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Author: brewer12345 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 35248  
Subject: Re: Union Carbide (DOW) 7.75 of '96 Tender Offer Date: 3/4/2011 6:18 PM
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I guess I have a couple of problems with very long term maturities:

1) the risk of a bout ofhefty inflation/a rate spike is a lot higher over 30+ years than over 5 to 10. With a shorter maturity you also claw back toward par quicker as the bond creeps to maturity.

2) the risk that the issuer will blow up is greatly magnified over longer time periods. I can usually do credit work and get comfy with a company's ability to make it for 5 or so years. Much beyond that is generally a guess.

So I like to keep it shorter when buying individual bonds, the more so as you go down the credit quality scale. I will happily buy junky junk (at the right price) if you can get comfy with an issuer's ability to stay alive and my recovery in bankruptcy is equal to or better than my entry price. But the timeline over which I can do that with any confidence is a lot shorter than 30 years.

I was around a year ago. I was buying with both hands (and even borrowed money) in the first half of 2009, but I liquidated the bulk of my positions last year at fat capital gains. Currently down to one individual bond that is quite illiquid and not eager to jump back in the pool at current values. Then again, I get a lot more interested when bonds are quoted at dollar prices rather than spreads and yields.
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