Being Defensive when investing in Corporate Bonds

I have a friend who claimed that he was investing in corporate bonds.  I asked him what bonds did he own? He said that he bought his bonds in the share builder's Plan and they were high yield bonds.  His statement was my first clue that he did not own Corporate Bonds. He had bond funds.

 

Many times, brokers and other people will pull a bait and switch on unsuspecting people. They tell customer that bonds are bond funds. This has been going on since the 1980s. Here is the reason why I started educating people on the difference between bonds and bond funds.

 

When interest rates decline, bond funds go up because the rates given by other investment keep pace with bond investments. That also means that the bond interest of the individual bonds go down. When interest rates go up, bond fund prices go down because bond interest rates go up.  Since it is a fund, the investment never matures. Here is why I stay away from bond funds. 

The beautiful Becky Quick dumped all of her bond funds. She explains her actions here. 

 

(Becky Quick), Rebecca ("Becky") Quick (born July 18, 1972) is an American television journalist/newscaster, co-anchorwoman of CNBC's financial news show Squawk Box. Quick is currently based at CNBC’s New Jersey headquarters.

 

I opened my first brokerage account when Becky was born.

 

Here is why I invest in Corporate Bonds. My interest is locked in. They mature on a date and I get my money, interest usually every 6 months and usually $1,000 on a date.

 

For example, I bought;

 

Cloud Peak Energy Resource LLC CPE SR NT has a coupon of 8.5% on $1,000 or $85 per year, that matures on Dec. 15, 2019. So if you bought this bond at $900.00, you will get $1,000 on the maturity date. If you bought the bond on December 15, 2015, you will receive $85.00 times 4 years or $340. That means on a $900 investment, you will get a $440 return. Your risk is Cloud Peak Energy Resources filing for chapter 11.      

    

Click on the link or on the picture.     

https://www.youtube.com/watch?v=I1PWBsUZvUE

 

CNBC's Becky Quick Dumps Bond Funds

 

Becky Abandon Ship

Becky got out of High Yield Bond Funds at the top of the Market.  Now interest rates are going up, bond funds are going down because of what I told you about the inverse actions of interest rates and bond prices. Bond funds become illiquid because everyone is running to the door at the same time and prices fall like a rock.

 

Read this article, " Could the Bond Market Be Transformed?" and you will see how Becky quick saved her 401K from destruction.

http://www.newsmax.com/Finance/Robert-Feinberg/Bank-Merrin-Newmark-El-Erian/2015/05/19/id/645469/

Could the Bond Market Be Transformed?

 

What am I doing about this?

As for me, I own the bonds. As interest rates go up, my bond prices go down. My interest that I get is locked in. But my bonds mature and I get $1,000 no matter if I paid $900 or $500 for them.  My only worry is the underlying company files for bankruptcy.  

Let's Review Corporate Bonds 101 and Beyond

Hopefully, this Light House will help you see the way.  

This is a British firm talking about Corporate Bonds. Why am I showing you a British Video? Because US Brokerage firms tell US Citizens that Corporate Bonds are high risk, spreading misinformation for their own interest.

Here you will find that everything that I told you about individual Corporate Bonds is true. Not only that, the British tell their citizens about the difference between individual corporate bonds and bond mutual funds.

Bond funds have added risk because they do not mature. Individual Bonds mature. Here is where US brokers pull a bate and switch on Americans, getting you to believe that if you invest in individual bonds, you will loose money. Brokers make no money here.  But if you invest in corporate funds, you will do great.

If you are armed with the truth, you know that Bond Funds are the risky investments. Stay away from them.

Click on the link below or on the picture.

https://www.youtube.com/watch?v=RpOdBHay29o

Bonds explained - Buying bonds at issue and holding to maturity  

Published on Apr 25, 2013

In this 9 minute video, Patrick Gordon, Senior Investment Strategist and Head of Fixed Income, will cover Corporate Bonds; Bond Features; Bond Prices; Bonds bought at issue and held to maturity and Bond Yields.

https://www.youtube.com/watch?v=PDpTHmzWVok

Bonds explained - Buying and selling bonds on the secondary market

In this 9 minute video, Patrick Gordon, Senior Investment Strategist and Head of Fixed Income, will cover Bond Prices; Bond Yields; Yield to Maturity and why invest in Bonds.

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

If you listen to me back in December 2014, you would have bought Corporate bonds like I did. As of May 12, 2015, my profit just on these bonds was 4.344%. Most people investing in stock at the same time is looking at a loss or at best break even. 

Here is where I draw the line!

I do not trade in Corporate Bonds. I invest in corporate bonds until maturity in most cases. If you want to trade in Corporate Bonds then look at the video below. I would not recommend doing this type of investments but look at the video and maybe you will learn something!

https://www.youtube.com/watch?v=IpIhbZjeAvI

How to Trade Bonds

If you notice, this man is from Tennessee, USA. That is because when trading bonds, the commission is higher than if you buy bonds and hold them. That is an American brokerage game!

