking at the e-Trade platform. March 1 the money comes in, so until then my time on the bond platform is looking over the landscape. Meanwhile my stocks have been rewarding me handsomely and on the whole, the bond market looks pretty awful by historic standards.

Two issues paying a coupon of 7.35% are being called. Both were purchased at a discount about 8 years ago. Both companies are issuing new paper at a lower coupon, and clearly the reason for the call is that 1) they can and 2) they expect to be able to sell the new paper and reduce their interest expenses accordingly.

Option premiums now are quite good, and a 10% premium on a good, fairly volatile stock for a 1 or 2 year LEAP is fairly easy. Maybe I'll put the money derived from the calls into buying a stock and selling a call option on it. To sell a covered call on a stock like AAPL, however, requires a $50000 investment--which would be too big a position for my portfolio.

So, I'll be following any wisdom Charlie may choose to pass on at this point. I started out with bonds but have diversified long ago. Without question, bond yields are at historic lows. Some talking heads may think the yield on a long treasury in 6 months will be half the present paltry yield--but I sure am not going that way! Junk, maybe. I'll be shopping around on e-Trade, window shopping for the moment, but in a couple weeks we get serious.

And the Puerto Rican bond this community didn't like when I bought it a couple years ago has faithfully paid its 6% coupon, and currently selling for 112. Now, prices at that credit quality are too high--I don't pay premiums which admittedly constricts the choices. Or, if you prefer, cuts the candidate list down to a workable size!

Best wishes, Chris
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