991 TTS value
02-18-2015, 01:21 PM
#61
If you expect yields to go up but are unsure, you get a callable bond. Therefor, if yields go up, nothing happens, you make money. But if yields go down, the bond will be called away and you don't lose as much.
This is getting really into like bond trading. Not for people who buy a bond and hold it to maturity. It's also a way to hedge risk. But you pay a premium for the call feature, over the same bond that doesn't have that call feature.
This is getting really into like bond trading. Not for people who buy a bond and hold it to maturity. It's also a way to hedge risk. But you pay a premium for the call feature, over the same bond that doesn't have that call feature.
Sorry, but as yields of bonds go up the price declines and as yield rise the price declines. If I think that yields will go up I want short maturity (duration) bonds because no issuer will call bonds on which it is paying lower than then current rates. If I think that yields will go down, I want the longest duration, non-callable bond because it will appreciate in price more than the short duration bond.
02-18-2015, 02:19 PM
#63
It is not getting into bond trading at all and despite the fact that it is way OT, demands a clear response. It is just math.
Sorry, but as yields of bonds go up the price declines and as yield rise the price declines. If I think that yields will go up I want short maturity (duration) bonds because no issuer will call bonds on which it is paying lower than then current rates. If I think that yields will go down, I want the longest duration, non-callable bond because it will appreciate in price more than the short duration bond.
Sorry, but as yields of bonds go up the price declines and as yield rise the price declines. If I think that yields will go up I want short maturity (duration) bonds because no issuer will call bonds on which it is paying lower than then current rates. If I think that yields will go down, I want the longest duration, non-callable bond because it will appreciate in price more than the short duration bond.
Think of it as options. You can buy a call or write a call. If you write the call you get money now, but you lose the benefit if the option is exercised. With a callable bond you have a higher premium than you would have for a non callable bond, but you lose out if rates go down and the bond gets called away. If you hold to maturity then this is a bit risky because you may lose your bond. If you are a bond trader, and therefor do not hold to maturity, you get that higher yield now, and if things don't go your way, you limit your downside possibly.
As a borrower, issuing the callable bond is attractive because in an environment where you think rates will go down, you can call your bond away and refinance at a lower rate. For a lender the advantage is getting that higher premium now.
Also duration isn't the whole picture. That is one part. You need to look at convexity as well. Then if you really like math you can go deeper into the taylor series, but the average investor probably wouldn't go beyond convexity.
But again way OT for this thread
.
02-18-2015, 02:52 PM
#64
Instructor
Join Date: Apr 2008
Location: Chicago, IL
Posts: 220
Likes: 0
Received 0 Likes
on
0 Posts
With rates where they are today, I would hope that anybody who can afford a $200k car in cash would actually finance that car... $200k cash suggests fairly significant liquidity and disposable cash, which typically also means large investment portfolios... What is the return on that portfolio over the life of the car? Get a loan at 2% and be making 5/10/12% for 2 or 3 years - it's a no brainer... A number of friends with significant net worth have lines of credit with their bank in the low single digits for stuff like this...
02-18-2015, 03:17 PM
#65
With rates where they are today, I would hope that anybody who can afford a $200k car in cash would actually finance that car... $200k cash suggests fairly significant liquidity and disposable cash, which typically also means large investment portfolios... What is the return on that portfolio over the life of the car? Get a loan at 2% and be making 5/10/12% for 2 or 3 years - it's a no brainer... A number of friends with significant net worth have lines of credit with their bank in the low single digits for stuff like this...
02-18-2015, 05:20 PM
#66
With rates where they are today, I would hope that anybody who can afford a $200k car in cash would actually finance that car... $200k cash suggests fairly significant liquidity and disposable cash, which typically also means large investment portfolios... What is the return on that portfolio over the life of the car? Get a loan at 2% and be making 5/10/12% for 2 or 3 years - it's a no brainer... A number of friends with significant net worth have lines of credit with their bank in the low single digits for stuff like this...
02-18-2015, 05:32 PM
#67
Your logic is correct, albeit it depends on how quickly and how much yields change. Again a callable bond is a way to hedge risk. And yes it is into bond trading.