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

 

 

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 5: What are the Interest Rates?

What are the banks selling money for?



















We learned in the last 2 lessons to make sure your credit is as good as you can get it. If you have not done that yet or have not read the last Parts (4 and 5), read the following blog.


https://www.blogger.com/blogger.g?blogID=4738936030458353613#editor/target=post;postID=7867299750255712615;onPublishedMenu=allposts;onClosedMenu=allposts;postNum=3;src=link

It is time to shop for interest rates.

As I said before, my credit is in the 770s to 800 range, that is great credit. I should be able to get the best credit possible. Today as I am writing, that is 2.5% and I should be able to borrow $170,000 on a $225,000 home easily.

 What are Corporate Bonds selling money for?



What is the spread between the rates?

The bond or bonds that I expect to buy has a rate of 5%. That is what the bonds that I need sell for in interest. So we are talking about $100,000 bonds, giving  $5,000.

The Banks interest rate on my line of credit is 2.5%, getting a loan of $100,000, using my house as collateral, I pay $2,500 interest expense.

The difference between the money that I have to pay the banks  is $2,500.  $5,000 - $2,500 = $2,500 is the spread or the money that I am keeping.

Notice, that this is a "no money down" deal and I am walking away with $2,500 per year. In this strategy, I should make more than that. I also make money on the Maturity Price, say $1,000 minus the Discounted Purchase Price or $750. I put in my pocket $250.00 per bond. 

This is our objective in this process. We are going to take the banks money and make money to buy cars, homes, or bigger homes or better cars.

Now it is time to see the brokerage firm!

Apply for your brokerage account. You can find several online.   I suggest a firm where you can invest online. I use Zion's Direct Online Brokerage because of the low commissions on bonds. But I am sure that other brokerage firms have commissions just a low.  

But remember, they must have low commission rates and a large portfolio of bonds that includes BB+ through CCC bonds. Make sure that they have bonds which you can buy as low as 1 bond per trade. However, the volume of bonds sold per transaction maybe controlled by the seller.

http://www.forbes.com/2011/01/25/how-to-open-your-first-online-brokerage-account-personal-finance.html

If this is your first account, you may want to read this link above.

Remember that security of your brokerage account is important. Click on this link below to learn more about securing your account.

http://www.sec.gov/investor/pubs/onlinebrokerage.htm



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-
 

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.  

Thank You Very Much from Darnell L Williams

Financial Analyst and Activist Darnell L Williams

I want to thank the people who wrote me on facebook, AOL, and contacted me on other media to tell me how much they appreciated my work to educate the people on investing. People from all over the world read my financial blogs.  On the eastern Sea Board of America, I heard from people as far south as Washington DC and as far North as the Pennsylvania/New York boarder.

 

One person wanted help in getting into the market starting with what brokerage services to buy. Then how to set up a portfolio. Another told me that their children quote me on a regular bases. These people are very flattering and shows that I am getting through to people.

 

Let me give the new grandparents a gift for their grand children. The children may not care about it now but will appreciated it 10 to 18 years later. Remember, life is one march from the birthing room to the cemetery. What happens in between is up to you and your family. Here is how you can help in moving your children and grandchildren in becoming successful in that period of time and help them become successful.  

Take $30 per month or more, place this money in a sharebuilder's account. To find out more,  by clicking on:  https://www.sharebuilder.com/sharebuilder/default.aspx

for one of your grandchildren. If you have more, then open one for each child. Many of you spend 100s of dollars on each child on toys that get broken up as fast as you give it to them.  Instead of doing that, why not save this money toward a car for graduation day, 18 years away.  You can open a custodial account making you custodian of the account and in control of the assets until age 18. Plus, if you are smart, you will use the child's social security number which will make the money in the account tax free to you and taxable to the child at the child's tax rate. Most of the time, that rate is 0%.   

 

This account allows you to buy full and fraction of shares. I suggest buying stocks with a good history of giving dividend each year. In my opinion, AT&T (Symbol: T)  is the best stock. They increased dividends every year since at least 1984. click on this link to see its dividend information.

 

AT&T Building

In my opinion, if your grandchild is born 2/13/2015, I would send for the child's social security number 2/16/ 2015. Get the information needed by going to the Social Security Website:  http://www.ssa.gov/pubs/EN-05-10023.pdf.

 

Contact Sharebuilders and see if you can open an account now while waiting on the Social Security number. Start putting the money into the account and buying the stock until something changes in AT&T or at age 18. In our case the year 2/13/2033. By the way, the parents can help increasing the child's wealth as well.   

