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Briefly last week, Royal Bank of Scotland’s 4.7’s of ’18 were priced to yield just above 8% and were available as singles. But by the time I could do even the briefest of due-diligence (for never having looked at their financials before), someone had grabbed 7, and the new min was now 10, which was more than I wanted to go on a very questionable situation.

Yesterday, if you follow world markets (as you should be doing), you know that RBS’s stock got trashed, both as part of the general downturn of things and because (it was announced Friday) is it being sued by the US (along with Barclays and some others). So the reasonable expectation today would be that RBS’s bonds would be priced down in response. But, “No”, that isn’t what is happening yet, for reasons that are beyond me to understand. Fundamentally, RBS is a POS bankster, just like BoA, lying about how sound they are and that “they don’t need to raise capital”. But reasonable analysts are arguing otherwise. So it comes down to deciding whom you want to believe and which risks you’re willing to accept.

I own none of RBS. So I was willing to begin averaging down on them to build a position. But I’m not willing to buy them at 7% percent. Something a lot higher, and at a price a lot closer to a Chapter 11 workout, is the only way I’d now get involved, which raises this question for me. My ratio of current-income to current-expenses is about 4.7, and my ratio capital to current-expenses is around 39.0. In other words, I ain’t rich, but I’m not three pay checks away from being put on the street, either. If I do nothing more ambitious than sit in cash for the rest of my life, it is highly unlikely that I’ll ever run out of money. So why bust my butt trying to buy more bonds, especially questionable ones, when there’s a ton of money to be made on the short side? It’s not easy money, despite my flippant report (in another thread) of this morning’s trade. But is it money that can be made by anyone willing to do the work.

YTD, I’ve added 90 new bond positions and sold off (or had called or was redeemed on) 40. So I was able to clean up most of several years of mistakes. Now the portfolio is looking pretty solid, pretty conservative, and it should be able to chug along on its own without a lot of fussing and fretting. On other words, if I’m not needed to manage it, and if I’m not looking to add to it, then I can turn my attention to where the action for investors does seem to be headed, which is selling short, as the market goes down, down, down.
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