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I would think the odds of loss in any of these worthy funds over the next 5y to be nontrivial, no matter what they do, even, you know, BERIX and FPA. So I would stick a hundred thou, or even more, into SC 4% bonds, and make a few thou against inflation. I mean, I like very much PONDX, FSICX, DODIX, FTBFX, BOND, PDI, and a few others, but have had trouble breaking even with all of them over selected short recent periods, when I was overmonitoring.
Are you seriously suggesting that this poor fellow put $100,000 into a single bond offering issued by this company? I took a quick look at the prospectus for this bond. It's unrated, unsecured, and the protective covenants for the investor are practically nonexistent. I did a bit more research and found that S&P had rated a secured bond issue from SolarCity that matures in 2022 at BBB+, and an unsecured bond from them maturing in 2022 at BB. BB is not investment grade. Other than some posters here dropping dead from the shock, what happens if somebody like Ted Cruz or Rand Paul gets elected president in 2016 and the investment tax credit and other subsidies for solar power gets dropped? It's questionable whether there will be a secondary market for these securities (that's from the prospectus), and SolarCity isn't obligated to redeem them early under any circumstances.
I strongly suggest that the original poster take a good look at these risk factors if he's considering this SolarCity offering.
Thank you for doing some research on this matter. Personally, I would never drop $100,000 in any single offering, whether it be a bond or fund/stock. I'm a very cautious, conservative investor.
I should have mentioned that you can buy these bonds in $1000 increments if you should wish. If I read that prospectus correctly, you are also signing away any bankruptcy rights and in that unfortunate circumstance would be receiving 25% of your investment back. If you want to support solar energy and like SolarCity this would seem to be a way to do it, but it doesn't seem to be any equivalent for a savings account.
>> Are you seriously suggesting that this poor fellow put $100,000 into a single bond offering issued by this company?
Sure. Have you slogged through the details of many corporate bond prospectuses? Thanks for the official rating info, and yes, I agree it is best to forget it for someone 'very cautious, conservative' to that degree.
>> signing away any bankruptcy rights
Usually the case, no? I lost quite a bit of money with very safe Lehman bonds, so yeah, I am aware they're not like a bank CD. My thinking was that SC, with all of its contracted gov work (DoD housing), is not about to die in the next five years, Cruz or no Cruz (not gonna happen, but someone almost as bad is a possibility, I suppose).
These bonds are not the same as typical corporate bonds. A couple of decades ago, some corporations started selling bonds direct to the public, marketing them as CD alternatives. Instead of buying bonds on the secondary market, with market discount/premium, commissions, and accrued interest costs, small investors can buy them at issue and at par (albeit at a lower coupon rate than the bonds bought by the "big boys").
They are (were?) known as InterNotes, DirectNotes, and a slew of lesser marketing names. You'll find the Solar City notes under InterNotes' unrated offerings.
But they come with a downside - they're generally not marketable - you can't get out of them until they mature or default. (See Direct Purchase Notes in this LA Times article.) That's different from typical bonds that trade through networks of brokers.
I've tended to be skeptical of these offerings - they seem to be attempts by companies to borrow from small investors when they can't borrow (at least at rates they accept) from institutional lenders. That certainly proved to be the case in 2008, when the Lehman InterNotes as well as CIT InterNotes and others went bust:
Targeting bonds to individuals “was part of a proliferation of gimmicky devices which on the surface looked attractive but was nothing more than high-pressure marketing tools,” said Arthur Levitt, a former chairman of the U.S. Securities and Exchange Commission
That's not to say that all InterNotes are bad products, but that one needs to look at them closely, and ask why the issuer is borrowing through the retail market.
The Lehman bonds I was referring to and lost considerable moneys on were not InterNotes but notionally solid and safe corporate bonds, tradable, brokerage-sold, etc.: GCB LBH inc NIKKEI 225. Issued 2003.
Comments
Sure. Have you slogged through the details of many corporate bond prospectuses?
Thanks for the official rating info, and yes, I agree it is best to forget it for someone 'very cautious, conservative' to that degree.
>> signing away any bankruptcy rights
Usually the case, no? I lost quite a bit of money with very safe Lehman bonds, so yeah, I am aware they're not like a bank CD.
My thinking was that SC, with all of its contracted gov work (DoD housing), is not about to die in the next five years, Cruz or no Cruz (not gonna happen, but someone almost as bad is a possibility, I suppose).
And not a poor fellow by my standards
http://www.quora.com/How-good-or-bad-an-investment-is-SolarCitys-Solar-Bonds
These bonds are not the same as typical corporate bonds. A couple of decades ago, some corporations started selling bonds direct to the public, marketing them as CD alternatives. Instead of buying bonds on the secondary market, with market discount/premium, commissions, and accrued interest costs, small investors can buy them at issue and at par (albeit at a lower coupon rate than the bonds bought by the "big boys").
They are (were?) known as InterNotes, DirectNotes, and a slew of lesser marketing names. You'll find the Solar City notes under InterNotes' unrated offerings.
But they come with a downside - they're generally not marketable - you can't get out of them until they mature or default. (See Direct Purchase Notes in this LA Times article.) That's different from typical bonds that trade through networks of brokers.
I've tended to be skeptical of these offerings - they seem to be attempts by companies to borrow from small investors when they can't borrow (at least at rates they accept) from institutional lenders. That certainly proved to be the case in 2008, when the Lehman InterNotes as well as CIT InterNotes and others went bust: That's not to say that all InterNotes are bad products, but that one needs to look at them closely, and ask why the issuer is borrowing through the retail market.
Thanks v much (as always) for SC further detail.