Tuesday, January 12, 2010

Bonds. Cheese Bonds.

I just bought three Cheese Bonds from Wendy Levy, a.k.a. the Cheese Snob, to help her fund Curds and Whey, her soon-to-be cheese and tea shop in Jersey City, New Jersey.

The bonds have a face value of $10.00, redeemable in cheese and/or tea, and she's selling them for $9.00 each. That's an 11% payback right there. Plus, the bonds are callable at any time, so if I cash them in in three months, that's a roughly 44% annual return.

Of course, that 44% is not risk-adjusted. But I've been watching Ms. Levy from afar for a while. She has been methodically planning this store for over a year. There are lots of ducks, and yet they are all in their row. I am going to get my cheese.

Also, it is true that cheese and tea are a bit less liquid than cash, so I should probably throw in a little liquidity discount there as well to adjust my expected return. And then, opportunity costs: Is cheese-and-tea really the best use of my $27?*

But even given all that, we're still talking north of a 30% annual return: Beat that, Bank of America! (On second thought, Bank of America, don't try to beat that...maybe just stick to savings accounts and stuff like that for a while.)

For more info: The Roquefort Files.

*Well I do love cheese — and tea! And my household consumes quite a bit of both. Plus as I have entered my dotage, I have become a bit of an epicurean in matters gastronomic (and sartorial), so my utility function has changed from five or so years ago. In short: Yes. This is the best possible use of my marginal $27.00. You have my word on it.

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