I saw it in 2008, and again in 2020. The worst of times can be the best, if you keep your head, and swing for the fences when the odds are stacked in your favor. As nearly anyone could have predicted, there was no way that any administration, Democrat or Republican, would let certain vital American companies go out of business. In 2008, it was the top ten banks, in 2020, it was Ford, and to a lesser degree, Macy's. When the Fed hands a company money, either directly with a "loan" or indirectly, by buyings the company's bonds on the open market, you are looking at a functional guarantee. Buy! I did, both in 2008 and 2020, with huge results. My paper gain on Ford bonds bought in 2020 is nearly 40%, on top of the interest earned along the way. While I think the future for Ford is dim, its centrality in the American economy means that the functional bond guarantee will persist for some time.
My second Covid course of action is a departure for me, from bonds to the world of MLPs, master limited partnerships. Enterprise Products Partners (EPD) is a mid-stream player in the gas and oil realm, with a heavy emphasis on natural gas extraction, processing, and delivery. OK, not great from a renewable point of view, but as an interim alternative to vastly dirtier energy sources (coal, fuel oil, diesel, etc), it has a bright future for a long time. Its present yield is 7.6%, based on a distribution of $1.80 with a unit price of $23.50. Since that $1.80 is treated as a return of capital, there are no taxes due on it until the stock is eventually sold. I have a paper gain of 25% over six months, plus the distributions. Since I use margin (a bit less than 1:1, the actual yield is about 13%, tax-deferred. So, one-year paper profit about 38%. The company is huge, and has grown its distribution for over twenty years. So, not absolutely safe, but far safer than your average junk bond, with a better yield.
And now my epitaph to Transocean. The company survives (is actually up quite a lot in 2021, its C rated bonds continue to pay interest), but I too now think I see the handwriting on the wall. Deepwater oil drilling is nearly the last thing the world needs, and I don't see much hope for Transocean going forward. I just sold my last bonds, at prices well above last year's lows, but well below purchase. Here's the final snapshot:
Global Marine Transocean Bonds Options
Trading gains: $ 63,000 -$31,500 $58,000
Interest 205,000 $80,000
So, nets gains over $360,000 on a stock that cratered, with no short-selling involved! I'll take the results, but won't play this game again.
