freefall51

The Riskiness of Bonds

Those investment grade corporate bonds can turn on a dime.
Look at LyondellBasell, one of the world’s largest companies for plastics, chemicals, and fuels.
Over extended debt for the merger $12.7 B, cannot be served in economical downturn.
Rating downgrade by S&P and Moodys earlier in Dec to selective default. Then press release, company considers filing for Chapter 11 on Dec 31, 08.
Lyondell bonds sell now for 11.5 c on the dollar. It costs $ 8.5 M to insure a $10 M loan over the next years. BAM!
Here is an idea. Other than going for high yield bonds, screen companies for high debt/ equity and short the hell out of them.