It's possible the bonds might be down another 30 to 50 bucks per bond in a month? I'm thinking sell now, and see what happens. At worst, they go back up a little. At best, buy back between 85 and 90?? If down more than that might be best to wait and see. Yes, I could have made a few bucks buy selling when the bad reports first came out. Oh well. That's rearview mirror stuff. I recently heard someone say or write...I don't have a rearview mirror. Screw something up, learn, and move forward.
Black,By itself, the price of a bond is meaningless. By itself, the price you pay is meaningless. You need to think about the whole risk-management problem, not just a tiny portion of it. Charlie
Hi Charlie, Thanx again for your informative charts on the JC Penny bonds,,,both charts. But, I'm not quite sure what your trying to say in this last short post. I agree that the price of a bond is not important by itself. What is important is the CY and YTM of the bond at that price (and if selling at a premium. And of course, As far as risk, my three JCP bonds are 6% of my direct corporate bond holdings. I've had a few called away or tendered which I have not replaced...United Auto Group, Tesoro, SoloCup, I believe. Soo, I'm still ok with 3 bonds, but 6 to 7% is on the high side. So, sell three now, maybe buy back one, hopefully at a lower price. I'll sell bonds for a capital gain if the YTM is not longer attractive to me and there is something else to buy, but normally I do not try to trade on hiccups...just not worth it. For this one time, maybe I will. I'll re-visit this bond after 4th quarter numbers get posted, and try to figure out what the chances are of getting paid off in full if the company goes bankrupt. So, if I've missed your point from that last post, feel free to re-explain to me "like I'm a fifth-grader"...(which I am, or lower, regarding a lot of subjects). My three sold on Etrade at 94. My original purchaser $20 or $30 over par per bond. With interest, its close to a wash, plus/minus less than $50 either way. I just glanced at the numbers, did not break out my calculater yet. Oh, for now, the receipts from the sale will be dead money. Anyone listen to Dave Letterman last night?? Had a great line, after reviewing this lastest sex scandal with two generals, two women married to others, and a FBI agent with his shirt off...."Don't you now just yearn for the simplicity of the Clinton years?".....I loved it.
...I'm not quite sure what your trying to say ....I agree that the price of a bond is not important by itself. What is important is the CY and YTM of the bond at that price ... As far as risk, my three JCP bonds are 6% of my direct corporate bond holdings.Blacktree, Every investor will have his/her own ideas of how to manage risk (or should), because that policy is the cornerstone of their investing plan (or should be). So, in that sense, the answer as to what you should do about your holdings of JCP's debt will be found on Page One of your investing plan under the paragraph heading, "How do I get myself out of trouble when I seemed to have failed avoiding getting myself into trouble?" In other words, when an investor finds him or herself long (or a short) a position (which could be stocks, bonds, whatever) and prices have moved against them more than they are comfortable with, they don't need anyone to tell them what to do, because the answer is obvious. They screwed up, and they need to fix the problem before it gets worse, Going flat is often the best way to do that. Close out what should be closed out. That's not the only way to fix the problem. But 'fixes' that aren't simple, fast, and cheap aren't 'fixes'. They are just more problems have to be dealt with. Getting flat puts an immediate end to the problem, frees up capital, and clears the head. A couple threads back, I did a post on "How many bonds?" As usual, it attracted no comment, because few investors worry about risk-management to the extent I do. But the answer to your current dilemma is to be found there, namely, if long-term survival in this game is your chief concern, then you're over-weight that issuer. Charlie
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