 Good day, film investors! Today we continue with our book summary of The Intelligent Investor and we discuss Chapter 6. However, if you're interested in a more modern perspective on value investing, please check out my book on Amazon Modern Value Investing. The link is in the description below where I discuss 25 tools how to analyze companies in addition to modern perspectives on portfolio strategies. Chapter 6 of The Intelligent Investor discusses junk bonds, foreign bonds and new issues stock IPOs. So junk bonds, this is really not contemporary now because the interest rates on junk bonds are really low when compared to other interest rates. So there is huge risk because those interest rates expand and there is little return because you are not going to risk that much for investing in junk bonds. Let me show you. This is the US high yield effective yield and you can see that now it is at 6.11% but in 2016 it went to almost 10%. In 2012 again it went to 10% and during a real recession it went to 23-24%. And that's when you have to buy those junk bonds, not when things are good, you have to buy them when things are bad. What's very interesting that Graham tells us how all junk bonds suffer severe sinking spells in bad markets but most of them recover when favorable conditions return. So this is really crazy. Nothing has changed since the 1960s, 50s, 40s. Junk bonds go hugely up, hugely down and you can, in bad market conditions, you can buy them really, really with a huge discount. So given the low interest rates now and if we see interest rates expand, we can really see those bonds, those junk bonds, be bought at huge discounts when a bad market comes. And then it is the time to look at junk bonds, look at what's the probability of default, finding those that don't have default or that those have a margin of safety and then investing. For now the risk is too small for the reward but if you're just patient and you wait for the normal market cycles, you will find that opportunity. Just to show you how an increase in interest rates affects a bond, this is the yield on Tesla's bond, which means that investors are now scared for the risk of Tesla and this bond is much cheaper than it was when it was issued with a 5.5% yield. On foreign bonds, Graham is completely against foreign bonds but then you have to see okay, how that fits your portfolio, your portfolio diversification and whether you need to be exposed to currency risks or not. If you live in one country, you might want to stick to those country yielding bonds if you don't like global risks. That's something that's a personal preference. And foreign bonds are different than foreign stocks because a business is a business and the bond has much more risks because all those risks are fixed like currency risks, interest rates, etc. So keep that in mind. Now what about IPOs? Graham really doesn't like IPOs from a general perspective but he says that in bad market times there could be opportunities in IPOs then when the bull market somewhere in the middle of the bull market then IPOs are fairly priced and in the late stages of the bull market IPOs are extremely overpriced. So if you look at IPOs you might want to wait a little bit that they are more fairly priced and that's what we have seen happening with Snapchat. However in the early stages of the bull market just think of Facebook, the IPOs were okay priced but even then Facebook stocks first drop almost what 50% only to rise to the current levels. So be careful with IPOs, you can perhaps always wait or invest in stages to get to lower entry prices because those are usually a very very volatile environment. Further when any IPO is done always keep in mind that the bank promoting the IPO gets a fee between 2 and 8% so there will be very very positive on promoting that to get as high fees as possible. Therefore I don't like to invest in IPOs, I like to invest later if the story is the same but the market stops liking it. So I usually look at an IPO 3-6 months later or after the lock-in selling period from the management has passed. So something to think about Graham says also that we have to look at IPOs later when there is really a margin of safety and when those become a bargain. The moral of this chapter is that in the market nothing changes, the same cycles happen over and over again. There is enthusiasm about high yield, people take a lot of risk for a little bit higher yield, they are exposed to huge risks. IPOs, bull market, the number of IPOs explodes and we can see here over the last 20 years, 1990s huge number of IPOs, beer market big drop, 2004, 2007 huge number, 2008 practically nobody, 2014 the top and then already a little bit less as the market is a little bit different now but still very high number of IPOs spread over the last 6-7 years. What's different now is that interest rates are very low so it might pay to get a loan instead of going to do an IPO and diluting yourself. So in these cycles also always think of the market in cyclical ways. When things are good is usually not the time to buy anything. When things are bad then you might want to buy and this is Graham's message. Be greedy when others are fearful, be very fearful when others are greedy. Thank you for watching, looking forward to your comments and I'll see you in the next video.