Investment grade corporate bonds have been behaving like a safe haven trade recently. They used to move with stocks, like junk bonds do (JNK or HYG). But look at the lows on treasuries (TLT and IEF) and compare with LQD:
Junk bonds are down today in contrast:
Today I purchased stocks in four precious metals miners. I’m probably early, but I don’t think the US dollar is going much higher. We’ll see. If it does, I’ll add to these. I still see the economy strengthening (no matter who gets elected).
Both the bonds and the stock issued by Overseas Shipping Group have been severely punished recently. Here is a comparison of the losses using the prices of the dates that I purchased the bonds.
March 1, 2012 purchased for $61 the $100 bond maturing 2/15/2024. The price now is $42, a 31% loss. The OSG stock closed at 9.06 on 3/1/2012 and now is $3.40, a 62% loss.
April 2, 2012 purchased for $75 the $100 bond maturing 3/30/2018. The price now is $41, a 45% loss. The OSG stock closed at 12.32 on 4/2/2012 and now is $3.40, a 72% loss.
It will be interesting to see if the percentage losses eventually match going forward. I’m hoping OSG will figure out a way to continue paying me nice fat interest payments and avoid bankruptcy, of course.
I own two issues of OSG bonds. These are two of the worst performing bonds in my portfolio of junk bonds. IMHO these bonds have been performing better than the stock, especially considering that the interest payments received are based on the face value ($100). Charts of each bond and the stock follow:
OVERSEAS SHIPHOLDING GROUP INC 7.50000% 02/15/2024 SR NT
OVERSEAS SHIPHOLDING GROUP INC 08.12500% 03/30/2018 CALL MAKE WHOLE
It is the stock market’s volatility that scares away the investor and that attracts the trader. The risk is the same (high probability of bankruptcy and therefore loss of invested capital). I sleep well at night and work well in daytime because I keep each position size small (max 5% per corporation) and invest mostly in corporate bonds (lower volatility than stocks). It is fun to trade stocks, but they need more frequent baby sitting than bonds. The two markets are very different, as the above charts demonstrate.
This a.m. I purchased some Sitel bonds CUSIP 78428EAB5. I first noticed them several weeks ago, but had to wait until today to see them available again in the market. At the price I paid they will yield over 17%. You can read about this ‘contact center outsourcing’ company at www.sitel.com . Note especially their work at home program for employees in the USA, if you or someone you know is interested in this line of work. I couldn’t find a stock symbol for this company so there’s only the bond chart below:
Last week we closed on four 1/2 acre vacant lots with city water, reasonable deed restrictions and NO HOA fees. Nice location within walking distance of public library, major shopping center, and easy bicycle distance (2 miles) to additional major retailers (walmart, lowes, home depot, etc.) and hospital (4 miles). Quiet neighborhood that had no flooding during Fay. Now I’m reading books on barrier-free a.k.a. universal a.k.a. accessible designs for our first real house (we live in the same mobile home we bought 30+ years ago). The plan is to build our modest dream house in the middle of two lots (effectively giving us a 1 acre homesite — we live on 5 acres now and 1/2 acre seems extremely small to us). The other two lots can be used as another homesite for our son or we might sell them later for a profit.
This a.m. I purchased some shares in Coffee Holding Co., Inc. (JVA). Where I live the weather has finally started to cool down and this will increase coffee consumption IMHO. I’ve also been reading about Arabica coffee bean prices trending lower for several months now, which bodes well for coffee processors’ profits (assuming they don’t blow the other aspects of their business). You can read more about JVA at their web site.
Yesterday I sold half of my boatload of GDX, most of which was purchased at high prices. This large capital loss will counter other capital gains this year (for tax purposes).
As I look at the chart above, it just looks to me like GDX is going down for a while. Hopefully I can buy it back when its cheaper, because I think gold will be priced much higher long term.