Part 9: Let's Talk About Buying Bonds

If you missed Part 8, please click the link below before moving on. 

 

https://www.blogger.com/blogger.g?blogID=4738936030458353613#editor/target=post;postID=8678365559044098582;onPublishedMenu=allposts;onClosedMenu=allposts;postNum=1;src=link

 

 

The New York Bond Exchange

Think of a bond rating as the report card for a company's credit rating. Blue-chip firms that are a safer investment have a high rating while risky companies have a low rating. The chart below illustrates the different bond rating scales from the two major rating agencies, Moody's and Standard and Poor's:

 

Bond Rating		Grade	Risk
Moody's	Standard & Poor's
Aaa	AAA	Investment	Lowest Risk
Aa	AA	Investment	Low Risk
A	A	Investment	Low Risk
Baa	BBB	Investment	Medium Risk
Ba, B	BB, B	Junk	High Risk
Caa/Ca/C	CCC/CC/C	Junk	Highest Risk
C	D	Junk	In Default

 

Although junk bonds pay high yields, they also carry higher than average risk of the company defaulting on the bond. Historically, average yields on junk bonds have been between four and six percentage points above those on comparable U.S.

 

When I invest, I stay away from the "C''s and "D" bond rated investments. They may give you the highest rates but they may not stay in business to pay you your money. I try to stay in the "B-" to "BBB+" rated investments. I look for bonds in industries that are out of favor like the Oil Industry.

Why do you invest in oil when it materialize
 as an out of favor industry?


Security Description                          Maturity Date 
"BERRY PETE CO SR NT6.75000%          11/01/2020"

Moody's/S&P Rating                    Recent Price 
  "B1/BB-"                                    "$79.00000" 


 "A" to  "AAA" bonds give the least amount of interest to bonds rated "BB" to "B-" but investment grade bonds have low risk as appose to "High Risk Junk." If my B- bonds would get down graded to "CCC+," I would consider selling the bonds. If a "BBB" Investment Grade bond would fall to "BB+," the institution investors would have to sell the "BB+" bonds in their portfolios, causing the bond price to fall and causing the yield to go up. If I have the money, I would buy the bonds as soon as the bonds fall and stabilize in price.  

With this strategy, the investor can usually buy the bond at a deep discount and the YTD would give a high maturity.



******************************************************

My Book; Building Wealth with Corporate Bonds

 

I told you many times about my last book published in 2003 called, "Building Wealth with Corporate Bonds." The price is $35.00. I am selling off my final copies of this book. After that, I do not plan to produce anymore.  Some of the topics enclosed are: 

• Creating a Risk Policy
• Bull and Bear Markets
• What are Stocks and Bonds
• Corporate Bond Strategy
• Buying Corporate Bonds on Margin
• How to Place orders

You can buy a copy of my book by sending a donation of $35.00 money order to: Darnell L Williams

Building Wealth with Corporate Bonds

I/O Darnell L Williams

200 A Seneca Way

Havre de Grace, MD.  21078

I only have a limited amount of copies so order yours today. When they are gone, they are gone.  

Part 8: Let's Learn how to look for High Yield Corporate Bonds

If you missed Part 7, please click the link below before moving on.

http://brokermakesyoubroker.blogspot.com/2015/04/part-7-where-do-i-invest-for-best-deal.html

Look at this bond:

  Security ID 
"085789AE5" 


Security Description                          Maturity Date 
"BERRY PETE CO SR NT6.75000%          11/01/2020"

Moody's/S&P Rating                    Recent Price 
  "B1/BB-"                                    "$79.00000"

Let's start with a few definition of how to read bond quotes.

Security ID = The SYMBOL ID is another unique identifies used to represent a particular security listed on an exchange or  traded publicly. Commonly used for trading, market data, and other places. All listed securities have  unique ticker symbol.

Security Description  and Maturity Date = make up the name of the bond security. This is the Berry Pete Co., Senior Note, 6.75% that matures on November 1, 2020. The bond usually gives $1,000 on that day. the bond also gives 6.75% interest of $1,000 usually broken up giving one half of $67.50, every 6 months.

Moody's/S&P Rating = That is the rating of the bond by Moody's and "Standard's and Poor's." We will talk about ratings later.

