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Author: brucedoe 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 35400  
Subject: Why? Date: 11/3/2006 9:18 AM
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I keep wondering how corporate bonds can sell when they yield less interest than a super safe CD? There is the aspect that some people go after capital gains on bonds, so if you think interest rates will fall, you can make some capital gains. But it also occurs to me that some people have a LOT of money to do something with - millions, perhaps even billions, of dollars.

Of course some banks are as safe as any corporation so the Federally insured limit of $100,000 shouldn't be any more of a problem than a corporate bond, but can you buy millions of dollars of a CD? There is a limit. Also you can lock in interest rates on a corporate bond for long periods of time, even 100 years in some cases (Few companies last 100 years. The second largest company in 1900 was U.S. Leather, for example, and then there was the "super safe" Pennsy Railroad that died (when, about 1963?) which sent shock waves around the world).

But for us small fry, CDs, now, are probably better. I did buy some corporate bonds back in the low interest rate days because I felt I needed to get 5% interest or better to permit us to withdraw 4%/yr. I had to go way out to do this and most of the bonds are selling at pretty large discounts. Couldn't get close to an insured CD of 5% in those days, though I had some paying low interest. But we don't plan to sell the corporate bonds (In fact, the maturity dates are undoubtedly beyond our life expectency so it will be a consideration for our heirs as we are in our mid 70s.). Still in October we were hitting our largest security net worth ever (not including property) in spite of all the money we withdraw to furnish a new home, trips, etc. And we are not plungers, but quite conservative investors. Our largest holding is Genuine Parts (GPC), for example.

brucedoe
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