Question

Corporate Finance and Investing, Part G: Junk Bonds and Part H: Zero-Coupon Bonds (pages 97-109) from "The Essays of Warren Buffett: Lessons for Corporate America" Summarize: Three topics you found to be most noteworthy in this reading.

Answer 1

The three topics from the lessons on junk bonds and zero coupon bonds were:-

1) On junk bonds, Buffett spoke that while salesmen tried to convince investors about buying junk bonds and diversifying their portfolio, the fact remains that most of the bonds were ultimately not investment grade and should never have been invested into.

2) He also harped on an important fact that past performance and historical returns do very little to predict future performance and returns from bonds.

3) He also spoke of how the recession of the 1990s caused many corporations to fall because of crushing interest costs which was against the research showing that interest rates compensated for the high default rates for the junk rated companies.