Bond market: small investors not wanted

It looks like I'm going to have to dump my junk bond idea. A view I have held of the bond market was just reinforced. Namely, that it is not for small investors and is not efficient.

I investigated whether I could buy some junk bonds through my broker and it is not worthwhile for me. It should be noted that I'm in Canada and trying to buy an illiquid bond.

I requested some quotes from my discount broker, HSBC Invest Direct, for a couple of Sears Roebuck Acceptance Corporation bonds and their prices are horrible (quoted price includes commission.) The quoted a 6.7% bond maturing in 2012 at a price value of 68.84 while FINRA shows the latest price as 49.75. Another 7.5% is quoted at 85.74 while FINRA shows a transaction at 48.02. So, bonds that are yielding around 30% can only be purchased through my broker for yields of around 20%. That's a huge premium and it's simply not worth it for me. I'll see if Canadian bonds can be bought at attractive prices. If not, I'll look to see if I can buy some exchange-traded bonds.

I'll note that I'm looking at illiquid bonds but even then, the prices are not attractive--at least at my broker.

Comments

  1. UnknownNovember 28, 2008 at 10:01 PM

    You can still capture high yield bonds through two ETFs I can think of off of the top of my head: HYG and JNK. There may be others. JNK is yielding 16% right now - a bit less than your target. However, it is very liquid and you could lever up to get to the desired yield.

    One more option - you can purchase shares of a company that owns a portfolio of high yield debt, like HTGC. They do super-senior loans to early stage companies. Currently yielding 21%. I have a position in HTGC. There are other, similar operations.

    ReplyDelete

Post a Comment

Popular Posts

Thoughts on the stock market - March 2020

Image
Right now, DJIA has a P/E of 16.8 and forwand P/E of 15.1, whereas S&P 500 is at 20.1 with forward P/E of 15.8. Source: WSJ market Data If you ignore interest rates and inflation expectations--both of these influence valuations but depends on your macro call-- the market is not cheap. Long-term P/E is around 15. Trailing P/E is around 20% (Dow) to 40% (S&P500) higher than average. Forward P/E is in line with long term average but that assumes a strong V recovery. Consensus forecast is for profits to drop 1.2% in 2020. In 2008, it dropped 25.4% so current forecast is a very mild recession. Covid-19 coronavirus is not going to last more than a few months but these forecasts are still too rosy in my opinion. So I wouldn't rely on forward P/E. The richly valued (mostly tech or high quality) have not fallen much but the distressed ones have. So if you want to outperform in the long run, I think one’s choice right now is to: • Wait for market to fall another, say...
✖ READ MORE >>>

Warren Buffett's Evolution and his Three Investment Styles

Image
A Young Warren Buffett In a comment to one of my posts , Mark Carter, who incidentally appears to have a  good blog worth checking out , asked: "Buffett Prime is 1970's to early 1990's" Could you elaborate? I have vaguely indicated how I view Warren Buffett in the past, but I thought I would detail my view of his investing behaviour. This is more of an opinion piece and many others would disagree with me (if you do, I'm curious to hear your thoughts). I don't follow Warren Buffett as closely as many value investors so I may get some facts wrong. My view is that Warren Buffett went through three different phases, with each consisting of different investment techniques. The overall investment theory remained the same—what people call value investing—but his execution, tactics, and strategy differs across the three phases. Some people may break up his career into additional periods but my feeling is that the three I will describe essentially capt...
✖ READ MORE >>>

Hugh Hendry discussion at the Alternative Investment Conference

Thanks to Value Investing World for bringing this Hugh Hendry interview to my attention. I may not agree with all the things—short-term orientation of hedge funds is actually worse IMO; the sharp pencil effect doesn't always work—but Hendry is a true contrarian and worth listening. Like Marc Faber or Jim Rogers, you also can't take everything Hugh Hendry says seriously. I had always felt Hugh Hendry was firmly in the deflation camp but I get the feeling that he is now opening up to high-inflation possibilities. Otherwise, his stance appears to be similar to past opinions.
✖ READ MORE >>>