Quote Originally Posted by SBQ View Post
Yes not only tax on the individual level but also the tax at the company level.

In Finance grade school, our prof told us corporations have 3 main ways to raise capital. 1) Issue more shares 2) borrow cash from the bank & 3) issue bonds. All have issues. ie A reason why Buffet isn't a big fan of owning junk bonds? Because from the point of view from the company, bond issues are a last resort if major or private banks refuse to lend. Have a think about this. Just query why your local banks only lend mortgages on residential properties instead of lending to small businesses? If there are no buyers of bonds, then usually as a last resort, the corporation issues more shares which has a negative impact to existing shareholders (called dilution).

re NZ investing: I have not come across any NZ broker that are competitive to US brokers in terms of commission trades and account management fees. Many US brokers have gone commission free trades and rely making $ off margin accounts. In NZ, Macquires, Craigs, etc have very high brokerage fees when you look to buy overseas shares. On top of this as an example, there's a local Christchurch firm Jarden that charges like a 1% account management fee per year (correct me if i'm wrong but last year I saw one of their presentations and they spoke of such administration fees when they were canvassing new clients). Also they were only interested in clients with +$500K in wealth to invest with them. I assume that would be no different to various Kiwi Saver Funds that charge similar fees. Ie. US Vanguard ETF 0.08% vs using a NZ managed fund to buy the exact same Vanguard ETF but they charge 0.8% per year (they say it's to cover tax compliance FIF / documentation etc.)

Anyways.. today we've seen the true impact of what COVID19 can do with the share market. A near 1,200 pt drop for the DOW is significant. I hope you all are buying.
Indeed. Companies do diversify their source of funds, with equity, bank funding, and bonds.

"Just query why your local banks only lend mortgages on residential properties instead of lending to small businesses?"
Banks do lend to small businesses, but they want security for the loan, and for many if not most small businesses, the only security that is available is either a personal guarantee or a mortgage over (residential) property - usually the small business-owner's house. I suspect that this is simply a result of the retail banks making most of their money from residential property loans, and having little understanding of anything else.

"A reason why Buffet isn't a big fan of owning junk bonds?"
I'm not a fan of junk bonds either. After all, what would it take for an Apple to turn into a Blackberry for example? I run a portfolio of directly held New Zealand bonds, bought at time of issue, to be held to maturity, average credit rating of A. The income goes to fund other investments - bond income provided the funding to buy into the 2013/2014 New Zealand electricity company floats.

". . . a local Christchurch firm Jarden. . .
They're actually a diversified national financial services company, ex First NZ Capital ex Credit Suisse/First Boston. Last time I talked to them (2015?), the 1% annual account management fee came down to well under 0.5%. I suspect that it depends on what you want from them.

Out of idle curiosity, when I own shares and bonds in New Zealand, these are held at the registry in my name, without any third party custodial arrangements. Is this the case in the US/Canada, or are shareholdings/bonds held by the broker - with or without DIMS?

"Bonds have their place... but in Warren Buffet's books (and he's getting near 90 years old), don't waste your time unless you're the person that can name the terms of the bond rate with warrants and options
Can you explain what this actually means? The "warrants/options" makes no sense to me in the context of holding individual bonds.

Thanks for the posts, I'm learning a lot.