The Great Wealth Transfer Issue #4:



  • Why bonds are the wealthy ex-wives of the financial world…
  • How holding a bond can make you more feared than a mobster (and make you more money)
  • ​Discover how to bend the investing odds in your favor – by pairing the special privileges associated with bonds with a once-in-a-lifetime fire sale in the financial markets... 
  • ​How to get paid first, even when the sky is falling!  
  • Bonds 101.
  • ​A no-nonsense guide on how to find a good bond broker, a list of firms we recommend, and the 3 steps to successfully executing your first bond trade...

Let’s have a little fun.

Would you rather be the ex-wife or new girlfriend?

Financially speaking, if you’re the ex-wife (with a good lawyer) once your divorce is finalized, you're legally entitled to certain assets from the marriage.

Spousal and child support, cash settlements, the family home, even a portion of the business...  

And in the case of a wealthy couple this can amount to millions, even hundreds of millions of dollars (just ask Mackenzie Scott, the ex-wife of Jeff Bezos).

Now here’s the important thing – the ex-wife gets paid first.

Sure, the new girlfriend might get jewellery, a sports car, and luxury vacations – but she isn’t legally entitled to receive anything. And she only gets paid after the ex-wife.

It’s only the ex-wife who has financial security – legally-backed financial security.

Try skipping those obligations to your ex-wife… the judge will come down on you like a ton of bricks.

This is exactly what it’s like to be a bondholder.

You’re first in line to get paid, always. This is because the terms of bonds are concrete and backed by law. 

Meaning bondholders have a legal claim to a company’s cash flows versus equity investors who are last in line for a company’s cash flows or profits.

This feature gives bondholders incredible power.

And when you pair these special privileges with the opportunity to shop for good companies at pennies-on-the-dollar fire sale prices – which is what we’re going to do over the coming months – you can make a fortune.

With less risk and greater upside than equity holders.

In today’s issue, we’ll walk you through exactly how the system works… how to buy bonds… a list of recommended bond brokers… and some additional benefits of buying bonds over stocks.


Think of the movie Goodfellas…

There's a scene where the mobster, Henry Hill, is explaining what happens when people borrow money from the mob. 

The answer is, no matter what happens, they have to make their interest payments. 

Or as Henry puts it…

"The guy's gotta come up with Paulie's money every week, no    matter what. 

Business bad? F**k you, pay me. Oh, you had a fire? F**k you, pay me. Place got hit by lightning, huh? F**k you, pay me." 

When you're holding a bond, you're Paulie.

No matter what happens, they have to pay you... or else.

Here’s another way to think about it…

You’re like the banker who holds a mortgage. And the company, like a homeowner, has to pay back the principal and the interest to you. 

If they don’t pay, they get “evicted” – in other words, they go out of business.

Which is why we love bonds.

They put YOU in charge. They put YOU at the top of the food chain.
They’re predictable money makers because the cash flows are predefined. 

See, when a company issues a bond, the company is now in debt – which it must pay off – in addition to the interest payments.

There are different types of bonds – such as treasury bonds which are issued by the U.S. government, or municipal bonds which are issued by local and state governments.

But we’re interested in corporate bonds.

These are tradable “loans” backed by companies.

The same legal structure that makes bonds relatively safe also makes them easy to understand and to value.

A bond has only two primary components. 

First, there's the price, which starts out as "par." 

Generally, bonds are issued in the U.S. in $1,000 increments. A bond trading at "par" is quoted as being "100." That really means it will cost you $1,000 to buy it.

The second component is its coupon. 

The coupon is quoted as a fraction or a percentage. A $1,000 bond with a 6.5% coupon would pay its owner $65 per year in interest.

These coupons are generally paid twice a year – or sometimes more frequently, depending on how the bond is written. 

If the payments were made twice a year, you wouldn't get $65 twice. You'd be paid $32.50 in June and $32.50 in December.

The key to understanding bond prices and how they might change is to always remember that the coupon is fixed.

As interest rates change, the prices of bonds will fluctuate. If interest rates go down, everything else being equal, the price of your bond will go up. That's because the coupon is fixed.

For the rate of interest to change, the bond price must change. 

Likewise, if interest rates go up, the prices of bonds will go down – at least, temporarily.

But if you hold your bonds to maturity (when the principal is repaid), then these changes in price can be meaningless. You're still going to be paid back $1,000 per bond. 

Assuming you're happy with the nominal coupon, there's nothing to worry about. 

That's a lot safer than owning stocks. As you know, stock prices bounce around for no apparent reason all the time…

Stocks can also be hard to value... which means it's possible to pay way too much for them when you buy, and it's possible to sell them for far less than they're worth.

A stock's dividend is also never guaranteed. 

