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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: isopatch who wrote (4128)	11/17/2001 1:45:56 PM
From: Joan Osland Graffius	Read Replies (1) \| Respond to of 36161

iso, >>Closed end muni bond funds are another good idea if your tax bracket makes 6 to 6 1/4% free of federal taxes attractive. In Minnesota we pay 10% taxes so some of these muni's certainly look attractive. The problem I have with these muni bonds is our state, county and city governments have been on a huge spending spree during the 90's. They have been floating bonds like there is no tomorrow. At the moment I am not going to take the risk with these debt instruments. One may call me paranoid, but I feel more comfortable with debt instruments from entities that are absolutely required for human survival. <ggg> Does anyone on this thread have any knowledge of history as to what happened during the 1930's with debt instruments that were dependent on taxes? Joan

To: isopatch who wrote (4128)	11/18/2001 10:20:46 AM
From: majaman1978	Read Replies (1) \| Respond to of 36161

Iso, I have been playing bonds called inverse floaters which are tied to FHLMC, and if rates continue to drop they pay tremendous returns. I have one currently paying 35% and a newer one about 18%.. The rates fluxuate daily and are tied to LIBOR. They pay monthly. If rates rise, however, they basically become zero coupons and you're stuck with them for their life, maybe 30 yrs. So I don't go too overboard with them. But they can be beneficial in a bond portfolio. You can also buy a TIB which is similar but is capped if LIBOR does not rise to a certain rate according to the prospectus. There's a new one offered at 10% fixed. The other risk (if you could call it that) is faster prepayments due to falling rates will eventually return all of your principal in a relatively short period of time and you will have to look elsewhere to reinvest.