Their personal styles are likely very different, but when it comes to finding value in today’s markets, two prominent financial pros look to the same thing: municipal bonds.
“Where are you going to get 5 ½% or 6% tax-free, which is equivalent to 10% or 11% taxable, with very little risk?” said Suze Orman, speaking recently on her CNBC television show.
Just a few months ago, we weren’t hearing much of that in the popular media as investors fled muni mutual funds on fears the Fed would curtail its bond-buying program and interest rates would spike. Detroit’s financial woes only deepened the anxiety.
Struggling to meet overwhelming redemption requests, mutual funds were forced to dump large quantities of munis on the market. Muni yields then rose, creating the environment now extolled by Orman, Tisch and others.
“The returns are truly, truly extraordinary in the municipal bond market,” James Tisch, chief executive officer of Loews Corp., told Bloomberg Television recently.
As we previously noted (“Embrace the Headlines“), maintaining a level head amid the hysteria is key to successful investing. Close analysis pays off.
And with regard to interest-rate fears – an issue frequently invoked among the punditry when discussing muni bonds – Orman’s thinking is impeccable:
“I cannot predict where interest rates are going to go, but truthfully, I don’t care because I don’t trade bonds, and I doubt you do, as well.
I just want to know that I’ve purchased a good municipal bond that I will hold until it matures.”
Common sense, explained simply. We could not have said it better ourselves.