 

AT&T on 2/13/2015 at 11:30 AM sold for $34.65 with a yield of 5.43%. This money could compound in the account four times a year for 18 years until 2/13/2033 or as long as it is in the account. Keep in mind that this stock has raised its dividend from 1984 starting at $1.40 to February  2015 with a dividend of  .47.

 

 Wait, I said that the stock increased its dividend every year since 1984? It did.  click on the link below.

http://www.att.com/gen/investor-relations?pid=5673

 

If you take into account 3 stock splits. The stock is worth far more than before the splits and the stock dividends have vastly increased.

AT&T Inc. Historical Split Data
(formerly SBC Communications Inc./Southwestern Bell Corporation)

Year	Split Information
1998	March 19 — 2-for-1 common stock split
1993	May 25 — 2-for-1 common stock split
1987	May 22 — 3-for-1 common stock split

Solving a Financial Problem

I make money from financing in Natural Resources.

Let me start with me telling you that I don't want you calling me any names. Don't call me arrogant or a braggart. I am trying to teach you how to make money in the coming financial markets.  Do you remember when I told you that the next up trend was coming in the market? Here is the last blog about the coming up trend in the market just in case you missed it. Click on the link below.

 

http://brokermakesyoubroker.blogspot.com/2014/12/my-investment-of-choice-is-still-bonds.html

Investing in Bonds

 

I saw signs that the market was in the capitulation stage. That is when you have the market going down 100 to 300 points per day and you hear from the news people that the world is coming to an end. This was the signal to tell you to "buy, buy, buy!" So I told you about it and I started buying.

 

I am retired so my investments make up a large part of my income. I spent over $200,000 this year just to survive.  So now I have to generate some income before I run out of money by age 65.

 

That is the reason why I started buying into the bottom of this market.

 

 

CLIFFS NATURAL RESOURCES

I bought 10 Cliffs Nat Res Inc. 5.700% due 01/15/2018 bonds, giving me 21.299% in interest per year until January 15, 2018. The Standard and Poor's Rating on these bonds is BB- and the Moody's Rating is B1. I buy bonds with a Standard and Poor's ratings between BBB+ and B-. They give the best interest with the least amount of bankruptcies.  This bond is right in the middle of my target rating bonds.

 

I spent $6,889.62 on this investment.  I plan to get on January 15, 2018, $10,000 in bond principle at maturity and ($57.00 times 10 bonds = $570.00 per year; $570.00 times 3 years and 3 weeks = $1,742.79 in interest over 3 years and 3 weeks but I had to pay the seller 259.67 plus $9.95 in commissions to the broker) $1,473.17 in total interest.  The bonds pay semiannually on January 15 and July 15.

 

Each bond cost $662.00 per $1,000 bond. I am making on this bond investment, $1.56164 per day.

 

In total out of this transaction I hope to have $12,010.38 over 3 years and three weeks.      

 

Cliffs Natural Resources Inc. is a leading mining and natural resources company. The Company is a major iron ore producer in the Great Lakes region and a significant producer of high-and low-volatile metallurgical coal in the U.S. Additionally, Cliffs operates iron ore mines in Eastern Canada and an iron mining complex in Western Australia. Driven by the core values of social, environmental and capital stewardship, Cliffs’ employees endeavor to provide all stakeholders operating and financial transparency.


Why am I telling you this?

 

If I did not tell you this, I would still make the money that I am telling you about if the company does not go bankrupt.  Most of you cry the blues when you see people living in big houses or have nice cars. You find out that most rich people get opportunities that you will never see or understand. They make far more money than you will ever have.  Why?

 

Because information about investing is handed down from generation to generation. No, they do not teach what I am showing you in school. No, they do not want to teach you what I am talking about in school. If you know what I am talking about and do it, you will buy less junk and start thinking about how to make money and become your own boss.  You will start thinking about how to make your children and grandchildren better off than you.  You will understand the benefit of becoming a corporate activates and put full communities in the job market making plenty of money.

  

Think back to what your family and your church is teaching you.  You ask your mother or your father about money and they will call you names like I was called, "Money Bags", "lover of money", or one that I heard today, "Money  is my god". 

 

The church tells you that, "it is easier for a camel to go through the eye of a needle than for a rich person to enter the Kingdom of God!", Matthew 19:24.  This gives people the idea that poverty is better in the long run and being poor and disadvantaged gets you into heaven. This directs people to have faith in the idea that it is better to complain about the system than to learn how to use the system. Here is the reason why the poor can't be helped!

 

So you got the idea that you are not suppose to talk about money and money is bad.  Many people are taught that exchange of ideas is bad so you and your family for generations stay financially retarded while others get better and wealthier every generation. You call it discrimination. I call it your stupidity.

  

You want better jobs for your children, better schools for your children, a better home and reliable transportation, well this is where it starts. You learn about money and how to invest it to make more money and take over part of the economy.  You do that and you will have more rights and they will be more respected than being poor with no rights at all.   




