Table of Contents
We dedicate this book to Lt. Robert Andrew Cohen, Naval Intelligence Officer. You are the best of the best in life: Great nephew, caring person, and integrity personified. Honor, courage, commitment ... thats you.
Ooh-rah, Rob.
Aunt Marilyn and Uncle Chris
Foreword
The credit crisis of 2008-2009 was brutal, not only for equities but also for bonds. The only safe harbor was Treasuries, yet for several months in 2009 even Treasury note and bondholders suffered losses as equities and junk bonds surged in value. This violence in the fixed-income securities markets underscores why investors badly need the sure, expert guidance of Marilyn Cohen. We know how crucial it is to have diversification in our portfolios, but how do we navigate the tricky markets of fixed-income securitiesparticularly Marilyns specialty, bonds? Most issues dont have the liquidity one expects from stocks, and even mutual funds can experience uncomfortable spreads in some of their holdings. Yet bonds are crucial componentsor should bein the portfolios of millions of investors.
With Bonds Now! Marilyn Cohen has written a book giving us step-by-step ways to navigate the new, post-2008-credit-crisis bond market. Too often bond investors delegate control of their investments to their brokers. In these turbulent times its understandable that you might want to hire a professional, but you should understand the strategies and tactics he or she will be using. Marilyns book lays these out in an honest, forthright manner.
Too many individual bond investors make a buy and then never look at the position againa big mistake as Bonds Now! shows. The credit crisis has changed the rules of engagement for bond investors; now they must learn how to navigate information sources, find a number of reliable news sources (such as Forbes!) and use several bond brokers to work their transactions.
To be a successful investor you need to understand the changes that have occurred in the bond market and be aware of new investment dos and donts. Those who ignore them will be condemned to follow in the footsteps of those whose bond portfolios suffered so much between 2008 and 2009. Bonds Now! gives a dead-on account of how the bond ratings game has changed, as well as how the usefulness of ratings and the assurance they once provided have flown out the window. Traditional bond ratings still provide some helpful information, but you have to know when and how to apply the ratings to your investment strategy.
Another crucial factor: corporate management teams. For bond investors this knowledge is critical. Management teams change: A company may have a history of being friendly to its bondholders but can suddenly change when a new CEO comes on board or economic circumstances fluctuate. Marilyns book discusses reliable ways, regardless of the reason, to anticipate the effects of such changes. You can take specific steps in your bond portfolio to prevent damage from corporate executives who suddenly turn on their bondholders.
Marilyn has been the fixed-income securities columnist at Forbes for 14 years. I consider both Bonds Now! and the Forbes Tax Advantaged Investor newsletter essential reading for anyone who is serious about making money in the bond market. Both provide useful insights and specific recommendations (by CUSIP number) in the plain-speaking style that has become Marilyns trademark.
Forbes is so convinced that bond investors need this information that we and Marilyn are offering a free three-month trial subscription to the Forbes Tax Advantaged Investor newsletter with the purchase of Bonds Now! They will give you two of todays most powerful tools for bond investors.
Take the time to study the Bonds Now! techniques, understand how they work, and then put them to use. To make this even easier, Marilyn has sprinkled critical Action Steps throughout her book, each containing specific instructions on how to implement the ideas in the preceding text. What could be clearer and easier?
Happy and profitable investing,
Steve Forbes
Preface
If you listen closely you can hear the Baby Boomers repeatedly chant, No more equity risk, no more equity risk. They see the end zone of their careers. Theres no time left to recoup losses incurred from foolish investment mistakes. The Baby Boom generation has suffered the tech wreck of 2000 and the credit crisis of 2008. The game clock to retirement is ticking. Many have lost a significant chunk of the nest egg they thought was set aside for their golden years. Most just ask for a foolproof way to protect what they have left.
The smart baby boomersand there are millions of usopened the welcoming door to bond investing. Timing is everything. Just as the door swung open, the bond market began transforming. Even now it continues to evolve. Before its morphing is finished, the bond market will be a more regulated and less liquid beast. There is a whole new set of rules on how to buy, what to buy, and when to buy in order to make money in the bond market. Ignore them and you are doomed to losses. Know them, use them, and you will not only protect your capital, but you will prosper.
Bonds Now! identifies the most recent changes in the bond market. It links the new rules of profiting in the bond market to new survival methods and fresh buy/sell principals. The book combines them all to show individual investors how to make smart bond investments in the post-credit crisis era.
We wrote this book for you, the individual bond investor. Perhaps you feel in the pit of your stomach that your broker deliberately fails to provide you the best and most current prices for your bond orders. Sound familiar? This little book shows how to deal with such lapses and many others in getting and judging bond intel.
Do you wonder if your investment portfolio can take you through retirement? Youre in good company. There are 78 million Baby Boomers in the same desperate boat. Bonds Now! shows you how to create a predictable income stream to subsidize your Social Security and retirement pension. Climb aboard. We sail on the tide, bound for bond investment safety and prosperity.
Bonds Now! shows you the new, post-credit crisis way of smart bond investing. It will improve your bond trading management skills. Well teach you how to better manage your bond portfolio. Astute investors learn from past mistakes. Bonds Now! shows by example the costly errors of some investors, then, how to make the necessary corrections so they can never happen again. Bonds Now! is your fixed income GPS system. Use this book to chart a new, safer course through the changing bond landscape.
Bonds Now! picks up where the basic texts leave off. If you manage your own bond portfolio and you want to do it better, smarter, and achieve more profitable results, then this book is for you. Wall Streets consolidation of the banks, investment banks, and brokerage firms along with all the new regulations have changed the way investors conduct business. If you want your bond portfolio to profit from these new rules of engagement but dont know how, then youve come to the right place.
Each of the 14 chapters featured in Bonds Now! walks you through how the fixed income landscape has changed and what to do about it in your own investing. There is no technical