No. of Recommendations: 2

Your reported 37% default-rate for issues bought below 50 is consistent with Moody's work on historical default-rates. So, no surprises there.

Part of the reason I was exploring the lower limits (and the upper limits) of prices is that I'm trying to put together a set of guidelines (not rules) for my daughter that aren't based merely on what seems to be working now, but point toward risk-management principles that apply to any asset-class, anytime. (Risk is risk, no matter where it is found). But, yes, I don't do anything else but bonds, because they provide enough interesting puzzles and decent returns.

US Concrete was a bond I dithered over and then backed away from, as was Dynegy. Like you, I did get slammed by Norske. But the loss (when the court settles with creditors) will be tolerable, because the position is a single, as is any of my speculative positions, and I try to keep exposures per position for such issuers under one-eighth of one percent of AUM. In other words, if I lose one or two, as has to be expected, the impact amounts to a rounding error. OTOH, the contribution they make toward total gains, when such positions do work, isn't insignificant, as you well know.

Again, thanks for your detailed follow-up.

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