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duxup

I think Planet Money also bought a mortgage backed security a while back when things had already gone south.

They tracked the houses involved and their history.

It was interesting to see the investment tied to specific homes, and etc.

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Also a junk/high-yield bond https://www.npr.org/2020/02/19/807544557/meet-our-junk-bond

Schwab allows retail investors to buy junk bonds. I bought one a few weeks ago.

Really? Care to share your experience/details?

Fidelity allows one to do so as well. The interface is a bit different from trading stocks (no intraday charts, additional fundamentals like YTM/YTW) but not exactly obscure. You search for a bond, type in a bid, quantity, and hit buy. The coupons show up in your account every few months.

Sure, I bought a Delta Airlines bond with a 3.4% coupon for 93 cents on the dollar due in a year from now. Provided Delta doesn't go bankrupt in a year I will make 10%.

They have a pretty healthy balance sheet compared to their peers and I don't expect the government to let the sector fail in such a way that bondholders get wiped out.

I would of thought holding Delta stock would have more than 10% upside if they don’t go bankrupt

He’s not talking about stock, and you’re right - their stock would have a far greater return. Potentially over 100% within a year.

But also far more likely to go to zero.

The stock probably does have a bigger potential upside, but also a more probable (than the bond) downside. The stock could drop quite a bit while the bond remains solvent. Bankruptcy and declining stock are not (completely) correlated positions to take. It's always a risk trade off.

Guess who gets paid first if the company collapses.

Even if they don't go bankrupt, the equity has a much higher risk. The gov't could take massive warrants or preferreds etc. in exchange for needed money. That sort of dilution can be profound. Look at a 10 year chart of AIG. Yahoo chart says all time high was 1971 (by eye), currently trading at 23. Of course the stock was never actually trading at almost 2000/share, that's just the dilution factored in.

What happens in the event of a default? I would have thought that your broker would zero it out, but I remember hearing about someone buying a worthless bond from a friend for like $1 once as a favor.

Toxie. Here are the relevant episodes:

https://www.npr.org/sections/money/2011/06/01/131077279/toxi...

I've always wondered If I could just go out and buy like 10 mortgages or car loans in my area, and try to recover some of the money. I've heard that debt goes for pennies on the dollar, so I would think it would be possible to make a decent amount if you have the time.

I think in most states, if you are the original owner of the debt (i.e. you or your business lent the money), you can just go collect it.

But in a case where you're collecting a debt you did not originate, you'll need a debt collector's license in the state where you plan to operate. The license isn't hard to get, but typically there is a very large bond that needs to be posted.

And you're right: if you have the stomach for consumer debt collection and are good at being nice to people (being nice has a much higher success ratio than being a dick when trying to collect), and you're incredibly patient (the really cheap debt is almost uncollectable) it's basically printing money.

source: wife used to be a commercial debt/receivables collector and a long time ago I considered writing debt collection software.

Thanks for giving some insight into that process. I'd rather be patient and take on 'human' risk, which for some reason I feel more comfortable with. I'm probably being overly idyllic, but I just imagine being friendly and reasonable with people and their situations might go a long way, especially reaffirming that you're not some massive bank that doesn't give a shit.

1. Buy cheap debt.

2. Call debtors and offer to teach them to code.

3. Walk them through interviews, etc.

4. Collect!

I don't know if that particular path is viable, but I am somewhat taken by the idea of making money by/while helping people out.

I like the concept.

Honestly I think the toughest part is buying the debt. I tried to do some research, but I'm even more confused how people do it. Do they just call up a bank and ask for some debt? Is there some online exchange for debt? California doesn't require a license or anything to buy debt, so in theory I should be able to, but I'm not sure exactly how to.

I did some quick research and it does look like it's a lot harder to buy debt these days than it used to be. Which is a good thing: there were/are a lot of shady characters involved. Anyway, links:

https://proleadbrokersusa.com/cheap-debt-portfolios-for-sale...

https://www.accountsrecovery.net/portfolios-for-sale/

https://www.debttrader.com/buy/

Caveat emptor.

They also have a bot kicking around somewhere to buy stocks on Trump tweets. Pretty interesting stuff.

John Oliver bought peoples debt and released it: https://www.youtube.com/watch?v=hxUAntt1z2c

You can donate to RIP medical debt, and they’ll do this for you.

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