Speculating in Gambling

You know if I put gambling and speculating in the same sentence then you know up front that it is high risk. On the other hand, if it works out, you can be rewarded. Since we are talking about corporate bonds, you know that the risk that we are talking about is limited to the money that you put into the investment. The bond is;

MOHEGAN TRIBAL GAMING AUTHORITY 6.87500% of 02/15/2015

It is rated as a Standard and Poor’s “CC” and a Moody’s “CAA3” Bond.

As of March 8, 2011, the price of the bond was $720.00. The bond gives $68.75 in interest per year. The bond matures on 02/15/2015. I am too lazy to calculate the interest from today’s date. So let’s say that you bought the bond at $720 on Aug. 15, 2011 and kept the bond until maturity. This is what you would get.

1. From August 15, 2011 to February 2015, you would get an appreciation of $280 per bond.

2. You would make $240.63 per bond in interest.

3. That means that your appreciation of $280 plus your interest of $240.63 would give you a total return of $520.63 on a $720 investment. That is a “Yield to Maturity” of 20.66% yearly for 3.5 years.

Bond Ratings:

BBB: An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC, and C: Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the least degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB: An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

B: An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

CCC: An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC: An obligation rated 'CC' is currently highly vulnerable to nonpayment.

C: A 'C' rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the 'C' rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument's terms or when preferred stock is the subject of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.

Operation of the Authority

The Authority is an instrumentality of the Mohegan Tribe of Indians of Connecticut, or the Tribe, a federally-recognized Indian tribe with an approximately 507-acre reservation situated in Southeastern Connecticut, adjacent to Uncasville, Connecticut. The Authority has been granted the exclusive power to conduct and regulate gaming activities on the existing reservation of the Tribe, including the operation of Mohegan Sun, a gaming and entertainment complex that is situated on a 185-acre site on the Tribe’s reservation. Through its subsidiary, Downs Racing, L.P., the Authority also owns and operates Mohegan Sun at Pocono Downs, or Pocono Downs, a gaming and entertainment facility offering slot machines and harness racing situated on a 400-acre site in Plains Township, Pennsylvania, and several off-track wagering facilities located elsewhere in Pennsylvania.

The Tribe’s gaming operation at Mohegan Sun is one of only two legally authorized gaming operations in New England offering traditional slot machines and table games. Mohegan Sun currently operates in an approximately 3.1 million square-foot facility, which includes Casino of the Earth, Casino of the Sky, Casino of the Wind, 100,000 square feet of retail space, including The Shops at Mohegan Sun, a 10,000-seat Mohegan Sun Arena, a 350-seat Cabaret Theatre, a 300-seat Wolf Den, 100,000 square feet of meeting and convention space and the approximately 1,200-room luxury Sky Hotel Tower. Pocono Downs offers approximately 2,500 slot machines and electronic table games, several dining options, including two fine dining restaurants, a casual dining 300-seat buffet and a quick-serve dining area, six retail outlets, three bars/lounges and a bus passenger lounge. More information about the Authority and its properties can be obtained by visiting mohegansun.com, mohegansunpocono.com or mtga.com.

Authorities "Screw Up!"

If you know anything about the City of Harrisburg, Dauphin County Pa., and the Harrisburg Authority problems, then you know that an authority can “screw up” something terrible, be insolvent, and still stay in business, paying its bonds. MOHEGAN TRIBAL GAMING AUTHORITY is such a “screw up.” That is why I own the bond.

Where is Darnell's Portfolio compared to the Dow

At the end of month 26, Darnell’s IRA portfolio has grown 97.88% since January 30, 2009. It has grown 10.78% Year to Date. That means 37.38% of this year’s growth so far has been in interest given by the bonds of the portfolio.

The Dow has moved up 6.02% this year and is doing its best in 12 years. Year to Date without a contribution, my portfolio is up 4.08%.