Comments on: Buy Muni Bonds

By: fidel_castro

fidel_castro — Tue, 04 Mar 2008 00:56:29 +0000

I myself, small guy from California, decided to buy munis. One closed-end is permanently on my watch list, EVM — Eaton Vance California muni. The drop which munis experienced was reflected in the price of the EVM but faithful to the nature of closed-end funds it dropped less than the underlining NAV.

The lower muni bond price resulted in opening a wider premium gap and made the EVM unattractive for the moment.

Confronted with that I picked a California Muni Index fund — PWZ. It is an index amalgamating only insured bonds and didn’t drop as much as the gap from the spread demonstrated here. I think that the small guy doesn’t have the capacity to pick the most fruitful yields which this dramatic sell off offers to people in the bond trading desks.

Anyway, PWZ it is.

By: PaulinKansasCity

PaulinKansasCity — Mon, 03 Mar 2008 20:44:50 +0000

This is an informed opinion. OK; so DFR is down; I’ll argue Thornburg fears are what is driving the stock down below $5.50; but will DFR go bankrupt?? Anything is possible I guess but the risk reward of a largely GSE RMB securities portfolio is decent at these prices.

By: Steve Milos

Steve Milos — Mon, 03 Mar 2008 14:51:01 +0000

Thanks Josh.

By: sam barrera

sam barrera — Sun, 02 Mar 2008 23:39:33 +0000

This advise from the same guy that recommended DFR.

By: M.B.

M.B. — Sun, 02 Mar 2008 17:15:04 +0000

The yield is a function of increased risk here. The glass isnt necessarily half full. As property values are plummetting, tax revenue is too, and municipalities are significantly reducing their budgets and some WILL bankrupt.

Honestly, when REAL inflation is running 8-12%, why would anyone settle for any low yield bond anyway? At least let the coming hyperinflation work for you, not against you.

By: Josh Stern

Josh Stern — Sat, 01 Mar 2008 18:12:25 +0000

The web site http://www.etfconnect.com is useful for screening closed end funds. You can select taxable or nontaxable, sort them by discount to NAV and yield, and look at current mgmt. fees plus historical charts of NAV to get a feel for the percentage payout (after comparing to historical charts of the asset class).

On an unrelated note, I was interested in David’s recent purchase of shares in DB (mentioned on RealMoney). RBS is a similar stock that is trading close to book value, at a P/E of less than 5, and recently reported strong earnings (which the market apparently chose not to believe).

By: Steve Milos

Steve Milos — Sat, 01 Mar 2008 17:50:22 +0000

I second Paul’s sentiments. Heck, I’m Canadian and cannot enjoy the tax benefits of munis, but I do like to buy cheap assets when others insist on dumping them. As Canadian mutual funds don’t invest in US munis, my question is: does anyone have a few unlevered, closed-end fund candidates for me to do some research on?

Thanks.

By: PaulinKansasCity

PaulinKansasCity — Sat, 01 Mar 2008 16:55:37 +0000

Great writing the last few weeks David. A great supplement to this article would be your views on using closed end funds for munis (Scott Rothbort mentioned this briefly on Real Money). Your experience in the bond world would be helpful to myself and I’m sure to others.

By: R

Sat, 01 Mar 2008 15:22:34 +0000

…as long as you don’t mind being invested in a currency that is being inflated away.