After 7.5 highly adventurous years of bond investing, I decided it's time to take stock, or rather "bond". So, I went back to the beginning (2008), when I switched from my (frankly) disastrous stock / options style of investing to bonds: bonds, nothing but bonds, bonds all the time. I prepared a trade-by-trade listing of each purchase and redemption from May, 2008 until the present. My first purchase, Clear Channel 7.25% of 2027 was the very worst. I bailed out in September of 2011, with a nasty loss of $3100 on an original investment of $6800. Things soon got better though, a whole lot better.
From that start date to now, I bought a face amount of bonds to the tune of $2.88 million. The actual cost was $2.4 million. Since nearly all the bond positions have since risen well above par, that gain alone looks rich. In the meantime, I sold off positions worth $1.28 million, for a pre-tax profit of $176,000. The remaining positions are worth $1.35 million, with an unrealized profit of $304,000. On the taxable side, I used margin along the way, generally paying about 1.25% annually from Interactive Brokers. Starting with an initial total dollar outlay of $277,000 as of March 1, 2009, this portfolio is now worth $652,000. Adding back in $477,000 withdrawn over this period for living expenses, the adjusted value is $1.13 million, a return of 307%, or a compounded return of 20.5%! People praise Soros and Buffet for gains in the 18-20% annual range. Their calculations don't account for ANY withdrawals over the years; mine were nearly half a million! Had I reinvested those funds over the years, my results would have been substantially richer and I'd be looking down my nose at those amateurs.
So, where are MY acolytes, slavering for scraps from MY yearly press conference?
Of course, my IRA returns are far more modest: only 115% on an original outlay of $274,000. That's merely 12.5% annually over five years (my IRA bond investments were complete by July, 2010). Still, what bond maven wouldn't have killed for such returns (I'm talking to you, Bill Gross)?
Looking back, I am very inclined to fret. If I had only doubled, tripled, quadrupled down! Knowing what I knew, believing what I believed, why didn't I swing for the cheap seats? Well, to put it bluntly, I did, to the extent of my abilities. While it would have been technically feasible to be far more aggressive, I actually went to the farthest limits of my psyche. The risks I took (and they were considerable) were all I could handle. More and I might have exploded, imploded, or simply melted. Only the retrospective glow of success makes additional risk-taking look plausible. So, I simply have to pound the drum I have, not that bigger better one.
My disadvantages vis a vis Warren and his crowd are many: they have lots of insider information, they have huge sources of very cheap funds; they can command seriously favorable terms in buying and selling; they can influence management to do their will; and the pilot fish trailing in their shadow bid up the stuff they buy after the fact. I, however, am not without certain modest advantages as well: I can buy and sell without moving the market; I can overweight to my heart's content; I have no one riding my ass about last quarter's results and ... well, that's about it. But perhaps there is one additional advantage: it's MY money; I care a lot about it; and I watch it very carefully.
When I started this blog, I was sure I had useful advice, and this latest analysis bears me out. Folks, listen up! You'll thank me later!
