Forever bonds
Two questions.... Do you think that's a smart investment?
Do you think that a college should tie itself up in debt essentially 'forever'?
Quote: SOOPOOAs many of you may know, yields on Bonds right now are at historic lows. Even getting as high as 3% requires an extremely long term, or a risky company. When I plugged in some numbers that I wanted greater than 4%, a bond issued by Hamilton college came up. I miss read the exact date of redemption. It will be paying me 4.75% until it is redeemed in........ 2113!!!!!
Two questions.... Do you think that's a smart investment?
Do you think that a college should tie itself up in debt essentially 'forever'?
The Brits are still paying bonds from the Napoleonic Wars, CONSOL.
It is no more or less smart than any other investment. Do you feel the college will be around in 2113? What is the default risk? Is there an active market for resale?
As to the college taking on the debt, why not? If it is used wisely it locks in a low rate and no need to roll it over in 30 years. I have heard the Feds are not all that happy with these kind of 100 year bonds and IIRC perpatuities are banned outright. But the Feds should be selling their own 100 year or perpetual bonds and lock in today's rates. That assures a better market for new issues.
Quote: SOOPOOAs many of you may know, yields on Bonds right now are at historic lows. Even getting as high as 3% requires an extremely long term, or a risky company. When I plugged in some numbers that I wanted greater than 4%, a bond issued by Hamilton college came up. I miss read the exact date of redemption. It will be paying me 4.75% until it is redeemed in........ 2113!!!!!
Two questions.... Do you think that's a smart investment?
Do you think that a college should tie itself up in debt essentially 'forever'?
Actually it probably is based on your expectations on life span and estate planning.
Who cares if a college is in debt if they can make the payments. Everyone understands the margins they are working off of.
The time frame means nothing if they can make the required payments.
Quote: BozActually it probably is based on your expectations on life span and estate planning.
Who cares if a college is in debt if they can make the payments. Everyone understands the margins they are working off of.
The time frame means nothing if they can make the required payments.
I don’t expect to be alive in 2113. I dont expect my sons to be alive in 2113. I guess I should think of this bond more as an annuity. I paid $10k to get guaranteed income of $475 for life. I’m not unhappy with that. What I’m unhappy with is that I mis-read the date. I saw 2113 but thought 2033.
It’ll be back again at some point don’t worry.Quote: TigerWuI just want to know how the government was able to pay 15% on the ten-year back in the '80s.... Wow, wish I had been around for that...
the manager buys a few hundred so the risk of loss from default is spread out and not really an issue
if a few fail it is likely that others will soar in value
some are not aware that in addition to yields, a bond's value is also determined by its price and price action
the price action of a bond is highly speculative and similar in many ways to a stock's price action
Quote: lilredroosterIMO you would be much better off with a high yield bond fund
the manager buys a few hundred so the risk of loss from default is spread out and not really an issue
if a few fail it is likely that others will soar in value
The thought of paying someone a fee (the fund manager) is anathema to me! I think I now own over 100 separate bonds, so I am my own bond fund. (Fingers crossed...) I have not had a single bond not pay off. A lot of my bonds are not really bonds, but FDIC insured CD's. So that is an extra level of certainty.
Quote: SOOPOOThe thought of paying someone a fee (the fund manager) is anathema to me! I think I now own over 100 separate bonds, so I am my own bond fund. (Fingers crossed...) I have not had a single bond not pay off. A lot of my bonds are not really bonds, but FDIC insured CD's. So that is an extra level of certainty.
you might be surprised by how low those fees are especially from Vanguard which built its company on emphasizing low fees
also, there is no way that you as an individual investor can get as good a deal on your buys and sells as a mutual fund manager
Quote: lilredroosteryou might be surprised by how low those fees are especially from Vanguard which built its company on emphasizing low fees
also, there is now way that you as an individual investor can get as good a deal on your buys and sells as a mutual fund manager
Never have sold a bond. Hold to maturity. As far as the 'good deal', who knows how much money goes under the table when those big bonds are bought and sold to big buyers? They may be right for you; they will never be right for me.
and I don't represent or in any way have an interest in Vanguard
but you are talking about holding a bond until maturity and you are talking about buying one with a 4.75% yield
Vanguard's fund VWEHX has over the last 10 years returned 7.26%
Quote: lilredroosternot interested in debating
and I don't represent or in any way have an interest in Vanguard
but you are talking about holding a bond until maturity and you are talking about buying one with a 4.75% yield
Vanguard's fund VWEHX has over the last 10 years returned 7.26%
You KNOW that is irrelevant! Even the fund manager would not predict nor expect the present return on the bond fund to even approach that rate. In this historically low interest rate environment, the likelihood of a return like that is almost zilch.
I'd bet you VWEHX does not achieve a return of even 6% from 11/19/2019 to 11/19/2020. Interested?
Quote: SOOPOOYou KNOW that is irrelevant! Even the fund manager would not predict nor expect the present return on the bond fund to even approach that rate. In this historically low interest rate environment, the likelihood of a return like that is almost zilch.
I'd bet you VWEHX does not achieve a return of even 6% from 11/19/2019 to 11/19/2020. Interested?
no, I don't want to bet - I prefer to bet on horses
but as you know interest rates have been very low for several years now
the Year to Date return on VWEHX is 13.65%
you're holding bonds until maturity - only interested in capturing the yield
the fund manager is also interested in capitalizing on the price action
https://finance.yahoo.com/quote/VWEHX/
I'm outta here. the rest of the thread is all yours
Quote: TigerWuI just want to know how the government was able to pay 15% on the ten-year back in the '80s.... Wow, wish I had been around for that...
Here is a better one there. When Volker finally broke the back of inflation even if causing the worst Post WWII recession to this day, those rates fell. That of course made bond prices rise. I forget the exacts, but played right you could have made about 20% in a month on some of those bonds.
Quote: SOOPOOI don’t expect to be alive in 2113. I dont expect my sons to be alive in 2113. I guess I should think of this bond more as an annuity. I paid $10k to get guaranteed income of $475 for life. I’m not unhappy with that. What I’m unhappy with is that I mis-read the date. I saw 2113 but thought 2033.
That is pretty much what they are. I would ask if they are callable but at that low coupon who would ever do so?
Quote: AZDuffmanThat is pretty much what they are. I would ask if they are callable but at that low coupon who would ever do so?
They are not callable. . If they were they would be called today. They can issue new bonds, also forever bonds, and the going rate now is approximately 4 1/4%.