CEOs can cancel or decrease dividends at the drop of a hat. As an equity holder, you’re entirely at the mercy of someone who may not have your best interests at heart.

Bondholders don't have to worry about their coupon payments being lowered. The coupon is legally required to be paid. Companies have to meet that obligation, or else the bondholders are entitled to certain underlying collateral.

If they fail to meet their obligations, it’s likely because the business is going bankrupt. 

But even then, as the bond holder, you can partially recoup your investment as the courts will force the company to pay its debts.

Typically, this involves selling off underlying assets such as equipment, property, land, intellectual property, along with everything and anything else that can be auctioned off for cash.

As the bond holder, you are entitled to this money. 

It won’t be enough to cover your entire investment, but it’s better than a kick in the teeth with bond holders seeing an average of 40 cents on the dollars.

But equity holders... they do get kicked in the teeth.

This legal protection is just another one of the many reasons we love bonds at Porter & Co. and why they’ve long been Porter’s favorite way to maximize his investment returns while reducing risk.

Before you invest in bonds, however, it’s important that you fully understand how the market functions…


When a company issues a bond, the “market makers” (investment banks like JPMorgan, Goldman Sachs, or Morgan Stanley) will underwrite the bonds.

The underwriters are responsible for raising capital on behalf of their client, the corporation, and the underwriters ensure that there is a market for the bond.

The underwriters will either buy the bonds or sell the bonds, but either way, they are responsible for originating new bond issues. 

This is the primary market, where the money from the bondholders goes directly to the issuer.

The investment banks, market makers, ensure that there is a market for bonds… they either hold the bonds or deal them in the secondary market. 

The secondary market is where individual investors can buy and sell bonds.

The bid/ask spread represents the difference between the prices the market maker is willing to buy and sell the bond.

The bid/ask spread will depend on the trade size, credit risk, interest rate as well as other economic conditions like inflation. 

For example, inflation will cause spreads to widen due to higher default risk. Ultimately, it’s the buyer and sellers in the secondary market that determine the price of these assets.

Some key things to know before you invest in a bond:

Who are we lending to?
This is the company/corporation, otherwise referred to as the issuer.

What is the face value of the loan?
This is the amount you will be repaid in full.

What’s the schedule of the bond?
These are the dates interest payments and principal are due.


It’s simple to buy stocks these days with all the online brokerages and apps.

That’s not the case for buying bonds. 

But there are good options for you. Depending on your brokerage, you may or may not be able to buy the bonds you’re looking for online…

If not, you’ll need to call your brokerage and have them execute the trade for you. If you work with a full-service broker, you will work directly with someone from the brokerage, usually over the phone.

Full-service brokers can be great at providing additional research or advice that’s specific to you.

Sure, this can be a little daunting the first time. But once you get the hang of it, it’s simple. (And don’t worry, we’ve give you a simple script to follow if you do need to call your broker).

When you call your broker, they will tell you whether the bond you’re looking to buy is available to them. 

Sometimes the bond won’t be available to the broker because the bond market is much less liquid than the stock market…

When you speak to your broker, ask him for the current market price of the bond you’re looking to acquire, and they will give you the bid offer. 

The bid offer is what you’ll be paying and then tell him how many bonds you’d like to buy.

The process for buying bonds varies depending on your broker. Some brokerages may need additional documentation, or require you to be approved for bond trading.

We recommend being comfortable calling your brokerage firm or the fixed-income specialist who will help you get quotes.

These specialists will analyze the prices on the market and check what the dealers are asking for the specific bond you’re looking for. 

Most brokerage firms will charge a $1 commission for every time you purchase or sell a bond (check your brokerage firm for minimums or fees).

Porter & Co. has no affiliation to any brokerage firms, but we will share some large, reputable firms if you’re interested in making these types of trades.

Charles Schwab, Fidelity Investments, E-Trade, Interactive Brokers, and TD Ameritrade are all reputable firms who allow you to invest in bonds online.

Each has a slightly different fee structure, minimum account size, and purchasing process so be sure to review each brokers individual brokers terms and conditions.   


1. Tell your broker (or place an online order) for the amount of bonds you’d like to acquire.

2. Then the name of the borrower, the coupon, and maturity date.

3. And finally, the CUSIP number. The CUSIP stands for “Committee on Uniform Securities Identification Procedures” and is assigned to every traded security. 

By providing the CUSIP, it will ensure that you’re buying the right security.

And that’s all there is to it. 

Once again, we invite you to bookmark this page, or print these issues out, and refer back to them as often as you’d like.

Because next we’re going to talk more about exactly what bonds to buy and when. 

If you have any questions or comments as we go, please drop us a line at

We of course can’t reply with individualized investment advice, but we’ll certainly tackle any and all recurring questions as they come in.


Porter & Co. 













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