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Martin and Mike here with a quick update on the muni bond market …
The big picture in a nutshell?
Just as we warned, their prices are collapsing, driving interest rates sharply higher.
U.S. Treasury bonds, corporate bonds, and mortgage-backed bonds are following a similar pattern.
And as a result, most portfolios loaded with fixed instruments — held by individuals, banks, insurance companies, or others — are now suffering.
The implications? Far reaching!
First and foremost, this decline reflects an accelerating exodus out of bonds of all stripes and colors.
And second, it also seems to be correlated with a comparable RISE in the Dow, as investors switch into stocks.
Can this pattern continue for a while? Of course!
But don’t expect it to last forever; higher rates are ultimately a competitive threat to investments that do not offer good yields.
Plus, let’s not ignore some of the reasons WHY bond prices are falling, including …
- Falling confidence in governments and their ability to manage their finances.
- Growing fears of inflation as the trillions of dollars printed by the Fed begin to find their way into the economy.
- Plus, widespread impatience — and even disgust — among millions of fixed-income investors who feel they deserve a lot more than the miserable yields they’ve been getting on their money.
Bottom line for you: Get out of bonds — while you still can at relatively good prices.
Then seriously consider the many other good investment ideas and strategies we’ve covered here in Money and Markets this week …
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EDITOR’S PICKS
Bond market meltdown hitting rate-sensitive stocks, ETFs — Here’s what to do! by Mike Larson Since I started closely following the financial markets more than 16 years ago, I have seen several major interest rate cycles. Have a bank pay for your next vacation … by Nilus Mattive Last week I said there were a lot of simple ways to live a richer lifestyle, including plenty that don’t require investing money. The Markets Take No Prisoners … by Larry Edelson It was just about this time last year, in my columns in Uncommon Wisdom, that I started warning …
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THIS WEEK’S TOP STORIES
Global Currency War: The Pacific Theater by Mike Burnick Last month in a Money and Markets column, I pointed out that the euro/U.S. dollar exchange rate would be the next battleground in the global currency war.
Turmoil in Venezuela Could Spell Opportunity for You in Brazil by Tom Essaye Venezuelan president Hugo Chavez died last week after a lengthy fight with cancer. Reactions to his passing have run from despair in the poor sections of Caracas to jubilation in the ex-pat Venezuelan communities in Miami. Regulators Close Frontier Bank, LaGrange, Georgia by Weiss Ratings On Friday, regulators closed Frontier Bank, LaGrange, Georgia. This marks the fourth bank failure for 2013 following a total of 51 failures for all of 2012, a sharp decline from 92 and 157 in 2011 and 2010, respectively. |
