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Distressed Debt, The Great Reset, And More
This is Porter’s Daily Journal, a free e-letter from Porter & Co. that provides unfiltered insights on markets, the economy, and life to help readers become better investors. It includes weekday editions and two weekend editions… and is free to all subscribers.
Readers take center stage today… Why they don’t like distressed investing and why they do… Taking issue with Porter’s “great reset”… Teach a boy to fish… |
Table of Contents
We are turning today’s Daily Journal over to you, our readers.
Porter gets a steady stream of emails every day – most of which he personally replies to. Over the last few weeks he has written about a few topics that have generated more feedback than usual, so today we’re dedicating an entire Daily Journal to the “Mailbag.”
In the February 28 Daily Journal, Porter wrote: “This is, by far, the most valuable information we have ever published. This article will show you exactly how to beat the stock market, by a wide margin, by using corporate bonds.” He shared his personal story about investing in distressed debt and concluded – after pointing out that no one knows more about corporate bonds, particularly distressed bonds, than Distressed Investing senior analyst Marty Fridson – by saying: “if you’re not going to invest with Marty, then I want you to tell me why. Send me an email. Explain it to me…”
We received a lot of responses. Here are a few.
When I started out investing 17 years ago, I knew next to nothing. I got all of my education reading all the S&A [Stansberry & Associates] articles (sorry, I can’t bring myself to write out the full name to you… writing out your name to you is like feeding a narcissist his narcissistic candy). So, I’ve taken the teachings to heart and I trained myself to only invest in companies that I really don’t mind holding on to for decades.
For instance, I bought IBM way back at a cost price of around $100. I never minded when it went up and then down and stayed down because I reinvested the dividends and they were buying back shares. When I saw Warren Buffett sell IBM, it didn’t bother me at all. Let him leave the stock. I’ll hold on and keep taking advantage of its low price. Same with the cigarette stocks and a bunch of others.
How’s that going to work with distressed debt that has an average duration of four years? I’m not trained to invest in Peloton Interactive (PTON). To me, Peloton is a fad of high-priced exercise machines. What kind of a long-term (the only type I like) business is fancy exercise bikes that cost a ton of money going to be over decades? So, I immediately say “no, thank you” to investing in Peloton.
I understand that with bonds it’s much different. The whole bond is structured so that you only have to think in terms of its duration and that’s it. If they can make good on the bond, you make out just fine. But how does one know that when the maturity date rolls around that the company behind the bond will be able to make good on it? If they’re in big trouble prior to the maturity date, then that’s being stuck in a corner with a bond of a company that you never liked in the first place.
On the other hand, if I buy Meta (META) when it is down to around $100 per share due to Apple changing some permissions or something, I can figure that “this too shall pass” and META shares will keep making good money, and one day the downturn in their share price will end, and the downturn in price will be shown to have been an opportunity.”
Porter’s comment: Me, a narcissist?
Nah. My partners (Bill Bonner and Mark Ford) chose to use my last name because they thought it sounded prestigious. Ha! My paternal grandfather was a machinist who couldn’t read. We are poor Scotch-Irish from Appalachia.
Regarding your comment: “I trained myself to only invest in companies that I really don’t mind holding on to for decades”…
Bingo. Sounds like you’re a good investor.
Thanks for your note —
Porter