Think of it as options. You can buy a call or write a call. If you write the call you get money now, but you lose the benefit if the option is exercised. With a callable bond you have a higher premium than you would have for a non callable bond, but you lose out if rates go down and the bond gets called away. If you hold to maturity then this is a bit risky because you may lose your bond. If you are a bond trader, and therefor do not hold to maturity, you get that higher yield now, and if things don't go your way, you limit your downside possibly.
As a borrower, issuing the callable bond is attractive because in an environment where you think rates will go down, you can call your bond away and refinance at a lower rate. For a lender the advantage is getting that higher premium now.
Also duration isn't the whole picture. That is one part. You need to look at convexity as well. Then if you really like math you can go deeper into the taylor series, but the average investor probably wouldn't go beyond convexity.
But again way OT for this thread.
Think of it as options. You can buy a call or write a call. If you write the call you get money now, but you lose the benefit if the option is exercised. With a callable bond you have a higher premium than you would have for a non callable bond, but you lose out if rates go down and the bond gets called away. If you hold to maturity then this is a bit risky because you may lose your bond. If you are a bond trader, and therefor do not hold to maturity, you get that higher yield now, and if things don't go your way, you limit your downside possibly.
As a borrower, issuing the callable bond is attractive because in an environment where you think rates will go down, you can call your bond away and refinance at a lower rate. For a lender the advantage is getting that higher premium now.
Also duration isn't the whole picture. That is one part. You need to look at convexity as well. Then if you really like math you can go deeper into the taylor series, but the average investor probably wouldn't go beyond convexity.
But again way OT for this thread
.Regarding those who want to borrow and invest the $200,000, yes it is a reasonable strategy, as the principle can probably generate a higher return than the interest on the note, assuming of course that there is no amortization of the note and interest only is paid out by the borrower. Modest amortization would not necessarily disrupt an investment program, but owing much more than an asset is worth, which is what this thread is about to begin with, is not a comfortable position for most. As long as after tax investment earnings exceed the amount of the depreciation on the TTS borrowing and investing the $200,000 is a good idea.
Now we can talk about the rate of return necessary to break even, since it is an essential calculation that one must make to execute the invest $200,000 and borrow to buy the TTS strategy. Year one the depreciation is at least 15%, probably 20%. Who thinks with certainty that they can make say 18% after tax in the next 12 months? OK, how about year two of ownership? At least another 10% depreciation. so a cumulative two year after tax return of 28% will keep you whole relative to the depreciating TTS. Face it ladies and gentleman, unless you can buy an appreciating automobile, paying for it without borrowed money is a very sensible way to go.
And regarding the post about why there are not more on this forum, with the implication being that we were discussing a very dry subject of finances and depreciation, there was a very long thread on that subject relative to the GT3 forum a few months ago. Many good points were made.
02-18-2015, 07:03 PM
#68
Your logic is very curious and yes, there is convexity and no, this is not about bond trading. Bond issuers can get away with callable terms based on a number of market condition and credit variables, and buying bonds on a yield-to-call basis is prudent, but call features are not in favor of bond buyers. Your discussion of bond premium is also curious. Everyone is entitled to his own opinion.
Regarding those who want to borrow and invest the $200,000, yes it is a reasonable strategy, as the principle can probably generate a higher return than the interest on the note, assuming of course that there is no amortization of the note and interest only is paid out by the borrower. Modest amortization would not necessarily disrupt an investment program, but owing much more than an asset is worth, which is what this thread is about to begin with, is not a comfortable position for most. As long as after tax investment earnings exceed the amount of the depreciation on the TTS borrowing and investing the $200,000 is a good idea.
Now we can talk about the rate of return necessary to break even, since it is an essential calculation that one must make to execute the invest $200,000 and borrow to buy the TTS strategy. Year one the depreciation is at least 15%, probably 20%. Who thinks with certainty that they can make say 18% after tax in the next 12 months? OK, how about year two of ownership? At least another 10% depreciation. so a cumulative two year after tax return of 28% will keep you whole relative to the depreciating TTS. Face it ladies and gentleman, unless you can buy an appreciating automobile, paying for it without borrowed money is a very sensible way to go.
And regarding the post about why there are not more on this forum, with the implication being that we were discussing a very dry subject of finances and depreciation, there was a very long thread on that subject relative to the GT3 forum a few months ago. Many good points were made.
