Jim, Prophet, Persistentone, and Rusty. I think all of you loaded up on the AGO baby bonds like I did. I have made a small fortune on this investment.
Got add that I'm not smart or lucky enough to have done the loading-up by chance. I happened to know who W.Ross was from reading WSJ and how he put new life the steel business after buying the industry at 10¢ on the dollar. Happened to see him on CNBC during start '08 meltdown... had to do SOMETHING with my salvaged stuff before its all bankrupt... and the rest is history. Stayin' tuned on the salvaged muni insurance business...
You said ""Yield to call" numbers are all nice in theory, but in reality you seldom get that yield unless the issuer should actually redeem some at call date... never happens."
I've got news for you. In this month alone the number of calls is running at a higher rate than in the past 2 years. As I said yield to call calculations have never been more important than now because of the bond bubble. I don't even bother considering any minibonds that have a par of $25 and trading in the $27 to $28 range if the call date has passed or if the call date is less than 4 years away. I've done a bunch of calculations and the results look ugly. Incidentally, if you want to see the stats for yourself go to quantumonline and pull up the list list of redemptions in September and you'll see that so far there have been 14 and the month's only a third over. You bet your boots I'm doing yield to call calculations. I don't want to sound arrogant, but I truly believe that most owners of minibonds are not aware of the yield to call importance because they're fixated with current yield.
Well OK Tony, you got me this time for being sloppy on accuracy... :-). I just meant that the official earliest "call date" may not happen on THAT date, but of course it COULD not long thereafter. Anyone paying over $25 for ANY mini-bonds could be in for a rude awakening. I might add a little to a position that I had with average cost below $25 as long it did not get too concentrated with diversification. Got ANOTHER couple redemptions in last 30 days and have to decide what to do with those redeemed $$... :-(
If you're looking for a safe yield play (IMHO) then try the old MBNA TRUPs (KRB-PE). Bank America bought them out years ago but keep these preferreds outstanding. Nice yield (~8%) for effectively subordinated debt due to the trups structure and dividends are cumulative. It does trade at your 25.50 mark.
If BA didn't fail 2 yrs ago they sure will not going forward.
Diversification is more important to me than yield at this time. I don't expect to replace it with another yielding the same. I'll probably find something in the 6% range, but it will still be investment grade such as HTN OR IKM to name a couple. The extra cost is worth it. For example, losing 1% in yield will cost you $200 on a $20k investment. That's a cost I can live with.
For the first time I'm really paying attention to yield to call numbers. For example, I own VNOD and it now has a yield to call of 5.42%. This is still worth holding for now, but if it falls below 5% I'll start thinking about selling it. Some of the yield to call numbers have gotten absurd in my opinion. For example, EHA is now well past its call date has a large negative yield if Entergy called it in before the month was over. If I owned EHA I'd sell it in a New York minute.
"Yield to call" numbers are all nice in theory, but in reality you seldom get that yield unless the issuer should actually redeem some at call date... never happens. You might one buy one at some price higher than call price, but if you hang on to it until you sell for something else then you don't ever get the actual yield. You get what you got, without ever getting the "yield to call" yield.
So in my case, I have AGO mini bonds bought well below par, and until AGO decides to redeem some at par, I plan to keep them no matter what the "yield" works out to be. No way to replace that outsize yield on the price paid. Go WR...
Well "Mr. market" has returned to normal pricing for exchanged-traded issues. So now its time for him to decide if AGO is a screaming buy, or still a "show me" relative to future muni insurance business. If AGO can in there as long as ABK debt has done, it could be awhile. My "Las Vegas" $$ has AGO common to see if we can do a Wilbur Ross instead of a Warren B....
Yup. It looks like pricing is getting back to normality. I bought them because they were a great investment regardless of asset class. Now I am looking to balance my portfolio out a bit by including more fixed income which is why I am hanging onto a lot of these issues especially with the yields on treasuries. Have you guys been lightening up your positions on some of the debt issues???