Municipal Bond Forum
Hold your bonds
Q
I enjoyed your article about the Dow’s recent rise and how the TV talkers fail to mention how it’s only back to the level it was 11 years ago. These jokers like talking about bubbles. The bubble in the equity market explodes and is gone. A bubble in municipal bonds is different. If you are interested in fixed income, you keep the bond to maturity, never mind what the market value of the bond is. In the meantime, you earn income. Where is the bubble in this case? Compared to their alternative, their bubble is irreversible and I can show you the last 20 years. To make their blood-sucking point, they show you the performance since the Great Depression, not the last 20 years. There is a cycle of bust almost every 10 years but with no certainty on the exact time. A world-renowned professor friend of mine recently told me that the stock market is working perfectly — it is very large, liquid, efficient and competitive. Under these conditions, you should expect to make very little return. He answered my question beautifully. Thanks again.
A
James A. Klotz responds:
Thank you for sharing your thoughts.
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