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Municipal bonds
- Thread starter The Kin
- Start date
At these levels...when you reach for yield vs time...small rises in interest rates crush the principal value....and it will not be much fun...riding an upward curve...
Since Carter...bonds have increased...especially the 25 year zeros..
If one buys the long time periods...one believes rates are going lower...
A similar move in rates downward would create much better gains in the zero...
In my book...Bonds are a very poor risk...and the short term pays nothing...
You like deflation...then you like zeros...
You like inflation...then you like TIPS...
I do not like either one...
I do much better in stocks... no overnights ....
I do not trust anybody's forecasts....for any reason...
Develop your trading skills...stay sharp...stay nimble...think outside of the box...
All fixed instruments are very poor investments at this stage of the game...
You gotta develop the skills for risk taking...that's it...
Since Carter...bonds have increased...especially the 25 year zeros..
If one buys the long time periods...one believes rates are going lower...
A similar move in rates downward would create much better gains in the zero...
In my book...Bonds are a very poor risk...and the short term pays nothing...
You like deflation...then you like zeros...
You like inflation...then you like TIPS...
I do not like either one...
I do much better in stocks... no overnights ....
I do not trust anybody's forecasts....for any reason...
Develop your trading skills...stay sharp...stay nimble...think outside of the box...
All fixed instruments are very poor investments at this stage of the game...
You gotta develop the skills for risk taking...that's it...
Insured muni's aren't yielding anywhere close to 6%...and to go uninsured with the deficits alot of states are raking up is very risky, even if there are yielding 6%. Yet another dumb thread started by The Kin.
Hello:
Frankly I don't have a problem with ignorance. I expect it, and don't mind filling in where I can. If you want to know about Muni bonds, you should start by learning about the bond market in general. Comments about credit risk are subjective and can be measured by looking at bond ratings. Again you can learn more by going to the rating agencies or studying the ratings system for bonds. Try googling for AM Best and Moody's. Muni bonds offer value IF you are in the appropriate tax bracket. Your accountant can inform you as to the desirability of using Muni's. As regards risk, I generally look for new issues that are "general obligations" of the state where you reside. To put it in a nutshell, this means that they are less likely to default. If we use the state of California as an example, if everything went straight to hell, Muni's would be among the last obligations to default. In contrast, local jurisdictions within the state have the power to issue debt, but their paper is more susceptible to default (google "bond default, State of CA, Orange County"). For those who want to do some homework, I recommend Tony Crescenzi's book "The Strategic Bond Investor" published by McGrawHill. Based on your comments, I would also recommend that none of you transact in the bond market until you get some accurate information.
For those who just can't wait to get their ass handed to them, be aware that there are several kinds of bond transactions. If you intend to purchase issues for a single portfolio, your broker will want to act as principal, and the "advice" section on your transaction report will show the cost of transaction but no commission. That means they embedded the commission into the transaction cost (they don't want you to know what it cost you). If instead you ask for a agency transaction you can obtain a true cost to buy the paper. Also If you insist on buying new issues, you will save, as the issuer is on the hook for the commission (you don't pay commission). Finally, a knowledgeable buyer/seller should ask the broker whether they are moving paper from their inventory or from the "wire". Unlike the stock market, there is no central clearing place for debt, and your broker has no obligation to tell you about issues that are held by another firm. Ok then, I think you have the idea. Its a complex business and you need to do some homework before you step up and transact.
Good luck,
Steve
Frankly I don't have a problem with ignorance. I expect it, and don't mind filling in where I can. If you want to know about Muni bonds, you should start by learning about the bond market in general. Comments about credit risk are subjective and can be measured by looking at bond ratings. Again you can learn more by going to the rating agencies or studying the ratings system for bonds. Try googling for AM Best and Moody's. Muni bonds offer value IF you are in the appropriate tax bracket. Your accountant can inform you as to the desirability of using Muni's. As regards risk, I generally look for new issues that are "general obligations" of the state where you reside. To put it in a nutshell, this means that they are less likely to default. If we use the state of California as an example, if everything went straight to hell, Muni's would be among the last obligations to default. In contrast, local jurisdictions within the state have the power to issue debt, but their paper is more susceptible to default (google "bond default, State of CA, Orange County"). For those who want to do some homework, I recommend Tony Crescenzi's book "The Strategic Bond Investor" published by McGrawHill. Based on your comments, I would also recommend that none of you transact in the bond market until you get some accurate information.
For those who just can't wait to get their ass handed to them, be aware that there are several kinds of bond transactions. If you intend to purchase issues for a single portfolio, your broker will want to act as principal, and the "advice" section on your transaction report will show the cost of transaction but no commission. That means they embedded the commission into the transaction cost (they don't want you to know what it cost you). If instead you ask for a agency transaction you can obtain a true cost to buy the paper. Also If you insist on buying new issues, you will save, as the issuer is on the hook for the commission (you don't pay commission). Finally, a knowledgeable buyer/seller should ask the broker whether they are moving paper from their inventory or from the "wire". Unlike the stock market, there is no central clearing place for debt, and your broker has no obligation to tell you about issues that are held by another firm. Ok then, I think you have the idea. Its a complex business and you need to do some homework before you step up and transact.
Good luck,
Steve