[net.invest] bonds - part 1

tbul@trsvax.UUCP (08/31/84)

#N:trsvax:52900013:000:2280
trsvax!tbul    Aug 31 12:27:00 1984

BULKOWSKI'S INVESTMENT GUIDE

BONDS - ALL TYPES
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	A debenture is a bond that has no assets backing it up.  Only
	the general credit of the corporation backs up a debenture.

	When buying bonds for savings purposes, buy the general obligation
	bond.

O	Buy bonds rated A or higher for safety reasons.

O	Buy bonds in anticipation of a decline in interest rates.

O	If a corporation has extended easy credit to its customers during
	a time of good economic growth, collecting from these same 
	customers may become difficult when the economy turns downward. 
	Should a corporation be in such a state, do not buy its bonds.

O	If the company has overextended itself, when the economy turns
	downward it may not be able to pay its bills.  Do not buy its
	bonds!

O	Can the corporation repay the 'loan' (in this case, the bond)
	even when the economy turns stormy?

O	Has the corporation missed payment on previous bonds or loans?  If
	they have, then don't buy the bond.

O	The underwriter should be a member of a major stock exchange.

O	The company's assets should greatly exceed the face value of the
	bonds.

O	Is the issuing company in a growth industry (or is there a
	possibility or growth)?  If not, avoid the bond.

O	For a convertible bond, the conversion price of the bond should be
	within 15% of the stock.

O	The underwriter should be a well known outfit.  He will not take a
	chance supporting a convertible bond that is not stable.

O	The interest rate for a convertible bond should be within 1% of
	the rate for a non-convertible bond.

O	Avoid bonds that come from companies in cyclical industries.

O	If the bond is yielding the proper amount, do not wait to time
	your purchase; start collecting the income now.

O	Diversify your bond purchases; buy from several different
	companies.

O	When you do buy bonds, stagger their purchase dates.  In this way,
	when you begin to collect income and decide to reinvest it, you
	can profit from fluctuations in interest rates.  It is similar to
	dollar cost averaging in stocks.

O	Should you buy a discounted bond (one selling for less than its
	face value), the yield will include both the interest rate and the
	capital gain rate.

O	Will the bond will keep you ahead of inflation in the years ahead?