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Since the summer of 2009, I’ve been saying that “the low-hanging fruit is gone from the bond market”, that “there’s little worth buying”. But when I actually went looking, I found bonds to buy. This year has been no different. My whining has gotten louder and more strident. “Interest-rates are going up”, I say. “Bond prices are ridiculously expensive”, I say. “There’s nothing worth buying”, I say. But, in fact, when I look at what I actually did, instead of what I merely said, I find that I’ve been putting money to work at the same, leisurely pace I generally have done, week after week, year after year, which is to make a couple of new purchases per week and then call it quits for the day, so I can do an afternoon walk or bike ride.

Some mornings, I really can’t find anything to buy, and I give up in total disgust. No matter what I’m looking at, a tolerable risk/reward just can’t be found, never mind trying to find an attractive one. When that happens, I tell myself to back away. “Don’t spend money just because you have money to spend. Patience, Grasshopper. Patience. Don’t chase prices. Let them come to you.” On other days, the shopping is easy, almost too easy. The issuer has a decent balance sheet. It’s paying bills from current revenues (not borrowings). The bonds can be bought in small quantities, and they offer a real rate of return after taxes and inflation. When this happens, I say to myself. “Why wait for more favorable conditions before taking a position? What you’re seeing is good enough. You know enough to act right now . Stop stalling. Stop looking for excuses not to act. Put on a prudently-sized position, or else get out of the bond game. Fish, or cut bait.”

YTD, I’ve put on 20 new positions. Said another way, I bought $24k face at a cost of $19,866. The Current Yields average 10.3%, and they range from 5.1% to 26.6%. The projected YTMs average 13.5%, and they range from 6.3% to 53.9%. The ratings range from A2 to Caa2, but they probably average single B. Maturities average 8.8 years, and they range from 1.7 years to 27.6 years. In other words, what I’m buying is entirely consistent with what my investment mandate has always been: “Buy across the yield-curve, and across the credit-spectrum, what would be attractive to a hard-core, Ben Graham-style, value investor.”

If the next 43 weeks continue as the past 9 weeks have been, then in 2013 I'll spend about $114k and make about 95 purchases (which will be about half of what I did in 2012, but pretty much what I did each year 2007 through 2011). Thus, despite my constant whining about the difficulties of the current bond game, I’m also doing the job that I committed myself to doing when I retired some eight years ago, which is managing my own money, and I continue to be able support myself more than twice over from my investing efforts alone. Not many investors can say that. But, also, not many self-identified ‘investors’ are really ‘investors’. They’re just clueless gamblers who are “paying to play”, which is why I become annoyed with them. Why pretend to be an "investor" when your track record proves you are not?

But everyone needs a hobby, right? and for most people that hobby is “investing” done exactly as Wall Street (and the fund companies and the advisory services) would like them to do it, so that a constant stream of fees comes their way from the dumb, gullible money waiting to be told what to do or what to buy. How to buy? Now, that's entirely a different matter, and no one needs to look elsewhere for guidance than to the Value Master himself and his classic intro, The Intelligent Investor. Everything of importance is contained there. The rest is just tiny details, easily looked up or easily invented as needed. Caminate, no hay comino. Se hace comino al andar.


A loose translation: "There are no roads but by walking."
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When Life Gives You Lemons
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