Occidental Petroleum, Spirit Airlines and Intel

Walk into a bar

The three gals walk into a bar and talk about the problems they have experienced, and how they got bailed out of a bad situation by wonderful gentlemen like Trump and Mr. Buffett

Unfortunately, Spirit, with all its talents, couldn’t win friends and influence people since it crossed the mean girl Elizabeth Warren.

Would reading the book by Dale Carnegie have changed her life?

But at the bar, they are all equals, and no one knows who they are. So cheer up, the ever-depressed Spirit; they wanted to see what they were worth.

Here is where it gets interesting: after flirting, the men in the bar were keen on Spirit and not the other two.

Now, why would that be?

Intel has surged to all-time highs, quickly

Occidental has bounced back from the abyss with higher oil prices

And Spirit is no longer operating,

Credit quality

In this example, the suitors knew that Spirit had a better spirit than the other two.

Oddly enough, when Spirit stopped operating, and I read that their assets can be configured for AI, I wanted to buy their corporate bonds pennies on the dollar.

Usually, my broker won’t have those in inventory, but he did, and Spirit was trading above its par value.

Par is the price the company MUST buy the bonds back. So that means that Spirit is better off dead than alive to the creditors.

And yet when I looked at Intel, the price for some of its bonds is still below par!

That means, in addition to the yields, you will get an additional upside upon redemption.

Example. You bought Intel bonds at $980, and they redeem at $1000, you made $20 extra.

Why is that?

I am not sure.

The same with Occidental Petroleum, whose bonds used to trade at 12% yield now hover, I believe, around 5.5%, and with Buffett’s huge stake in the company

You just never can account for men’s tastes

Have a great Saturday morning