"Profit from the Muni Mess"

[2good]

I just posted this reply in another forum ("What to do with my cash"):

"I am also looking for ways to get some decent returns for the cash I am sitting on. I will probably follow the advice in a recent Money Magazine article (Profit from the Muni Mess, Munis: The new power portfolio - Feb. 12, 2008). Any feedback regarding buying Muni's at this time is welcome."

I decided to open a new thread since I am interested in any feedback regarding buying muni bonds. This would be my first time and I am sure many of you have experience with this.

thanks,
2good

Update: I just realized I linked to an older article. I searched the Money Magazine website for the article in the magazine but I cannot find it online. It is either not posted or I am too challenged to find it.

[Dimsumkid]

There's an article on pg P23 of this weekend's Barron's, March 7, 2011 titled "How to Play the Panic in Muni Bonds". I haven't read it yet, but it's current vs. the one you listed from 3 years ago.

[2good]

Quote:

Originally Posted by Dimsumkid There's an article on pg P23 of this weekend's Barron's, March 7, 2011 titled "How to Play the Panic in Muni Bonds". I haven't read it yet, but it's current vs. the one you listed from 3 years ago.

In order to read the Barron's article you need to be a subscriber, I just tried. There is a newer Money Magazine (March 2011 magazine) article than the one linked above but I cannot find it online.

[M Paquette]

Quote:

Originally Posted by Dimsumkid There's an article on pg P23 of this weekend's Barron's, March 7, 2011 titled "How to Play the Panic in Muni Bonds". I haven't read it yet, but it's current vs. the one you listed from 3 years ago.

That would be this: How to Play the - Barrons.com

He references various sources to point out that munis are undervalued, and suggests a 'barbell' trade involving munis under two years and longer ones in the 8-12 year range, on the theory that the midrange bonds will be hurt the most by an increase in short term rates by the Fed. The short term bonds are assumed to be trading at near cash equivalents (0.1% yields. Phbbth!) to be redeployed at higher returns when the yield curve 'corrects.'

[haha]

Quote:

Originally Posted by M Paquette That would be this: How to Play the - Barrons.com He references various sources to point out that munis are undervalued, and suggests a 'barbell' trade involving munis under two years and longer ones in the 8-12 year range, on the theory that the midrange bonds will be hurt the most by an increase in short term rates by the Fed. The short term bonds are assumed to be trading at near cash equivalents (0.1% yields. Phbbth!) to be redeployed at higher returns when the yield curve 'corrects.'

Here is a freely available Feb. 2011 Barron's article from a demonstrated bond expert, Jeffrey Gundlach.

Jeffrey Gundlach Is the King of Bonds - Barrons.com

[M Paquette]

Quote:

Originally Posted by haha Here is a freely available Feb. 2011 Barron's article from a demonstrated bond expert, Jeffrey Gundlach. Jeffrey Gundlach Is the King of Bonds - Barrons.com

Um. Colorful character, isn't he? Looks like his Big Plan is to raise cash, wait for the Great Muni Panic, and get out there and buy, buy, buy!

[haha]

Quote:

Originally Posted by M Paquette Um. Colorful character, isn't he? Looks like his Big Plan is to raise cash, wait for the Great Muni Panic, and get out there and buy, buy, buy!

My plan too. If it doesn't come, who cares? If it does, may be very nice. And it does not require individual bond analysis, which I found difficult. If a company has depressed bonds on the market, it obviously has a lot of debt. It's like passing on a busy two lane road. You can see a car coming up ahead, you only need to guess how fast it is closing. No appeal to me.

I also don't have the distaste for idle funds that many here appear to have.

Ha

[CCdaCE]

Quote:

Originally Posted by M Paquette Um. Colorful character, isn't he? Looks like his Big Plan is to raise cash, wait for the Great Muni Panic, and get out there and buy, buy, buy!

Man? He's a spooky lookin' bugger.

-CC

[brewer12345]

Quote:

Originally Posted by haha My plan too. If it doesn't come, who cares? If it does, may be very nice. And it does not require individual bond analysis, which I found difficult. If a company has depressed bonds on the market, it obviously has a lot of debt. It's like passing on a busy two lane road. You can see a car coming up ahead, you only need to guess how fast it is closing. No appeal to me. I also don't have the distaste for idle funds that many here appear to have. Ha

Ha, in the event of the great muni crash of 20XX, are you planning on scooping up individual bonds or funds? I had scoped out NUV as a possibility for a fund, although my taste usually runs to individual bonds.