Regarding those who want to borrow and invest the $200,000, yes it is a reasonable strategy, as the principle can probably generate a higher return than the interest on the note, assuming of course that there is no amortization of the note and interest only is paid out by the borrower. Modest amortization would not necessarily disrupt an investment program, but owing much more than an asset is worth, which is what this thread is about to begin with, is not a comfortable position for most. As long as after tax investment earnings exceed the amount of the depreciation on the TTS borrowing and investing the $200,000 is a good idea.
Now we can talk about the rate of return necessary to break even, since it is an essential calculation that one must make to execute the invest $200,000 and borrow to buy the TTS strategy. Year one the depreciation is at least 15%, probably 20%. Who thinks with certainty that they can make say 18% after tax in the next 12 months? OK, how about year two of ownership? At least another 10% depreciation. so a cumulative two year after tax return of 28% will keep you whole relative to the depreciating TTS. Face it ladies and gentleman, unless you can buy an appreciating automobile, paying for it without borrowed money is a very sensible way to go.
And regarding the post about why there are not more on this forum, with the implication being that we were discussing a very dry subject of finances and depreciation, there was a very long thread on that subject relative to the GT3 forum a few months ago. Many good points were made.
http://www.investopedia.com/terms/c/callablebond.asp
http://en.wikipedia.org/wiki/Callable_bond
Again think of it as writing a call. You get the higher premium now, and the downside is if the option is called away. If it is not called away you keep that higher than average yield with duration remaining unchanged. There are no opinions here lol. Callable bonds can be advantageous to both. Same way writing a call is advantageous to both.
I don't really know how else to explain this besides to tell you to take a bond trading class if it's still unclear.
02-18-2015, 10:30 PM
#69
Instructor
Some excellent perspectives expressed in this thread on buying, leasing and financing a purchase.
I have been a fan of Porsche since I was a kid in the '60's and have owned a couple of new 911's that were fun, but ultimately gave way to other automobile interests. It was not until the 991 that my interest in Porsche was renewed and after configuring a 991 C4S, then 991 TT, I decided that the opportunity to build my own 991 TTS was what I would seize. I was able to acquire my configured '15 991 TTS in mid-July and drove it quite a bit. I could have waited and gotten a used or leftover for far less money if I compromised on options, etc. The car exceeded all of my expectations and continues to do so. Even as an optimist and business owner I am mindful of the randomness in life so live every moment to its fullest. We all know that cars will improve much more so the car we buy today will give ground to newer models in a year or twoMy point is: just DRIVE and recognize that 991 turbos are probably the best performance value available. Whatever one does on acquiring a 991 TT/TTS, it should be without regret. We might have more or less money, but time is a precious commodity so use it wisely.
I have been a fan of Porsche since I was a kid in the '60's and have owned a couple of new 911's that were fun, but ultimately gave way to other automobile interests. It was not until the 991 that my interest in Porsche was renewed and after configuring a 991 C4S, then 991 TT, I decided that the opportunity to build my own 991 TTS was what I would seize. I was able to acquire my configured '15 991 TTS in mid-July and drove it quite a bit. I could have waited and gotten a used or leftover for far less money if I compromised on options, etc. The car exceeded all of my expectations and continues to do so. Even as an optimist and business owner I am mindful of the randomness in life so live every moment to its fullest. We all know that cars will improve much more so the car we buy today will give ground to newer models in a year or twoMy point is: just DRIVE and recognize that 991 turbos are probably the best performance value available. Whatever one does on acquiring a 991 TT/TTS, it should be without regret. We might have more or less money, but time is a precious commodity so use it wisely.
02-18-2015, 11:04 PM
#70
Pro
Your logic is very curious and yes, there is convexity and no, this is not about bond trading. Bond issuers can get away with callable terms based on a number of market condition and credit variables, and buying bonds on a yield-to-call basis is prudent, but call features are not in favor of bond buyers. Your discussion of bond premium is also curious. Everyone is entitled to his own opinion.
Regarding those who want to borrow and invest the $200,000, yes it is a reasonable strategy, as the principle can probably generate a higher return than the interest on the note, assuming of course that there is no amortization of the note and interest only is paid out by the borrower. Modest amortization would not necessarily disrupt an investment program, but owing much more than an asset is worth, which is what this thread is about to begin with, is not a comfortable position for most. As long as after tax investment earnings exceed the amount of the depreciation on the TTS borrowing and investing the $200,000 is a good idea.
