UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: globalist2013 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Suntech’s 3’s of ‘13 Date: 2/1/2013 2:43 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
Suntech’s converts come due next month on 03/15/2013. If they were going to mature, they’d be trading closer to par. But they aren’t, as the linked chart shows. http://cxa.gtm.idmanagedsolutions.com/finra/BondCenter/BondD...

The stock for Suntech is doing better than the two ETFs for the solar energy industry, TAN and KWT. http://finance.yahoo.com/echarts?s=STP+Interactive#symbol=st... But I’m not too encouraged by that. Who knows what’s really going on behind the scenes? My guess is that bond holders will be contacted shortly and be asked to roll their old debt into new debt. Obviously, I’m long the bond and wondering what to do. Here’s the schedule of how I got into the bond.

Qty Traded Price Amt P/L
1 04/08/10 84.000 $840 -41%
1 06/20/11 88.095 $881 -44%
3 02/01/12 66.365 $1,991 -25%
1 04/27/12 71.000 $710 -30%
------------------------------------------------
6 $4,422

The trade on 04/10 was my opening position. I was “dipping a toe”. Prices traded flat for year, so I felt encouraged enough to add another bond on 06/11 at 84. Then prices rolled over, then seemed to recover, and I averaged down and added three at 66. That seemed to have been the correct move, and two months later, as prices continued to recover, I added another bond at 71. Now, of course, that whole play book is in shambles, and the bond is trading around 50, creating losses across the board.

The total position is tiny, just 0.6% of AUM. So I can afford to lose it. But I’d rather not, obviously. Money is money, and if the bond-holders get made whole, I’ll make decent money. But I really expect the bond will go into technical default and that we’ll be asked to roll into new debt, which I’ll do. Likely, we'll be asked to take a haircut of about two-bits on the dollar, though traders --from their bidding-- are thinking the haircut will be closer to four-bits, meaning, my loss would be about 25 points per bond, but probably no more than (-$1,500) for the total position and, hence, tolerable.

In a nutshell, that is the bond game. If you want upside, you've gotta risk downside. Elsewhere in the portfolio, on situations that were no more risky, I've already more than made up those losses. So bond-investing is a probabilities game no different than pulling marbles out of an urn, each of which offers a different reward or penalty. If the game has a positive-expectancy, you'll win over the long haul *provided* you keep betting *and* never over-bet your hand. That's what's hard to do, to keep buying, year after year. But if you don't take the trades your system tells you have to be taken, you're just gambling, not investing.

Charlie
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement