Replies to post #120354 on Biotech Values

[biomaven0]

own only short- and medium-term individual munis that you plan to hold until maturity

A high-end broker I know (8-figure type accounts) buys long-dated highest quality munis and shorts an equivalent amount of zero coupon treasuries for his clients. (You have to be a little careful from a tax perspective when doing this). There's about a 100 to 150 basis points spread before the effect of taxes - much more after tax of course. You could get temporarily hurt in a flight-to-safety panic, but otherwise this is an interesting low-risk strategy with nice cash flow to boot. (Fidelity unfortunately won't let you short zero coupon bonds for some reason).

The other interesting development from a muni investing perspective is the push to end the issuance of new tax-exempt bonds and replace them with an interest rate subsidy. It would be better for the Treasury and would be great for existing munis.

Peter

[zipjet]

My advice (FWIW): Eschew muni funds and own only short- and medium-term individual munis that you plan to hold until maturity.

That is an interesting statement. I know a few people that can live very well off even a low muni rate of return. For them muni's are the investment of choice and dominate their portfolio. Even 30 year bonds are intended to be held to maturity and of course the duration is much shorter and for the wealthy duration is more critical than maturity.

As to the argument that muni's are going to see sharp drops in value - well - it will not be from rising interest rates IMO.

And defaults - well - around here the layoff of government workers are very significant and where layoffs are not being used, rif by non-replacement of workers is the rule.

ij