Earning interest income in cash with IB

Quote from Daal:

with the effective fed funds close to zero IB is not paying anything these days. I did something to earn some interest that I want to share. lets say you got $100K, you can buy $20k worth of too big to fail corporate bonds(the 8-9 banks that got tarp money), that will pay 10-12% a year(C and MS to be exact some other names pay much less). there is no liquidity to get out of these bonds, thats why you keep $80k in cash.

Now what you accomplished is a synthetic yield of 2%-2.4% on your $100K while still preserving liquidity. you can chase yield and buy more of course
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i've tried that. and it works until it doesn't..
now i'm in real deep shit with those bonds...and i have no idea,how it's ends...they all USE TO BE top of the line,investment grade(lehman included),diversified,etc blah blah blah..fuck it..fuck us economy.
they never ever going to get a dime from me..never ever.. fuck rating agencies too...fuck ib,who not alow me to borrow against those bonds,even they still have investment grade..
on top of that-another big question-how to report those losses to IRS? lehman for example-in default..the losses are never realized yet..and i don't know if they ever let me realize those losses. i can't even close the position to realize the loss,because ib not allow me...so..for those who want to try this-good luck..
 
calm down dude. you got burned in LEH but bernanke and paulson tried to bail them out, leh didnt had enough assets to get a loan, had tarp existed back then you would have gotten par in your bonds

C is more than 3 times the size of LEH, I'd say there is less than 1 in 50 that C is allowed to fail. at ~6%+ premium to treasuries PLUS recovery you are earning a nice risk premium that only came out because of the fearful nature of the market we are in
 
why would i have to calm down? i have over 100 positions in different corporations,with average yield around 15-17%. all about to mature within a year.. i'm diversified or what?
they all f**d,currently trading @-20-30% loss..manufacturing,banking,finance,utilities-you name it.
i'm not buying anything any time soon..unless they will start selling cds for general public,just like options..
screw "safe" bond market "investments"
day trading rules..
 
Quote from Daal:

with the effective fed funds close to zero IB is not paying anything these days. I did something to earn some interest that I want to share. lets say you got $100K, you can buy $20k worth of too big to fail corporate bonds(the 8-9 banks that got tarp money), that will pay 10-12% a year(C and MS to be exact some other names pay much less). there is no liquidity to get out of these bonds, thats why you keep $80k in cash.

Now what you accomplished is a synthetic yield of 2%-2.4% on your $100K while still preserving liquidity. you can chase yield and buy more of course
More...

Guess we learned something, no? Looks like that brilliant idea is gonna cost you 20k pal. Call it 'tuition,' and keep your chin up.
 
Quote from BlueHorseshoe:

Guess we learned something, no? Looks like that brilliant idea is gonna cost you 20k pal. Call it 'tuition,' and keep your chin up.
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dont worry about it. bailout is coming :cool:
the bonds prices are not slightly worried
 
Quote from Daal:

dont worry about it. bailout is coming :cool:
the bonds prices are not slightly worried
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Apparently you've never been on the receiving end of a "Cram Down." Lube up pal, 'cause its coming your way.
 
Quote from Daal:
with the effective fed funds close to zero IB is not paying anything these days. I did something to earn some interest that I want to share. lets say you got $100K, you can buy $20k worth of too big to fail corporate bonds(the 8-9 banks that got tarp money), that will pay 10-12% a year(C and MS to be exact some other names pay much less). there is no liquidity to get out of these bonds, thats why you keep $80k in cash.

Now what you accomplished is a synthetic yield of 2%-2.4% on your $100K while still preserving liquidity. you can chase yield and buy more of course
More...

This is probably one of the most ridiculous ideas I've ever heard of. Unless IB is letting you use your bonds as marginable collateral, you've accomplished absolutely nothing.... except buy $20k worth of bonds that yield 10-12%. The notion that you've somehow created a synthetic yield for your entire trading account in order to offset the fact that IB isn't paying that much in interest, is just not true. No matter how you slice it, you're still only getting paid interest on $20k, and almost nothing on the remaining $80k. And as a matter of fact, other than it being convenient, I don't think there is even any benefit to doing it in the same account as your trading account. At best you've just diversified a little.
 
I believe investment grade bonds counts for IB buying power. C is bigger than AIG and LEH combined, now just as paulson delivers me a nice capital gain :p
 
If C bonds lose me money the Treasury $25b preferred is WORTHLESS. imagine the kind of problem paulson would have blowing $25b like that then going to congress to ask for more $350b when he promised he would 'protect the tax payer'.
odds of default are next to 0, really :p
 
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