http://www.themediumthemessage.com/2010/02/02/analyst-warns-against-mcclatchy-bond-sale/ A blog about advertising, newspapers and other media Wed, 28 Apr 2010 23:48:12 -0600 http://wordpress.org/?v=2.8.4 hourly 1 http://www.themediumthemessage.com/2010/02/02/analyst-warns-against-mcclatchy-bond-sale/comment-page-1/#comment-894 avmed Sun, 21 Feb 2010 19:58:40 +0000 http://www.themediumthemessage.com/?p=1094#comment-894 I just buy corporate bond funds with intermediate target maturities. Corporate bonds are still paying a little bit, and Corporate America is fairly healthy right now. Whether they can keep the bottom line stable with a constantly shrinking customer base (thanks to a shrinking number of gainfully employed people) is a legitimate question, but it's a stretch to say they can't service their debt of the next seven years if they are investment-grade now. Even though inflation is a near certainty, we still don't know when it's coming, and there's no point, in my opinion, bailing now when it could be two or three years. In any event, the inflation is much more likely to be Jimmy Carter-style vs. Zimbabwe-style, and Carter-style inflation won't drive intermediate term bonds down in price anywhere nearly as bad as what you'd call a bubble asset, like a dot-bomb stock or a house out in the Arizona desert. As for treasuries, there's not much point in investing in them now even without a bubble scare. The returns are so pitiful, you might as well hide the cash in your mattress. TIPS are a fine concept, but you had better have your TIPS in some kind of tax-advantaged account, since the nominal return is taxable. Since the rate on them is essentially zero above inflation, when inflation picks up your economic loss will be the nominal return times your tax rate. I just buy corporate bond funds with intermediate target maturities. Corporate bonds are still paying a little bit, and Corporate America is fairly healthy right now. Whether they can keep the bottom line stable with a constantly shrinking customer base (thanks to a shrinking number of gainfully employed people) is a legitimate question, but it’s a stretch to say they can’t service their debt of the next seven years if they are investment-grade now. Even though inflation is a near certainty, we still don’t know when it’s coming, and there’s no point, in my opinion, bailing now when it could be two or three years. In any event, the inflation is much more likely to be Jimmy Carter-style vs. Zimbabwe-style, and Carter-style inflation won’t drive intermediate term bonds down in price anywhere nearly as bad as what you’d call a bubble asset, like a dot-bomb stock or a house out in the Arizona desert. As for treasuries, there’s not much point in investing in them now even without a bubble scare. The returns are so pitiful, you might as well hide the cash in your mattress. TIPS are a fine concept, but you had better have your TIPS in some kind of tax-advantaged account, since the nominal return is taxable. Since the rate on them is essentially zero above inflation, when inflation picks up your economic loss will be the nominal return times your tax rate.

]]>