Recent Price = This is the price of a bond. In the example above $79.00 times 10 = $790.00. That is the price bought or sold on the exchanges. Any bond sold below $1,000 is sold at a discount. If the bond sold for $1,290 that is above par or $1,000. That is known as selling at a premium. A bond sold or bought at $1,000 is called sold or bought at par.    

BONDS

Bonds are debts to the issuers, whereas they are investments to buyers. Such debts appear on balance sheets of the issuing entities as long-term liabilities. Bonds provide a source of funds for the issuer and a payment to the buyer in the form of interest. As we read in the last blog, Part 7, both bonds and stocks are referred to as securities, yet the two are different types of investments.


Credit ratings:

As a credit-rating agency (CRA), the company issues credit ratings for the debt of public and private companies, and other public borrowers such as governments and governmental entities. It is one of several CRAs that have been designated a nationally recognized statistical rating organization by the U.S. Securities and Exchange Commission.

S&P issues both short-term and long-term credit ratings. Below is a partial list; see S&P's website for more information.

Long-term credit ratings

World countries by Standard & Poor's Sovereign Rating:

The company rates borrowers on a scale from AAA to D. Intermediate ratings are offered at each level between AA and CCC (e.g., BBB+, BBB and BBB-). For some borrowers, the company may also offer guidance (termed a "credit watch") as to whether it is likely to be upgraded (positive), downgraded (negative) or uncertain (neutral).

Standard and Poor's Ratings

Investment Grade

• AAA: An obligor rated 'AAA' has extremely strong capacity to meet its financial commitments. 'AAA' is the highest issuer credit rating assigned by Standard & Poor's.
• AA: An obligor rated 'AA' has very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree. Includes:
  • AA+: equivalent to Moody's Aa1 (high quality, with very low credit risk, but susceptibility to long-term risks appears somewhat greater)
  • AA: equivalent to Aa2
  • AA-: equivalent to Aa3
• A: An obligor rated 'A' has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
  • A+: equivalent to A1
  • A: equivalent to A2
• BBB: An obligor rated 'BBB' has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.

Non-Investment Grade (also known as speculative-grade)

• BB: An obligor rated 'BB' is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitments.
• B: An obligor rated 'B' is more vulnerable than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments.
• CCC: An obligor rated 'CCC' is currently vulnerable, and is dependent upon favorable business, financial, and economic conditions to meet its financial commitments.
• CC: An obligor rated 'CC' is currently highly vulnerable.
• C: highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
• R: An obligor rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.
• SD: has selectively defaulted on some obligations
• D: has defaulted on obligations and S&P believes that it will generally default on most or all obligations
• NR: not rated

Moody's credit ratings
Investment grade
Rating	Long-term ratings	Short-term ratings
Aaa	Rated as the highest quality and lowest credit risk.	Prime-1 Best ability to repay short-term debt
Aa1	Rated as high quality and very low credit risk.
Aa2
Aa3
A1	Rated as upper-medium grade and low credit risk.
A2		Prime-1/Prime-2 Best ability or high ability to repay short term debt
A3
Baa1	Rated as medium grade, with some speculative elements and moderate credit risk.	Prime-2 High ability to repay short term debt
Baa2		Prime-2/Prime-3 High ability or acceptable ability to repay short term debt
Baa3		Prime-3 Acceptable ability to repay short term debt
Speculative grade

Rating	Long-term ratings	Short-term ratings
Ba1	Judged to have speculative elements and a significant credit risk.	Not Prime Do not fall within any of the prime categories
Ba2
Ba3
B1	Judged as being speculative and a high credit risk.
B2
B3
Caa1	Rated as poor quality and very high credit risk.
Caa2
Caa3
Ca	Judged to be highly speculative and with likelihood of being near or in default, but some possibility of recovering principal and interest.
C	Rated as the lowest quality, usually in default and low likelihood of recovering principal or interest.