[chinaco]

Quote:

Originally Posted by 2good In order to read the Barron's article you need to be a subscriber, I just tried. There is a newer Money Magazine (March 2011 magazine) article than the one linked above but I cannot find it online.

If you find the title of the article and do a google news search so that google presents the direct link to the article.... if you click the link, the full article is displayed. The same for the WSJ. I think there must be some deal with google to enable those subscription articles to be accessed through a google search.

Give it a try.

[haha]

Quote:

Originally Posted by brewer12345 Ha, in the event of the great muni crash of 20XX, are you planning on scooping up individual bonds or funds? I had scoped out NUV as a possibility for a fund, although my taste usually runs to individual bonds.

Funds (CEFs), both for diversification, less need for credit analysis, and possible large discounts as were found among Cv and lower quality bond funds during the last crash.

If I were in your place I also might well do the individual analysis, as you have the skill to avoid the stinkers.

Ha

[2good]

Quote:

Originally Posted by chinaco If you find the title of the article and do a google news search so that google presents the direct link to the article.... if you click the link, the full article is displayed. The same for the WSJ. I think there must be some deal with google to enable those subscription articles to be accessed through a google search. Give it a try.

Thanks, chinaco; I was able to pull up the Barron's article via google. I can still not find the Money Magazine article online though.

The Barron's article suggests to buy individual Muni bonds instead of bond funds. How does one buy individual bonds? I have to check my online broker.

[Dimsumkid]

Quote:

Originally Posted by 2good Thanks, chinaco; I was able to pull up the Barron's article via google. I can still not find the Money Magazine article online though. The Barron's article suggests to buy individual Muni bonds instead of bond funds. How does one buy individual bonds? I have to check my online broker.

I have accounts at fidelity and td ameritrade. You can buy bonds on secondary markets at both, fidelity also offers new munis but you need min. asset levels/min. # of trades/yr to qualify to buy these.

[Zero]

He mentions that the S&P will go to 500 within the next 2 years. I'd be interested in hearing what you folks think of that comment? With his track record, it's hard to just dismiss that unless it's just a toss our line that he intended as scare tactics.

Any comments?

EDIT: Here is the relevant quote.

"Though I rarely go public with specifics on stocks, I think the Standard & Poor's 500, which is now over 1300, will hit 500 in the next couple of years," he says. "I usually couch my belief by saying merely that 2011 will be a tough year for equities."

[REWahoo]

Quote:

Originally Posted by Zero Any comments?

Any truth to the rumor he's joined up with these folks?

Road trip to the end of the world - CNN.com

[Htown Harry]

Quote:

Originally Posted by Zero He mentions that the S&P will go to 500 within the next 2 years. I'd be interested in hearing what you folks think of that comment? With his track record, it's hard to just dismiss that unless it's just a toss our line that he intended as scare tactics. Any comments?

Gundlach is the real deal when it comes to bonds. I owned a fund (TSI) that he managed while at TCW (still do).

I don't put much faith in his specific stock market predictions, however, because to my knowledge he's not managed stock investments in the past. However, he's about to roll out a mutual fund with virtually no restrictions, so we'll all get a chance to see what he can do with equities in a portfolio.

He puts on a quarterly webcast that covers macroeconomic and political factors shaping the markets. TCW has removed all the old ones from their web site (no surprise there), but you can listen to more recent ones on the Doubleline site: DoubleLine Funds

I haven't listened to one in several months, but they typically have a lot of gloomy statistics about the federal government's financial picture going forward. If I had to guess, he may be predicting a stock market swoon as a result of disruptive events related to the dollar, the end of QE2, high levels of federal borrowing, growing underfunded entitlement obligations, etc.

[Hiredgun]

Does this guy's prediction convince anyone to sell their munis? I've got a couple hundred thousand in VWITX and I'm considering dumping them. Currently getting a 3% yield.

[M Paquette]

Quote:

Originally Posted by Zero He mentions that the S&P will go to 500 within the next 2 years. I'd be interested in hearing what you folks think of that comment? With his track record, it's hard to just dismiss that unless it's just a toss our line that he intended as scare tactics. Any comments?

I'd probably have to re-balance the portfolio at that point.

[jebmke]

Quote:

Originally Posted by Hiredgun Does this guy's prediction convince anyone to sell their munis? I've got a couple hundred thousand in VWITX and I'm considering dumping them. Currently getting a 3% yield.

What would you invest the proceeds in?

[Hiredgun]

I'd split the proceeds between a Total U.S. Market Fund and Vanguard's World Ex-US Fund (International). So, essentially stocks. I don't have any more tax protected space to add additional bonds (i.e.non-munis).