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...

BAG 90% U.S. SILVER QUARTERS $1000 FACE

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.