No. of Recommendations: 4
Everyone is saying that now is a lousy time to be buying bonds, because interest rates are so low. The talking heads have said it. I've said it. We've all said it. But, is it true? I haven't the slightest, and I don't really care. I do know as a certainty that I'm getting rusty, stale, and sloppy from sitting around and holding back in hopes that things will get better. Investing is an art, and like any art it has to be practiced. As Leonard Bernstein said:

“If I don't practice one day, I notice the degradation of my concert performance. If I don't practice for two days, the critics notice it. If I don't practice for three days, the audience notices it. So, I practice every day.”

In the past couple of weeks I've decided to hold my nose and go shopping, not with the open checkbook and casual vetting that the easy market of two years ago allowed, but shopping, nonetheless, with the intention to buy anything that's “good enough”, because I don't know whether markets are going to get better, or get worse, but I do know that my skills are going to get worse if I don't practice them.

With that in mind, I'd like to initiate a participatory thread in which everyone comments how they vet their buying decisions. Not a detailed explanation of their whole research process, but something along the lines of the following:

Before I buy a bond, I always…

And to get things started,

- Before I buy a bond, I always grind through the SEC filings.

-Before I buy a bond, I always pull listings for every bond the bond the company has issued and look for patterns. (Note: “Listings” are the total record of all issues of the company, including those already matured. “Offerings” is what is currently offered for sale.)

- Before I do anything fundamental work at all, I always pull a stock chart. If it's a crap stock, I assume it's a crap bond and look for another opportunity.

- Before I buy a bond…. [ your tip here ].

“He that cannot abide a bad market deserves not a good one.” (English proverb, unattributed.)
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No. of Recommendations: 1
Hi Charlie:

I just wanted to thank you for your contribution to this board, as a novice it's wonderful, especially this last inquiry. I've already printed what you said and am looking forward to the responses. As I said I'm just starting and am going to concentrate on short term, high quality bonds as a start. Thanks again.

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No. of Recommendations: 2

I love fan mail. Much thanks for finding usefulness in my words. But I'd discourage you from printing them out, any more than you'd want to take photos of an afternoon's footprints at surf's edge, before the tide advanced again, sweeping clean the beach.

What I write is worth reading, but its details aren't worth remembering, much less making a permanent record of, because it's throw-away material, musings on where I've been, pondering where I might go, always a playing with words and ideas. Their value isn't in anything I might say about "how-to-do-it", but in my attitude that "it-can-be-done", that markets are accessible, that success is possible, that a path can be found that matches an investor to her investments regardless of what supposed "experts" say.

That's the point I hammer on, that this stuff is doable. All it takes is clear thinking, an honest effort, and the sorts of bravery and determination, adroitness and humility that we employ in other parts of our lives. I can communicate infectious enthusiasm --which is the value of my posts-- but the actual working details of particular investment plans are things we each must work out for ourselves, because we each are a singular investor with our own unique skills and needs. Like shoes worn enough to become a comfortable fit for their owner only, investing/trading details don't borrow well.

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No. of Recommendations: 1
In the spirit of what Charlie asked ... tips ...

Well, first off there's my purpose for buying bonds. It's my overall investment plan, namely to build a core of stable interest/dividend paying things to allow the total investment pool to be organically growing. I'm just at the beginning of my overall plan with about $15,000 or REIT and bond investments.

Second - last year with my first bond purchases, both were a wash. The first was issued by Exodus, a formerly leading web hosting provider (my DD was "hmm, I work in the tech industry and know that Exodus is leading in web hosting, so they must be safe") and they went bankrupt a month later. The second was issued by Enron, with equally skimpy DD, about a month before their bankruptcy. Fortunately each was bought at a big discount, and the total investment was about $1,500 (?less?) so the lesson didn't cost a lot.

Currently I do some crunching of the company's SEC filings, their current and recent news releases, who they are, their safety as a company, etc. I'd love to know how to get the prospectus for the bond, but don't know where it might be, and I think the prospectus would be vital to know any special features etc of the bond.

My experience since those two winners were:-

1- Corning, bought at a slight discount. The company is being hurt by loss of fiber optics sales, and is running a high debt. The message board traffic implied the company has been cyclical in this way a number of times, implying the management know how to navigate this kind of territory. The bonds currently quote at a big loss to my purchase price, but they're paying their dividends, and if I hang on they may well recover eventually.

2- Citizens Communication - this is a second tier telecom company specialising in servicing small towns in America. This seems to give them an interesting advantage. I bought at a very slight discount, and the current price is at 109, for a nice percentage gain. Since I have only one bond, I'd rather get the interest than the $90 gain on the bond.

3- Muni (New Mexico Hostpitals) - It was at around par when I bought, and has been hovering slightly above par.

4- REIT Preferreds - These aren't techincally bonds, but stocks, but the REIT's generally use them as if they're bonds. They're generally callable after a specific date for a specific price, pay a fixed dividend, and trade at a discount or premium to the call price depending on the company's health. They trade a lot more freely than bonds, as they're stocks and are on the stock market. I'm reading and educating on the REIT market in general, and when I go hunting for a new investment I'll follow regular DD for the companies I look at. Most are trading at pretty much the same as my purchase prices.

- David
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