Bonds | Using Debt to Invest
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- čas přidán 28. 09. 2017
- The Plain Bagel Episode II
Companies use debt to help fund their projects, borrowing money from investors to grow their business. This video covers bonds, the instrument these firms use to raise their debt.
Intro/Outro Music: www.bensound.com/royalty-free...
Episode Music (Licensed): freemusicarchive.org/music/Pod...
The style presentation is very easy to digest. Do you have one for LIBOR and how it interacts with gov rates?
No I don't but I'll add it to the list of topics to go over!
@@ThePlainBagel Cheerio!
I love your channel so far. It lives up to its name thank you for that! Also please please please continue to keep the videos this short as well. 😩 Short and spicy i love it!!😊 I listen to one episode per day .
Hi Richard,
Thanks this was really helpful. I am trying to get my head around the Danish Bonds for mortgages. There is an interesting scenario now, where a lot of people are trading their mortgages in for 1% mortgages, which then triggers a ripple on higher yield bonds 2/3% as if they are worth 7-9%. Really interesting and this video helped me understand why. Thanks.
Your vedios are really good. Thanks!
finally - I understand the bond market! Thank you for putting this together!
Great content ! I AM pleased that you tube showed me this channel. Great job, keep going!
Hi Richard. Just started on your early clips. Looking forward to covering them all . Better than a Uni course . A good refresher economics course as you explain issues very well 👍😀
peter sydney thanks for the kind words!
The bond value "having a negative relationship to interest rates being paid by other companies in the market" sentence made my brain cry, but you explained this - and everything else - really well! I learned a lot about bonds, thank you. :)
Yeah, it just means that when those factors change, they move in opposite directions.
Watching this after passing my CPA exam and after SVB failed. Who would see this could cause a major bank to fail? Great video explaining the negative relationship between market value and interest rate.
Thanks Richard again for this amazing content!
Awesome videos! Can you go over stock splits and its affect on investors. Also when do companies know its the right time to perform stock splits.
So well done Richard! :)
Thank you for the info. this is a big help for me
This is so helpful! Thank you for making these videos
Great video. I like the channel and I'm currently watching the older videos (including this one). A good idea would be to tell people how to obtain these bonds
this
Brokerage firm
Nice suit! Plain bagel sporting some sprinkles.
I think that you missed one important part in the end. When you hold a bond until maturity, you get the principal back PLUS the coupon interest. So bonds are a safe bet. The worst thing that happens (excluding a total collapse and bankruptcy) is that you hold until maturity to profit. However, you stand the chance to gain more if the price spread exceeds the coupon before maturity.
I kind of appreciate the fact that this kid puts on a suit to talk about money. It's a nice change.
Crushing that suit, bro. Keep up the great work.
This is very very good plain!
Well explained , thank you !
4:00 For anybody coming back to these after learning about risk tolerance and diversification: High-yield (junk) bonds are more strongly correlated with stocks than they are with other bonds. If your reason for holding bonds is to mitigate big swings in the stock market, high-yield bonds won’t do that quite as well. But in return you get a yield about midway between investment-grade bonds and stocks.
Thank you for this!!! easy to understand 😻😻
Still a great series!
Very educational.
Thank you 🙏
Wishing your family the best of health.
$1 is all it takes from each of us.
Helpful thanks
Hey Rich what do you think about doing a video about Ontario's debt? What does it mean? Is it troubling that it's the highest sub-national debt? I think a lot of people might be interested in learning more. Also what role do central banks in terms of interest rates, treasury bill yields, and bond yields have to do with it?
Hmm interesting topic, I’ll look into it and add it to the list of topics!
Thanks!
Gracias
Thanks
Good video!
very understandable
Hi, could you please explain a little more the different types of investments that normal people (aka me) can do? Thanks
Think you
Could you cover stock splits? Thanks
Nice
Hi Richard, thank you for the videos !
I have a few question about bond returns and how it's shown on brokers websites.
I can see for example this bond: OAT 3.50%25APR26 listed at %123.45
Would that mean that for 123.45€ of bonds bought at current price, I will earn 3.5€ each year until 2026 and then get 100€ ?
If so, I get 7.27 * 3.5€ = 25.46€ of interest, which only makes like 2€ of net gain right ?
Is this bond simply a bad one or am I missing something ?
Thank you for your time !
Is there an episode about passive investing in bond indexing such as the Canadian td e-series?
Did Noah notice that you wore glasses this time?
Can you make a video about Leveraged Buyouts (LBO)?
how do you sell a bond? I bought some treasury bond but there is no sell option....very unhappy with my decision....
Do you have teaching experience? because you sound like a high school teacher. You remind me of one particular teacher I had.
Gems
Holy shit nice suit
Can I please know the animation software used here?? Nice content by the way...👌👌
Thanks! I use Adobe Premiere for both the video editing and the animation; it's surely not the most efficient method but it works for me!
how do (low) interest rates (like today) affect the return on assets of companies? Could you give me your thoughts as possible mechanisms?
