Annuities....The Next Nightmare

[yayt]

Quote from Vinny1:

These are US government bonds. Very safe investments. The reason I bought these is because long maturity zero coupon bonds are more volatile, which means big moves up and down. Worse case, I hold them until maturity and make back $1,000 per bond, which is 3.5 times my money invested.

Yes, but assuming it is 20 years until maturity, keep in mind this is about a 6.5% annual rate of return (assuming your figure of 3.5 is correct)

After inflation, which we can under-estimate at 4%, you are left with 2.5%.

I don't mean to be a downer but want to make sure you know what you're getting into.

 

[AMT4SWA]

Quote from libertad:

Worse than the Ibank problem.....


Just think of all the people depending on uninsured annuities.......

Then think of AIG etc....

Paper on top of paper on top of paper.......it will ALL come crumbling down, it is just a matter of time.

 

[Vinny1]

Quote from flytiger:

I used to sell them, when they first came out. It was a Merrill product.

It was a joke. Be careful with our phantom tax.

I made $200k in a little less than 5 months. 21% return. If they're a joke, I'm laughing all the way to the bank, of course making sure I don't keep more than $100k in one bank.

 

[Vinny1]

Well it's 6 months since i bought the May 2036 zero coupon treasuries. They are up 48% since May. These things have truly amazed me with their mega return in only 6 months.

 

[menelaus]

If you bought ANY treasury. 30yr, 10 yr, etc except for TIPS you made money. Sell, take your profit and shut up.

 

[stock777]

Quote from Vinny1:

I just checked the closing price of the 2036 maturity zero coupon bonds that I bought. They are now up 21% in a little less than 5 months. These things are great!!

I've already made around $200,000 for doing no work at all.

And if rates ramp up, make sure you tell us how much you gave back.

Of course you 'made' money, but if you sell you lose the embedded interest rate, so you're locked in. If you can time the moves you are entitled to make $$$$ and you could make even more if you were that good, and not lucky, trading bond futures.

 

[Vinny1]

Quote from menelaus:

If you bought ANY treasury. 30yr, 10 yr, etc except for TIPS you made money. Sell, take your profit and shut up.

I don't think the treasuries that pay interest moved up 48% in 6 months. The reason I bought the zero coupons with a 28 year maturity is because zeros are more volatile and longer maturities are even more volatile. I think I'll sell my bonds today and be happy with a close to $500k profit.

Any one think that rates will go lower from here? I will regret selling them if rates continue lower, which they probably will.

 

[Vinny1]

Quote from stock777:

And if rates ramp up, make sure you tell us how much you gave back.

Of course you 'made' money, but if you sell you lose the embedded interest rate, so you're locked in. If you can time the moves you are entitled to make $$$$ and you could make even more if you were that good, and not lucky, trading bond futures.

The reason that I don't trade futures is because I don't follow the markets on a day to day basis, plus I don't want to have to worry about margin calls if I'm wrong.