******************************************************

My Book; Building Wealth with Corporate Bonds

 

I told you many times about my last book published in 2003 called, "Building Wealth with Corporate Bonds." The price is $35.00. I am selling off my final copies of this book. After that, I do not plan to produce anymore.  Some of the topics enclosed are: 

• Creating a Risk Policy
• Bull and Bear Markets
• What are Stocks and Bonds
• Corporate Bond Strategy
• Buying Corporate Bonds on Margin
• How to Place orders

You can buy a copy of my book by sending a donation of $35.00 money order to: Darnell L Williams

Building Wealth with Corporate Bonds

I/O Darnell L Williams

200 A Seneca Way

Havre de Grace, MD.  21078

I only have a limited amount of copies so order yours today. When they are gone, they are gone.  

Part 7: Where do I Invest for the Best Deal for my Plan

Some of the largest Brokerage Firms in America

If you missed Part 6, please click the link below before moving on.

http://brokermakesyoubroker.blogspot.com/2015/04/part-6-dont-be-fool-protect-yourself.html

To Start, I better tell you what a stock and what is a bond?
 

A stock is an ownership share in a corporation. Each of these shares denotes a part ownership for a shareowner, stockholder, or shareholder, of that company. Stocks are traded on exchanges all over the world, the largest is the New York Stock Exchange or NYSE. Stocks are identified by their ticker symbol. For example, General Electric is identified as GE. Investors can buy a share in companies, or a share of a diversified global portfolio of stocks. Individual Investors, speculators, or gamblers can purchase shares for themselves, at a brokerage of their choice, or direct from the company, wherever they have an account set up.

There are different types of shares, common, preferred, and unlisted. Most shareholders purchase common stock. The goal is for capital appreciation, as well as income from interest, and dividends, so the investor can have a profit that beats monies in Treasury bills or beats inflation. Over time, stocks have outperformed cash and bonds; this takes into account depressions, world wars, and other world changing events. Stocks automatically adjust for the inflation of the currencies.

But bonds are not as speculative as stock. Many professional brokers, stock specialist, and traders may not agree with me. That is why my bond portfolio has out performed many of theirs over the past 6 years.

Bonds are evident of giving a loan to a company. It must mature at a given time and it must give a specified amount of money on a given dates. Here is why I borrow money from the banks and invest it in bonds. I pay the bond interest from the loan by using the interest from the bonds. At maturity, I pay off the loan principle from the bond maturity. I keep the difference called the "spread."

 

  Anything can go wrong with your stock purchase. A company backing the stock can have hard times and never recover. They can have labor problems, supply problems, and customer problems. What if you invested in a company that made buggy whips in 1890 then tried to get out of it in 1920 when people were buying cars not horses? What if you bought your stock at $20.00 then the stock fell to $5.00? Company "Y" comes along and buys the company out at $8.00. You have a loss.

With bonds, you worry about the company staying in business or going out of business. The only thing that can mess you up is if the company goes out of business.

Here is why we are going to use bonds in our business investment strategy. The rest of this series, we will start to combine the processes of borrowing money and buying Corporate Bonds. But to be successful at this, you must learn what we are doing here. 


*********************************************************************

-
 

My Book; Building Wealth with Corporate Bonds

 

I told you many times about my last book published in 2003 called, "Building Wealth with Corporate Bonds." The price is $35.00. I am selling off my final copies of this book. After that, I do not plan to produce anymore.  Some of the topics enclosed are: 

• Creating a Risk Policy
• Bull and Bear Markets
• What are Stocks and Bonds
• Corporate Bond Strategy
• Buying Corporate Bonds on Margin
• How to Place orders

You can buy a copy of my book by sending a donation of $35.00 money order to: Darnell L Williams

Building Wealth with Corporate Bonds

I/O Darnell L Williams

200 A Seneca Way

Havre de Grace, MD.  21078

I only have a limited amount of copies so order yours today. When they are gone, they are gone.  

   

Part 6: Don't be a Fool, Protect Yourself

If you did not read Part 5, please click on the link below.

http://brokermakesyoubroker.blogspot.com/2015/03/part-5-what-are-interest-rates.html

I can't say enough about the fact that you must protect yourself and what you are doing!  Most people don't care about what you do.  In fact, you will find many people resentful of what you are doing and how much you know about it.  I wish I had a dollar for every person that came to me, telling me that I should be enjoying myself with my money instead of doing what I am doing. When I hear that, they are telling me that I should be doing what they want me to do with my money.