Low interest rates are great for asset returns; for many companies, interest rates are the cost of funding projects, and lower rates also tend to boost consumer spending, both of which mean bigger profits for corporations. Hope that answers your question!
Pay your debts, insert tyrion lannister. Lol.
What’s the point in investing in a government bond that makes less than inflation?
I personally have all three via Vanguard I purchase both Gov & Corp bond index and a separate high yield bond along with my S&P 500 index. I love my new sweet returns with the hike in interest rates! I'm lending MORE THAN EVER! >=D
When Argentina defaulted in 2001 did people who had government bonds lose their money or they got it eventually back? Thanks in advance for any answer.
Hmm I'll look into it!
@@ThePlainBagel Thanks, highly appreciate it.
There’s usually negotiations and part of it is written off, depending on the clauses on the bonds. The bond holders can lay terms and austerity to improve the situation. But yeah the chance of default and losing money is real.
5% interest rate in 2021? These days that is a lot.
Good video but I’m still confused because like everyone else you explanation is good but I still don’t know where to go and how to execute the purchase 🤷🏿♂️
US Treasury bonds can be bought directly from the Treasury. Otherwise you'll probably need to go through a brokerage. There's usually an area titled "Fixed Income" or something like that where you can buy or sell government bonds, corporate bonds, bank certificates, annuities, or mutual funds that hold any of these things.
this is what every americans should do you have the luxury of having a strong currency and access to treasury bills unlike me who lives in asia
take debts to invest not to use it just on spending take debts and invest it in a secure profit treasury bills and you'd not be living on check to check anymore
If I could only choose one person for a loan, I'd choose you. Even if you had an outstanding credit card balance.
Damn that's smooth
Let's say we buy bonds that cost $1,000 when they were sold, when the price falls to $800. When the maturity date comes, will the company or the country buy this bond from us for $1000? If I understand correctly, if we buy a bond with one year to the maturity date according to the above scenario, will we earn 25% + coupon income in one year? Is such an income really possible?
Short answer, yes, the company will pay back the par value (in your example $1,000) at the end of the term, regardless of what you personally paid for it. That 25% return isn't likely though because of competition. If you're offering to buy that bond for $800 so you can get a 25% return, why wouldn't someone else offer $850 and get a 17% return, or $900 and get an 11% return? And it would keep going like that until this bond pays about the same rate as similar bonds.
Thanks for answer. I am glad to understand correctly.@@Magic_beans_
I think thi video has aged well with the interest rate possibly increse in this year
Wait so what happens when a bond matures? Does it just cease to exist? Cause in the video it sounded like: let's say I have a $100 bond, every year I get $5 and then when it matures i get the $100 back. That doesn't sound right, have I misunderstood something?
Bonds are just like a loan you borrow from the bank. You lend your money (buy the bond), get paid interest while its outstanding, and then get the money back when the bond matures. So yes the bond ceases to exist. Hope that clears things up
@@ThePlainBagel yeah it does! Thx!
Going into blockchain and Crypto's would be good!
Do War Bonds still exist?
Governments could "charge more taxes" to pay for bond commitments? What? I thought "money printer goes burrrr"... Do you have a video that goes into this more deeply?
If you buy a $1000 bond paying 3% and rates goes up to 5%, isn't that bond now worth $600 and not $783? Also, if you buy a $1000 bond paying 3% and rates go down to 2%, isn't that bond worth $1500 and not $1095 like you said?
It depends on the time to maturity of the bond I believe, so we don't have enough information in the example to calculate the exact dollar change. A bond that is about to mature would not sell for such a steep discount, whereas a bond that still has 10 years to go would probably see a larger drop in price.
Hope this helps!
No
2:00 hmm yes this individual is less likely to pay me back a large sum, I should charge an even *Larger* amount because he'll definitely be able to pay that but not the smaller amount
It’s more about more people with such risk levels will default so you need to recoup the loss through those who pay
Banks don’t just give out loans to 1 person, the give out loans to thousands. If you average it out, all their profits and losses - that will tell you the interest rates a person should pay to ensure profits
Not anymore, negative interest rate is coming
Opportunity cost
I like cream cheese on my bagels
bonds suck post 2008 , mostly.
The background music, while pleasant, is distracting.
3:44 SAFE UNTIL EVERGRANDE...opps.
If a company went under wouldn’t their insurance cover all of their liabilities
IHEartLReoy a company rarely has insurance to cover all their liabilities. In some industries you may see that if business partners require an insurance policy, but otherwise the company has nothing to gain from an insurance policy (if they are bankrupt, they already have nothing and won’t be able to gain from the policy without creditors going after them)
1:19 lol that rate is because you are like a junk bond lol
Background music is annoying :3
Why is bro so lanky 😂😂😂
Nice Jehovah Witness suit!
You really need to turn the music down, it is super distracting!!!