Wednesday, September 2, 2015

Junk Bagholders

Pimco High Income Fund Pimco Message Board

stockgangster • Sep 30, 2014 3:09 PM

buy phk on margin!!!

dividend will pay off both principle and margin interest rate. No brainier! I don't believe they will cut dividend after Gross just left.

In "principle", it's a no brainer to borrow money to buy junk.

stockgangster • Sep 30, 2014 5:12 PM

Ok I agree the game is not for everyone but for sophisticated traders. Use margin to buy at 11 makes perfect sense. Just do a little math and you will figure this out. Just don't use full margin of 40-50% and use about 10% so you can sustain a bit more downward move and you should be fine. Unless the game changes like the dividend cut or bond market crushes, this would be a high probability of wining trade. It's little too late now.

For sophisticated traders, it makes perfect sense. Just do a little math.

Hindsight PHK Math

Adjusted close on 9/30/14: $10.39
Adjusted close on 9/2/15: $8.57
Net loss: 18%

The adjusted close includes the hefty dividends. In hindsight, borrowing money to chase the "sure thing" non-investment grade junk yield was a horrible plan.

Northwest Territorial Mint: 90% Silver Coins

Commonly referred to as junk silver bags...


Sell price: $15,193.75
Buy price: $10,346.05
Round trip net loss: 32%

That's a hefty premium for junk. When I bought physical junk silver in 2004 and sold in 2006, it cost me roughly 6% to make the round trip. Surely there must be better ways to invest in silver for those who must have it. I bought "junk" because it was the cheapest. Now investors are paying a huge premium for it. Go figure.

Other than to say that there's a sucker born every minute, this is not investment advice.

1 comment:

Stagflationary Mark said...

For those curious, I opened one of those junk silver bags when I owned them. The typical coin was very worn. Many were completely black due to tarnish. A very small percentage were not even junk coins at all (meaning there was no silver in them).

I was slightly concerned about the latter but they bought all the coins back without caring. Too much trouble and labor for the mint to verify every last coin apparently, especially on bags that were sealed by them and remained sealed.

In any event, when they say junk coins they aren't kidding. Nobody in their right mind is going to get out the silver polish to make them look better! Seriously.