So just what did I see in the Ambac and Finlay bonds I bought? In hindsight, buying these bonds appears to have been an AAA rated bimbo move. However, after purchasing these bonds, I was able to collect about a year's worth of interest.
I would like to point out how the risk of a bond decreases with every interest payment the bondholder receives.
Say you bought the bond at $0.39 on the dollar. The face value of your bonds is worth $10,000. The bond pays 6.15% in coupon interest annually. With every interest payment you receive, your risk goes down by $0.0615 on the dollar annually.
So in a little more than six years, you've got your original investment back from the interest payments, which means that your investment is now virtually risk free.
If this were an ideal world, we would not have to face bankruptcy battles, but this environment is ripe for distressed debt investing. If Lehman would have survived, this would probably be a banner year for them.
Seriously, I am still so ticked off that Lehman was allowed to collapse. The whole situation made absolutely no sense to me. Why single them out? It was so unfair. Every other investment bank made mistakes as critical as Lehman. Would the world today be different if Lehman had survived?
Sometimes, I wonder if Hankie & Bernanke wanted to create The Great Catastrophe of 2008 in order to get their 15 pages in the history books. You never know. Human ambition could be very dark and honestly, I've never really particularly admired the smouldering Bernanke. He's a fair weather friend in my book and I'd like to find out if he shorted Bear Stearns and Lehman and bought a whole bunch of GS at $50.
The semi-feminist in me wishes for a Chairwoman of the Federal Reserve.
Would we get a woman President before a Chairwoman of the Federal Reserve?
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