invest in sears bond maturing next week 10/15 , trading at 58c on the $

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manuvns
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invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by manuvns » Wed Oct 10, 2018 1:01 pm

what are the bogleheads thoughts on buying the distressed debt of sears ?
Last edited by manuvns on Wed Oct 10, 2018 1:04 pm, edited 1 time in total.

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flossy21
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Re: invet in sears bond maturing next week 10/15 , trading at 58c on the $

Post by flossy21 » Wed Oct 10, 2018 1:03 pm

I don't know about the Bogleheads' advice but I think that sounds like a great way to lose some money.

manuvns
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Re: invet in sears bond maturing next week 10/15 , trading at 58c on the $

Post by manuvns » Wed Oct 10, 2018 1:04 pm

thanks now down at 50c

ge1
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by ge1 » Wed Oct 10, 2018 1:05 pm

manuvns wrote:
Wed Oct 10, 2018 1:01 pm
what are the bogleheads thoughts on buying the distressed debt of sears ?
I'm curious, how would you actually buy these?

Nate79
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by Nate79 » Wed Oct 10, 2018 1:14 pm

What is your expected payout in bankruptcy?

bhsince87
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by bhsince87 » Wed Oct 10, 2018 1:25 pm

That's not investing. That's speculating.

Not saying it's a good or bad idea though. I have no idea.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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cheese_breath
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by cheese_breath » Wed Oct 10, 2018 6:58 pm

You've been a forum member closing in on eleven years and have 648 posts. What do you think?
The surest way to know the future is when it becomes the past.

MichCPA
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by MichCPA » Wed Oct 10, 2018 7:15 pm

Well, management's plans are to try to reduce debt by 80%. That tells me all I need to know.

Grt2bOutdoors
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by Grt2bOutdoors » Wed Oct 10, 2018 7:24 pm

Buy it, you’ll likely get something more than the equity holders, just how much more is anyone’s guess.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by Grt2bOutdoors » Wed Oct 10, 2018 7:24 pm

MichCPA wrote:
Wed Oct 10, 2018 7:15 pm
Well, management's plans are to try to reduce debt by 80%. That tells me all I need to know.
Says mgmt is going to offer you less than 20 cents on the dollar.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

manuvns
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by manuvns » Sun Oct 14, 2018 9:00 am

thanks got paid this weekend and made 20% return in 10 days . the symbol was 812350AE6

RudyS
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by RudyS » Sun Oct 14, 2018 9:12 pm

CNN says they will file for bankruptcy Monday morning. I would think (IMHO) that there will be some small recovery for bondholders. No idea how much. A real gamble. But as they say on Shark Tank, I'm out.

MnD
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by MnD » Sun Oct 14, 2018 10:29 pm

I bought a truckload of General Motors bonds pre-bankruptcy at a variety of prices with an average something like 12 cents on the dollar.
Ended up +165% but while I was waiting for recovery the market was up that much so it was not worth the risk.
But I learned a lot about corporate bonds in bankruptcy and all the complexities of the GM demise and emergence of new GM.
Was paid in warrants and shares for the "new" GM at the IPO price which was also a learning opportunity.
Got a 100% tax loss on the old bonds and the new securities were then zero cost basis which I gifted to kids for college bills.
No regrets but not a big money-maker. :beer

Sears 50 cents on the dollar seems highly unlikely to have any profitable recovery, especially given the unusual circumstances of Lampert as CEO who has basically liquidated much of Sears already outside of bankruptcy.
Last edited by MnD on Mon Oct 15, 2018 12:25 am, edited 1 time in total.

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whodidntante
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by whodidntante » Sun Oct 14, 2018 10:44 pm

Make sure to diversify with some Puerto Rican bonds.


poundwise
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by poundwise » Mon Oct 15, 2018 2:26 am

OP: while this is a decidedly un-Bogley move, would you mind sharing your process for the edification of others?

Where do you buy and sell these bonds?
How much are the trading fees?
How do you check the market price?
How much is the spread? (And do you care about this when trading?)

jminv
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by jminv » Mon Oct 15, 2018 2:42 am

The CEO stripped all of the most valuable parts of Sears in the last few years so I wouldn't view this as a very secure bond since there's little to pay you back with if this goes to liquidation. I honestly don't see how this won't end in liquidation in the end. They're trying to re-organize and emerge with 300 stores but Sears will still be in a death spiral and it will just prolong it's misery. Even without liquidation, they want to emerge with 20% of the debt they have now implying a 80% haircut, on average. Without assets backing the bond, you need some sort of belief that the company will prosper but that's hard to believe. I wonder who their customers even are anymore. It's been interesting watching this saga unfold over the last decade, which is far longer than I thought it would take for it to happen.

I looked this issue up and it matured on the 15th, didn’t realize that was what you meant by getting paid. You got very lucky, enjoy the gains.

ivk5
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by ivk5 » Mon Oct 15, 2018 3:14 am

manuvns wrote:
Sun Oct 14, 2018 9:00 am
thanks got paid this weekend and made 20% return in 10 days . the symbol was 812350AE6
Let us know when it’s time to sell...

Out of curiosity, do you think this represents
A) extraordinary return for taking extraordinary (idiosyncratic) risk
B) getting something for nothing
C) luck
D) unique knowledge/skill
E) other?

quantAndHold
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Re: invest in sears bond maturing next week 10/15 , trading at 58c on the $

Post by quantAndHold » Mon Oct 15, 2018 7:21 am

So do you have some unique knowledge or expertise that the vulture investors that have deep pockets and do this full time don’t have? Do you have any expertise at all in investing in distressed assets? Are you the patsy in the room, or are they?

I’ve done some speculating on distressed assets. Two things...For a deal to be worth pursuing, it needs to have a potential payoff that’s worth the long odds you have of actually getting paid. Distressed bonds usually aren’t that. And you need to have enough deals in play that even if nine out of ten go to zero, the one that pays off will save your bacon.

I don’t do this anymore. I made money overall, but it was too much work finding the deals, and too stressful once they were in play. And I think every deal that made money had my money tied up for 2-3 times as long as I originally thought it would.

Edit....I hadn’t read the news before I posted. Assuming you didn’t get out in time. My condolences. You’re about to have a learning experience.

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