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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: S. maltophilia who wrote (60238)	5/21/1999 3:00:00 PM
From: Knighty Tin	Respond to of 132070

Khalil, I think AAA munis are very underpriced relative to Treasuries. However, I think A and below will see spreads widen even more, as credit quality stinks. AA, I just don't have a clue. <g> I would mention one offshoot of the muni market that disturbs me. The insurers, MBIA, AMBAC and FGIC, are taking larger and larger risks in non-muni issuance. To tell you the truth, I have no idea if they know what they are doing lending money to third world countries and so on. I hope they do. But it makes me a bit leery of the AAA rating on insured munis. One thing I do like. When these cos. get scammed by the municipalities, they go after them in court and almost always win. I have never found the games other managers play to be worth the spread on off the runs. I have never purchased "The Bond." Of course, the spread was closer to 70 basis points when I was managing a large portfolio, but I think the principle is still the same. I have also never found the spread on "the cheapest to deliver" to be worthwhile. And I think zeroes are a huge bargain for buy and hold types. Yes, I short them when I think rates are too low, but the spread has to be tempting for anyone in a long term, tax deferred account. The spread tends to widen with higher rates and with rate volatility. An inverse yield curve will tend to depress the spreads. Too many zeroes created out of an issue also tends to decrease the spread. And, in the old days, if I bought more than the float, that tended to depress the spread. <g> Retail investors do not understand stocks, but they don't have a clue about bonds. And the pros aren't much better. Most stock fund managers are incompetent. Most bond fund managers are failed stock fund managers. <g>