We’ve published hundreds of commentaries over the years to help investors succeed in the municipal bond market. Have our insights held up?
You make the call.
Exposing the cost of waiting
About 20 years ago we published a foundational piece for smart muni investing, “How Waiting Raises Income Risk.”
In the article, we discussed the tendency of investors to try to outguess the market. Unhappy with current yields, they think it makes sense to park their money in money-losing money-market funds. They figure at some point, they’ll jump back into the muni market when yields are higher.
Except they don’t know when, or if, that occasion will arise. No one does. Most important, these investors don’t consider the cost of waiting, i.e. the tax-free income they sacrifice to earn while waiting for yields to rise. This is money they’ll never recoup.
When we first posted the article, insured bonds were yielding about 5.60% – astronomical by today’s standards – yet some investors were pining for the higher yields of years earlier.
Can you imagine how much money they left on the table while waiting in vain?
We revisit this theme often, including a piece on the actual cost of waiting (“Now We Know the Cost of Muni Market Timing”) and will continue to do so. It’s a time-tested way to help investors make money.
A heads up on laddering
Another important topic we discuss is laddering, the strategy that turns common sense upside down.
In our 2011 commentary (“The Laddering Delusion”), we explored the theory espoused by too many for too long. It posits that by buying, say, 2 to 10-year munis with maturity dates staggered every two years, you can reinvest principal as they mature and keep pace with so-called higher nominal rates.
Problem is, if you’ve used this laddering strategy over any extended period of time, you’ve invariably received lower yields on each successive purchase.
Because of the popular, yet mystifying appeal of this strategy, we’ve explored this subject several times, as far back as 2001 (“Laddering Leaves You With Less”) and as recently as last year (“Finding Muni Bonds That Make Sense”).
As we told Forbes magazine, (“Supercharged Munis”), laddering is an illusion. Investors earn greater yields through long-term bonds. Even slight differences in yield between long- and short-term bonds can add up to significantly more income over time.
How have investors who heeded this advice fared? Exceptionally well, as a peek at historical yields shows.
Identifying unique opportunities
Having served clients for decades, we’re comfortable discussing immutable truths in the market and identifying unique situations that suddenly arise.
For example, last March, during the economic meltdown spurred by the pandemic, we pointed out a rare opportunity for investors (“Coronavirus Fallout and the Municipal Bond Market”).
At the time, investors were indiscriminately selling everything. As a result, muni prices fell and yields fattened. Quality, long-term tax-free bonds were available for more than 3.00%, 100 basis points above similar bonds available the previous week.
As expected, the market snapped back in quick order, but those who took advantage of the anomaly were well rewarded.
As we noted in the article referenced above, the situation was reminiscent of another phenomenon that occurred more than a decade earlier.
In 2008, amid the mortgage crisis, the entire financial system was deleveraging and money managers were selling, forced by fear, not fundamentals.
We described the confluence of unusual events (“The Bond Buyer: Forced Selling Sets Odd Stage in Muniland”) and helped scores of investors seize the opportunity.
And then there was Meredith Whitney
Shortly thereafter, in an infamous interview with “60 Minutes,” banking analyst Meredith Whitney predicted imminent, widespread danger in the muni market, which triggered panic selling by market participants. We saw in her dubious, but well-publicized claim, an opportunity for our clients and said so, loud and clear in full-page ads across the country (“Wall Street Journal Message Resonates in Unlikely Places”).
Specialization and experience to succeed in the municipal bond market
The insights we share are borne of experience and a singular focus on munis. We’re not distracted by stocks or options or other investments. We’re municipal bond specialists.
We own the bonds we sell, which means we understand them and can knowledgeably discuss them with you. Our investors buy with confidence.
For more than 40 years we’ve shown thousands of investors simple, straightforward ways to succeed in the municipal bond market, and we can help you, too.
Just take a look at our record.