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.  

Know Your Risk When Investing, Speculating, or Gambling

Financial Analyst and Activist Darnell L Williams

 

Here we go again with people calling me a "bragging, boasting, scruffy looking old man."  I shouted back, "Who you calling a scruffy looking old man?"

The reason why I talk about my investment successes and sometimes my disasters is because most people learn about finance from family members. That means they learn nothing at all since many families do not teach their children anything about finance. Public Schools tell you how to open a checking or savings account if you are lucky. Public schools are controlled by local banks. They tell you nothing about financial markets. They say, if you want to save, we will put you in high cost Mutual Funds.

 

So as the nation moves on, most people stay behind the financially educated. That is especially true with Black families. Most name calling directed at me comes from people in Black families because they were taught not to talk about finance. Then when they find out that they are behind in over all income vs. White families, they cry discrimination.

 Financial Education

Instead of learning from my blog, they call me names like what you see at the top of this blog. Now for people who want to learn high finance to help with family future purchases, read on.

 

Most brokers will tell you that junk bonds (sometimes call noninvestment grade bonds or High Yield bonds) are high risk investments. That is because they want you in open ended mutual funds, options, and annuities. Why? Because they can make more money off of you than individual stocks. They make very little from you if you purchase bonds.  So they tell the media that investors cannot make money off of bonds because they do not pay in a low interest rate environment. Junk bonds are very high risk and you have a good chance of losing money. The media, not knowing any better or because the brokerage firms are clients, tell you this propaganda.

 

 Well, here is what I am doing in this bad stock market environment. You know, this market that falls without warning , 100, 200, and sometimes 300 points per day.

 

The 6 month fall in the Oil Commodity Market.

362337AL1 | GTE NORTH INC DEB-G MBIA 6.73000% 02/15/2028. Purchase Price $775.95, giving me $136.89 (or +17.64%) in interest and appreciation since I owned them per bond, Standard and Poor's Rating is AA-. I bought them when they were in Junk Bond status. Now it is in investment grade. The company pays half of its interest on February 15 and half August 15.  

 

 

US Oil Refinery

I wrote this blog, click on this link to read it; 

http://brokermakesyoubroker.blogspot.com/2014/12/making-double-digit-gains-for-at-least.html,

"Making Double Digit Gains for at least 6 years"

 

on the same day I created this portfolio in the above blog. I bought these bonds in this portfolio on December 31, 2014. Today, January 15, 2015, my portfolio increased 1.595%. That is an increase of 1.595% in 15 days. If you annualized that increase it is 38.26944%.

In my IRA Account, I received a note today telling me that one of my bonds will be paid off early. That means that  I will get the remainder of what the company owes me on this bond on February 1, 2015. This is a Standard and Bond B-. It is a Junk bonds, giving around 12% Yield to Maturity.

CUSIP:	38121EAJ2
Security Description:	GOLDEN ST PETE TRANS
Interest Rate:	8.040%
Maturity Date:	2/1/2019

 

It was suppose to mature on February 1, 2019. I bought it in 2011. So I am crying all the way to the bank because I am missing out on 4 years of interest.

 

What is the risk that I am taking?

 

If you do not take a risk, you will anyway by default. 

The biggest risk that I am taking is the risk of bankruptcy of the companies that these bonds represents. There is a good chance that bankruptcy can happen.  It happened to me with Jamesway and A&P Supermarkets. When TWA went bankrupt in the 1980s, I got my money back plus interest. I am talking about "business risk" here.

    

What is the risk that you are taking with savings accounts?

 

The 2015 Hyundai Sonata ranks 1 out of 19 Affordable Midsize Cars.

 

Savings and investment is a matter of risk. What people do not understand is that it is purchasing power that you want, not cash per say! For example, I remember paying $12,000 for a fully equipped Hyundai Sonata in 1990. I just priced one today fully equipped and it cost $33,644. That is an increase of about $21,644 in 25 years. That is $865.76 or 7.215% per year increase. So instead of buying my car in 1990 and I had the patience to buy it in 2015, my money would have to increase by 7.215% to buy the same car. If I could not make that kind of money in 25 years then I would lose to car inflation. That is the risk that I could have taken.

 

Purchasing Power Risk may stop you from buying your home.   

This also means that if I wanted to be safe with my money like most people think they are doing at an average of 2.5% over 25 years, they would have lost purchasing power. This is why Bank savings accounts are not a good idea over time. The people's money is guaranteed by the Federal Government but purchasing power is not.   This is one reason why the average working person becomes poorer every year.  

 

 

Don't laugh, this may happen over night, if China calls in US Debt!

This is called "inflation risk" and since you made part of the money that you need you are also losing to "interest rate risk."     

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.