My Third Year Reporting on Bonds

This is Darnell's 12 Economic Sectors that he invested in from 2008 to 2012.

We are going to learn a little about portfolio analysis. But first, if you are the type of person who feels that someone is being self-serving when teaching something. If you feel that you don’t need to learn new ideas then leave this blog and go watch Jerry Springer. If you want to learn how to obtain money for retirement or you want your children to learn how to save for their retirement or advance education then keep reading.

The Bernard Madoff fund consistently recorded an 11% gain every year for 15 years. Berny was a Scam Artist and he took approximately $50 billion from people and institutions. The professionals knew that something was wrong because investments cannot grow consistently that long.

For the past 3 years, my IRA has grown on average 109.331%, 36.444% per year, 3.037% per month, .759% per week or .152% per business day.

No, I am not running a scam on myself. There is a way to make over 10% per year consistently, without being scammed out of your investment. You can’t be scammed because you as the investor. You take control of your investments and your money. You use a "Self Directed" IRA at an online brokerage firm that is insured under SPIC. This is what we will study here with my “Self Directed IRA.”

Portfolio Make Up
This is my Portfolio Make Up. I always stay fully invested. That is why less than 1% of my portfolio is in cash. I buy very little stock because I invest for income, not growth, or speculation. The stock is in Ford Motor Company, a bond mutual fund, and a Canadian Forestry Company.

Ford Motor Company will have its next earnings report on Friday Jan. 27, 2012. They have renewed giving quarterly dividends of 5 cents per quarter or 20 cents annually. For this quarter, the stock goes ex-Dividend on Jan. 27, 2012. Stockholders must be of record by Tuesday Jan. 31, 2012 to receive the dividend. The payment date for this dividend quarter is Thursday March 1, 2012. This dividend is nothing compared to what my bonds give.

In fact, my portfolio gives me a 9.43% cash return in interest even if my investments do not appreciate. That interest is reinvested into more bonds that give more interest. This is why over 97% of my investments are in corporate bonds with a Standard and Poor’s rating of BBB+ or below. That is the secret to making over 1% per month, every year.

ABC Portfolio Analysis
In my portfolio, I managed to diversify my investment with 19 bond issues. I am invested in 12 different sectors of the world economy. The top three sectors are Oil, Health Care, and Banking. Oil makes up 61.54% of my holdings.

This is where you should say, if something happens to the price of oil, Darnell is going to take a big price hit on his bonds. What if one of his oil companies goes out of business? What then?

Portfolio Oil Analysis

You got that right! This is where my portfolio is venerable. My 61.54% in Oil is broken down into two oil companies. The largest is the Venezuela Republic. That is in a country in South America run by Hugo Chávez. Chávez is said to be mismanaging the country's oil fields to the point where we can have a collapse of the Venezuelan industry in the near future.

But what I am doing is riding the world oil bubble. I am betting that this bubble will last until Dec. 2014. That is when my last Venezuela Republic Bond Issue matures.

You ask, what is my logic behind this bubble and why do I think it is going to end after the year 2014? The answer is very simple if you know world politics and the politics of oil. The world is in a depression. We have fewer cars on the road because fewer people around the world are working. This brings down the demand for oil. So the price of oil, (the 01-19-2012 Price; $100.27 for WTI Crude and $110.54 for Brent Crude Oil) that is still going up cannot continue to go up.

The Strait of Hormuz

If that is the case then why is oil going up? It is because of the problems in the Middle East. Israel does not want Iran to develop a nuclear missile capability. Iran claims that they have a nuclear program to create electricity for the nation, not weapons. Israel is a client state of the United States. So the United States is threatening Iran with economic warfare. Iran says that if the United States carries out that threat then Iran will shut down the Strait of Hormuz where 16% of the world's oil passed through. The US says that if Iran tries that, they will send the US Navy to keep it open.

So we have a real chance for a shooting war to start between the United States and Iran. But if that happens, it will not stop there. Iran is a client state of Russia and China. This is the same China that is the third largest holder of US Debt. These four countries can start World War III, a "loose, loose" situation. This is what is keeping up the price of oil and this problem will not go away in a few years.