JBmadera
Recycles dryer sheets
she did a follow up interview on CNBC this morning. Unsettling, to say the least.
she did a follow up interview on CNBC this morning. Unsettling, to say the least.
bonds are in your portfolio for stability not to provide juicy returns, taking risk is done with equities.
Munis aside, this is a big misconception. Under the right circumstances it is quite possible to generate equity-type returns with bonds, usually with less volatility than equities. You should always be on the lookout for big potential returns, regardless of the instrument. If you could lock in a double digit return via a 5 year bond issued by a stable, investment grade issuer, wouldn't you find that exceedingly attractive? So what if it isn't an equity.
Many masochists in that part of the country. No other reason to be there.
Ha
Many masochists in that part of the country. No other reason to be there.
Ha
Other than that it's a long way from California.
Which has more risk? A bond from a city in Illinois or stock in a company like Coca Cola, Walmart, or Mcdonalds?
+1 on what Brewer said.Which has more risk? A bond from a city in Illinois or stock in a company like Coca Cola, Walmart, or Mcdonalds?
Almost certainly the equity has higher risk, although at the moment relative prices of the bonds vs. the equities likely compensate you for this. But bond markets, especially smaller ones, throw up highly profitable anomalies from time to time and we should be prepared to grab them. Its easier to spot the opportunities in bond markets because all you have to do is figure out if the issuer can stay enough in one piece to pay you off. Equities are much tougher.
The question was risk, not return. BTW, it was not an equitable comparison. Better would be Coca Cola stock vs NY State bond. The risk from the bond is lower - which is why the potential return is higher for the stock.It is not only default risk in a muni bond you need to worry about, but rising interest rates. A 1% increase in interest rates will have a much larger detrimental effect on the principal.
I am also not sure if a lot of cities could remain current on their bond payments if Coca Cola, Walmart and Mcdonalds all suddenly went bankrupt.
So really, I am not so sure what has more risk.
It is not only default risk in a muni bond you need to worry about, but rising interest rates. A 1% increase in interest rates will have a much larger detrimental effect on the principal.
I am also not sure if a lot of cities could remain current on their bond payments if Coca Cola, Walmart and Mcdonalds all suddenly went bankrupt.
So really, I am not so sure what has more risk.
That is truly a stunning series of non sequiturs. You should print it out and frame it.
If I can buy a good quality muni at double digit yields and stay within a 10 year maturity limit, I will not be worrying too much about interest rate risk. If I were worried about interest rate risk, I would hedge via treasury ETFs or more likely puts on same.
Good luck with those risk assessments.
I didn't own municipal bonds but I bought into 4 different municipal bond funds in January 2010. They were a mix of short, intermediate and long.Is anyone on this board going to sell his/her municipal bonds ? I am thinking of selling mine.
I didn't own municipal bonds but I bought into 4 different municipal bond funds in January 2010. They were a mix of short, intermediate and long.
They did well all year long until QE2 announcement which included the end of Build America Bonds for 2011. Those funds fell like a rock and I finally sold them all right before I started losing principal. In four weeks time the funds lost the entire years worth of dividends paid as well as all of the Capital Gains for the year. I had chosen those funds to replace "money market" cash and I had a low risk tolerance for that money so I sold.
I know we're not supposed to try and time the market but I just didn't understand what was going on and I went against "buy and hold" and sold anyway.
Thanks to Brewer for helping me understand what was going on. I personally think it was the right decision for me anyway.
If I hadn't sold, it would have been much worse than having money in the mattress. I did make a few $$ but If I had sold when I first became suspicious of what was going on, I would have been "a genius". (I know...hindsight).This is my point. Everyone says muni bonds are so safe, and yet you give an example of practically worse performance than sticking the money in your matress. I made about 1% on my muni bonds in a year, so did a bit better than you. Was it worth risking principal for a 1% return? Hell no.
Is anyone on this board going to sell his/her municipal bonds ? I am thinking of selling mine.
For cities and towns facing unsustainable pension costs, the end game may look something like Prichard, Ala.
The financially troubled suburb of Mobile turned to bankruptcy court in October 2009 when it "simply ran of money to pay its pension obligations," says the city's lawyer R. Scott Williams.
Prichard proposed capping benefits to current retirees at about $200 a month, down from monthly payments of as much as $3,000. "That's not a hair cut, that's a scalping," said Larry Voit, who represented a group of 40 retired city workers in Prichard, population 27,500.
Though bankruptcy law remains murky on how far a city or town can go in scrapping deals for current retirees, cases like Prichard and other workout efforts stand to reshape the debate over how local governments deal with mounting public-pension problems.
The stakes are high for taxpayers, public workers and bondholders, as concerns escalate about whether governments can pay their debts.
...
But Chapter 9 remains a largely untested corner of the bankruptcy code, and bondholders aren't necessarily insulated from loss, lawyers say. Vallejo, Calif., which sought bankruptcy protection in 2008, is still negotiating with holders of $52 million in debt over terms of a possible haircut, according to the city's lawyer.
brewer12335,
do you buy junk bonds or junk bond funds? they have high yields too but are considered risky and by many inappropriate as a fixed income holding. i am not an expert on any bonds but munis just seemed to be poised for defaults should cities and states start going broke. pension and benefits promised to current and future retirees sound like they can not be met in this economic environment or over the next 40 years.
an 8% yield on a muni, sounds great, but is there is a reason why that coupon is so high? look at bonds from greece or ireland or portgual, they have high coupons too and for good reason. i am not saying you are wrong rather i am citing what i see as warning signs and remembering the ole saying if it looks too good to be true....