for those following along on the finace thread, the best place to put cash, and keep it in cash form, is paypal at 5.04%.
Ive been reading about bonds lately. If shares are ownership in a company, then bonds are loaning money to that company. would you rather have 1/1,000,000 ownership in mcdonalds or would you like to loan mcdonalds $1000 for a year?
bond information is rather hard to find without having a brokerage account. after some googling i came across the NASD bond search page, which is exactly what I was looking for.
What makes it interesting is that its an investment that breaks out of the 5% neighborhood. That money market rate is just as good as a 6 month or 1 year CD which is not liquid.
Look at the bonds from McDonalds (ordered by maturity date). 5.4% (AA) from now until 1-Aug. 6.3% from now until 15-Aug. 5.7% until 1-Jan-08. or 7.4% (AAA) until 15-sep-2027.
A fastfood chain will pay you 7.4% on a loan if they can use the money for the next 20 years. This is what I imagine the retirees do, who manage their own money. Want $1000/month from age 60 to 80? Let McDonalds have $162,000.
Why would you give McDonalds $162,000 in order to get $1000 a month? Because those 20 years of monthly payments is $240,000. But here's the kicker, at the end of the 20 years, they also give you the $160,000 back. brilliant!
Houses in big cities are expected to make that kind of income, but congress has tax incentives which makes home ownership even more attractive than a mcdonalds bond.
Ok so lets turn down the quality and check out the low-ratings bonds. How about some BBB to B bonds. The 'yields' are all over the board. 7.9% until 15-Aug from General Motors Acceptance Corporation. 9.3% until 1-Aug from Mandalay Bay Resort Group! a casino! 13% until 13-Aug from Sears Roebuck! 10.6% until 2-Jan-2008 from American Airlines.
I hope I'm interpreting the yield column correctly. If so, then yeah, that gets interesting. 10%+ returns.
Ok so lets dive into the Junk Bonds (C-D). Delta Airlines 71% ?! Owens Corning 40% ?! KMart 130% ?! crazy.