Ahead of the curve

The Globe and Mail has now reported the recent bond sale by Brookfield Asset Management.

I just learned from this article these bonds can be redeemed if the company suffers a credit rating downgrade.

That's a pretty safe feature and highlights another 'can't-lose' aspect to this bond issue which made it so attractive for individual investors.

The fact that I can report this story on my blog the day before a major financial reporting blog, with more detail and context, is due to two factors.

First, a skilled, experienced and involved investment advisor is a necessary precondition for developing a deeper knowledge of the investment community.

Second, my own willingness to follow the flow of information in fixed income markets and a willingness to interact and work with my investment advisor.

A skilled and connected advisor has years of experience working with markets and traders. They manage hundreds of millions and sometimes billions of dollars over decades. They protect the wealth of their clients during market crashes and they earn real, positive returns over the long term. In essence, they have seen people make millions and seen people go broke. They have survived and grown a large book of clients because they are stable wealth managers. They have the best ability to contextualize a clients personal needs and the financial environment within which they are living (ie. They understand better than most, through hands on experience, how the yield curve and interest rate cycles affect prices and yields for products and securities).

Having your own passion for knowing about the bond market isn't the easiest thing to have. It's something that usually happens late in life when you've finally tried every crazy scheme to make money and failed. Following the bond markets opens up a new world of medium and long-term investing where risk and return have inverted meaning compared to the mass-marketed, stock-market oriented education materials. The hidden world of Over-The-Counter (meaning corporate bonds are sold to retail customers privately- there is no central exchange to list sale prices for corporate bonds) fixed-income securities might seem to resemble a shadow cult, capable of mobilizing vast sums of money and deploying them for purposes of world domination. That might seem like something ridiculous, boring or unappealing for many forward thinking and capital gains/dividend-growth oriented individuals. The mainstream press would have you absolutely convinced half your savings must be in stocks and that bonds cannot be risked against stocks and must be kept in government securities. You must go out of your way and work to understand how you can personally take advantage of the bond market.

Without the willingness to reject a path-of-least-resistance way of thinking and investigate the real nature of the financial markets, and then applying that knowledge with a carefully selected advisor, the DIY investor will always be a day behind the headlines. Any individual who takes the time to find a skilled advisor (they can be young and well-trained, too), to educate themselves about the bond markets, and build a successful relationship with their advisor is truly ahead of the curve.