Now we can talk about the rate of return necessary to break even, since it is an essential calculation that one must make to execute the invest $200,000 and borrow to buy the TTS strategy. Year one the depreciation is at least 15%, probably 20%. Who thinks with certainty that they can make say 18% after tax in the next 12 months? OK, how about year two of ownership? At least another 10% depreciation. so a cumulative two year after tax return of 28% will keep you whole relative to the depreciating TTS. Face it ladies and gentleman, unless you can buy an appreciating automobile, paying for it without borrowed money is a very sensible way to go.
And regarding the post about why there are not more on this forum, with the implication being that we were discussing a very dry subject of finances and depreciation, there was a very long thread on that subject relative to the GT3 forum a few months ago. Many good points were made.
Regarding those who want to borrow and invest the $200,000, yes it is a reasonable strategy, as the principle can probably generate a higher return than the interest on the note, assuming of course that there is no amortization of the note and interest only is paid out by the borrower. Modest amortization would not necessarily disrupt an investment program, but owing much more than an asset is worth, which is what this thread is about to begin with, is not a comfortable position for most. As long as after tax investment earnings exceed the amount of the depreciation on the TTS borrowing and investing the $200,000 is a good idea.
Now we can talk about the rate of return necessary to break even, since it is an essential calculation that one must make to execute the invest $200,000 and borrow to buy the TTS strategy. Year one the depreciation is at least 15%, probably 20%. Who thinks with certainty that they can make say 18% after tax in the next 12 months? OK, how about year two of ownership? At least another 10% depreciation. so a cumulative two year after tax return of 28% will keep you whole relative to the depreciating TTS. Face it ladies and gentleman, unless you can buy an appreciating automobile, paying for it without borrowed money is a very sensible way to go.
And regarding the post about why there are not more on this forum, with the implication being that we were discussing a very dry subject of finances and depreciation, there was a very long thread on that subject relative to the GT3 forum a few months ago. Many good points were made.
02-18-2015, 11:04 PM
#71
Racer
I started buying CEF Pimco Bonds in 2003. Started with PHK (NYSE symbol) common stock and got into PFN and a few others. They have NEVER missed a payment and the fund is where it was when I purchased it. Bill Gross did step down a few months ago but the fund is still doing well.
All grades of bonds in these CEFs and I sleep well at night. Have prob almost tripled my money in the past 12 years. Just think, in PHK for every million $$ you will yield (taxable) $120 K a year. I bought some with a 15% yield. The dividend per share never changes ($1.4625) so your yield for the time you own it locks in the day you buy the stock at the price you pay. Of course the higher the per share price the lower the yield percentage. I think today it is near 12%. I have zero concerns about the future of this company, the largest bond co in the world... newport beach Calif.
All grades of bonds in these CEFs and I sleep well at night. Have prob almost tripled my money in the past 12 years. Just think, in PHK for every million $$ you will yield (taxable) $120 K a year. I bought some with a 15% yield. The dividend per share never changes ($1.4625) so your yield for the time you own it locks in the day you buy the stock at the price you pay. Of course the higher the per share price the lower the yield percentage. I think today it is near 12%. I have zero concerns about the future of this company, the largest bond co in the world... newport beach Calif.
02-19-2015, 01:04 AM
#73
02-19-2015, 05:22 AM
#74
Instructor
Join Date: Oct 2005
Location: Midwest, USA
Posts: 117
Likes: 0
Received 0 Likes
on
0 Posts
It is not a matter of affecting one's financial status. Probably most people on this forum's financial status does not get affected by paying an extra 20 or 30k for a car. For some, doing the deal provides almost as much pleasure as the vehicle itself and for others they would rather give the extra 20-30k to a charity or someone more worthy than the Piech or Porsche family or the Qatari royal family. It's just a matter of where each individual's priorities lie and what gives them most pleasure.
02-19-2015, 10:45 AM
#75
Racer
Cannot imagine what my Turbo will be worth in 4 years? Prob $85K.
I took a bath on my 997 TT with 8,200 on the trade-in too.
Time to think about buying cherry picked 964s or 993s in the future. I am getting fleaced buying these new cars. I think this will be my last new P Car.