 

People laugh at me when I give seminars when I tell them, "People are no damn good."  In my case, women tell me how much they love me. They think I know about money and that I am looking to spend it on someone. Because they think that I have money, I should be willing to spend it on them for trips, clothing, or because they need a car. That is why they want to date me until they find out that I don't spend money and I will not take them on a free cruise. That is when I don't hear from them anymore.  

 

I know wealthy women who think that they are in love, just to have the man move in and take everything that she has worked for. I have a friend who thought that they were doing their family a favor by giving them a place to stay just to find that the person they were helping was stealing things out of the home and selling it to pay for the drugs that they needed.      

 

So, we are going to talk about how to protect yourself before we go on.  First, don't talk about what you are doing.  If people do not know, they can't do anything against you.  That sounds a lot like what your mother and father told you. However, they do not tell you anything. Therefore, you never learn anything. They don't even give you a book or website to read like they did when they thought it was time to learn about sex. So this information that I am giving you, is never passed down to the next generation. That means the next generation grows up old and stupid, being taken advantage of and getting poorer as time goes on.  

 

More people than you know is controlled by addictions' such as drugs, alcohol, consumer spending, and other things. They will steal from their mother and sometimes kill family members for a dime just to feed the addiction. What I am saying, do not tell people outside your family, spouse, and  children. When you do,  don't tell them the details of your investments. Make it a family secret.  

 

The details should be placed in a book or some other media for safe keeping and put in a safe deposit box or house safe to be open upon your death.  You should control the Investment loans and the investments as much as possible.  I would not trust my spouse unless over time (15 or 20 years) they have shown that they could be trusted. Many of you know why. I don't have to tell you. Keep as much about what you are doing as close to the vest as you can.

 

Let me remind you that the police and courts are available to you, after the crime has been committed.  If the property is in Joint name between you and your spouse or Partner, the police can't help you.  Let's say that the police can help you because the neighbor next door committed the crime because your son talks to much, the neighbor may go to jail but the money is gone forever.  

 

The last thing to remember, control is 95% of the law so keep everything to yourself and train your children the same way. Now you know why most of the wealth in this country is owned by White people.  No, it is not racist or discrimination. What I am teaching you has been passed down from generation to generation because it is a family secret and you nonwhites are not in their family.

Questions and Answers

1. Many people look at what you are doing and is very happy to copy off of you if it can help them! (T or F)

2. Most people want to be consumer's first and pay bills second. (T or F)

3. Most spouses in financial trouble either hide their money problems from their spouses or is looking for someone to take their financial handicap situation from them.  

4. If you never tell your children about finance, you both would be better off.

5. Children learn about finance by the 12th Grade in Public School.

6. The reason why Black people in general is not as wealthy as White people in general is because White people invest money while Black people spend their money. (T or F)

7. Property in Joint Name between you and your spouse or a partner, the police will help you if one or the other takes that property.

8. The police can help you because the neighbor next door committed the crime of taking your property. The Neighbor knew where the property was stored because your son talks to much.

9. You found a $100 bill on the side walk. Your neighbor said that it belong to them. The unwritten law say that the person with the money has control therefore it belongs to that person.  

10. If you find an abandon car and your neighbor said it belongs to them, it does not because you found it and you possess it.   


1. F
2. T
3. T
4. F
5. F
6. T
7. F
8. T
9. T
10. F


******************************************************

My Book; Building Wealth with Corporate Bonds

 

I told you many times about my last book published in 2003 called, "Building Wealth with Corporate Bonds." The price is $35.00. I am selling off my final copies of this book. After that, I do not plan to produce anymore.  Some of the topics enclosed are: 

• Creating a Risk Policy
• Bull and Bear Markets
• What are Stocks and Bonds
• Corporate Bond Strategy
• Buying Corporate Bonds on Margin
• How to Place orders

You can buy a copy of my book by sending a donation of $35.00 money order to: Darnell L Williams

Building Wealth with Corporate Bonds

I/O Darnell L Williams

200 A Seneca Way

Havre de Grace, MD.  21078

I only have a limited amount of copies so order yours today. When they are gone, they are gone.