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IDS World Markets Fri 13th February 09


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4shzi, While I agree with your preference for corporate debt in this atmosphere

what I don't understand is that in doing so one is seriously risking their principal are they not in a

kind of game of Russian Roulette. Today its anybodies guess who will next be going BK,

thats precisely why these bonds are paying such high interest. If it is assumed the Dow

is potentially heading for 4,000 and we are in the first throes of a depression that could

last 5 to 8 years and as well if its assumed that hyperinflation will eventually kick in making

even 8% return on corporate junk not so hot in comparison, why would anyone want to

pour money into a corporate debt sinkhole that is also a minefield? Unless your somehow talking

about moving in and out of these bonds or ETFS nimbly and with an eye on the macroeconomic

situation. I am a neophyte when it comes to the complexities of the bond market but due to

foolish bond manager who beleived it never could happen I am bag holding Lehman AAA bonds and waiting for a meager recovery. I don't wish that Hell on anyone and so I am cautious of the entire racket of corporate debt. First and foremost all operations on Wall Street are rackets and without that perspective one can get dangerously overconfident imo. We go to 4,000 and that ETF you referred to will lose substantial value in a very short time.

 

All you points are valid....

 

Hence, T-bags and FDIC insured CD's are the only thing that provides 100% principal protection.

 

So, if that is your primary objective, then that is where you should be.

 

Nothing wrong with that at all, especially given that inflation (what inflation?) is not eating away at your returns.

 

But if I can get a bond for AT&T, Qwest or Verizon yielding 18% annually (price 54 cents on the dollar) with a maturity of 2038 because some hedge fund had to panic sell -- I'll take that risk. And, in fact, I did just that back in October during the panic -- just one example. Could I get defaulted on, sure. But I am willing to put capital at risk.

 

I stay very very broadly diversified with bonds in roughly 150 different companies on average....so my risk adjusted return is moderate.

 

The thing with bonds as opposed to equity, [1] your getting paid to wait, and if you're not getting paid that by definition means your common stock counterpart is zeroed out FOREVER, [2] you may have to wait to get your new debt and equity in a restructure, but that beats never getting anything back if you held the common stock.

 

Where it really makes sense is a company in a good cashflow generating business where the stock (for whatever reason) get's knocked from $60 to $3 and the divi gets cut to zero. The company never goes BK, but the stock sits at $1-4 range for 15 years. Meanwhile you get the interest on your bonds plus all your money back to reinvest elsewhere at maturity.

 

OK, that's enough "BOND CHAT" for today

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White House warns against "unreasonable expectations" regarding housing plan - Reuters

 

WOW.... tempering expectations, thats a first

 

More than likely due in part to CNBS bullhorning "HOmoaner Bailout" yesterday and completely misrepresenting any and all available information.....which, by the way, was none.

 

Shades of the Gas-bag is now infecting all of CNBS.....mis-report first, ask questions leter,

 

"Breaking News, CNBS has learned _______________________"

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Did they make their afternoon boner announcement too early today??

 

White House says Obama will announce plan to stem home foreclosures on Wednesday - Reuters

 

Jives w/ my idea for a top on Tuesday.

 

Doc's reverse hunchback almost perfectly targets the trendline connecting the Jan. highs with K-Wave's bat signal (highs from Feb. 9) -- the trendline is around 860. 850ish is the 61.8 retrace.

 

So that's my bet for the next top: 850-860.

 

I would post a chart, but for some reason my chart service and/or my computer and/or gremlins won't let me print/save the image.

 

So I have instead drawn this lovely ANCII chart for visual reference on the longer time-frames:

 

-*

--*

---*

----*

-----*

------*------*

-*-----*----*

----*---*---*

-------*--*-*

------------*

 

Well, that doesn't work as well -- I had drawn a nice arrow using asterixes, but the board collapsed everything. Doesn't work as well with the dashes in there, but that's as good as it gets. My lame attempt at humor has been foiled, yet again!, by Alan Greenspan's hair.

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White House says Obama will announce plan to stem home foreclosures on Wednesday - Reuters

Isn't this how this White House rolled out the recent TARP II "plan"? And it was serially postponed.

 

Watch Geithner give another presentation about the contours of the principles to govern a foreclosure plan whose details remain to be clarified... next Friday after it's been postponed on back-to-back days....

 

:lol: :lol: :lol:

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