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I don't think investing in municipal bonds is a very good idea right now. If you look at the problems of pensions around the country counties and cities are goi

I don't think investing in municipal bonds is a very good idea right now. If you look at the problems of pensions around the country counties and cities are going to declare bankruptcy unless unions back off their demands which they probably won't. All around the country politicians are putting their heads in the sand hoping that these problems will just blow over and hope for another housing boom. Right now holding onto cash is probably the best bet. I'd expect deflationary pressures to continue despite the federal reserve's inflation. They haven't started dumping money out of planes yet but they will if the default rate starts to climb much more. The rating companies who assign those AA and AAA are useless as well. Recently Moody's Investors Service threatened to lower Iceland's debt rating to junk. Why isn't it there already? It's absurd. Right now I prefer to invest my money in business opportunities and hold onto as much as cash as I can. It seems like risk out there is extreme when interest rates are 0%. How can you judge what's actually going on in the economy when the price of money is so distorted? We're facing a serious shortage of capital right now and the notion that a 0% interest rate is the way to raise more is insane. Anyway if these municipal bonds explode on you I don't think anyone is going to bail you out.

jakarta 17y ago
Munis depend on the insurer. I'd feel very comfortable with Berkshire insured munis.
steveplace 17y ago
I just got done talking for an hour on my show about crap like this, so I'm in the right frame of mind to discuss this. Munis are working right now because people with deeper pockets (pensions, institutions) are forced to allocate capital here. Essentially, cash is not an option. The risk for Munis on the short term is pretty fair, and we're probably not going to see a crash in the asset right now solely for the fact that it's so blindingly obvious. Define "cash." Holding onto the dollar may not make sense in this interest rate environment because our printing presses are the fastest on the planet. Gold sucks when the yield curve is this steep. You could try a carry trade and pick up some AUD or NZD... follow the ticker DBV to see how that's doing. Also, you could try LT government bonds-- the feds have had a crapton of auctions, and with the deficit is going they have an interest in keeping 30year rates low. The joe-retail trader way to play this is TLT, which is looking technically healthy. But with all this financial rambling, this is Hacker News. I absolutely agree with you-- the best asset you have right now is your business, so I would claim diversification is stupid, don't focus on the market because you can get much higher returns doing something that doesn't require yield curves. Odds are, you don't have enough cash to worry about munis.
lionhearted 17y ago
It's not sexy, but if you have the space for it, picking up a long term supply of necessities isn't a bad place to put your money. Various sales and firesales happen, picking up canned goods, toiletries, and so on is a decent hedge against inflation and the bulk savings from buying a year's worth is probably going to exceed anything you'd get on the market. Of course, this is more for people with low tens of thousands of cash around, not quite as applicable to people with hundreds of thousands and higher in cash trying to figure out what to do with it. But if I had a house, I'd go pick up a year's supply of the basics whenever I saw them come moderately to deeply on sale. It's going to save more money than you'd make on any bond in the near future.
- encoderer 17y ago
  For this to be true, you'd have to imagine the investment as at least 1 year, wouldn't you agree? So probably several years? And you'd have to purchase goods that would last that long. The reason I say that, is that you can still find 3% FDIC insured savings and money market accounts (look at your local Credit Unions). For me to get a better return on canned pears and chicken stock, we'd need real consumer price inflation > 3%. If you take a look at the consumer price index and remove energy costs, it's been quite some time since we've experienced 3% annual inflation. (Removing energy costs is the key here). Now.. if you hold it for 3 years, it would probably be a no brainer. As long as you don't mind actually eating what you bought over those years -- eg no 40 cases of Peanut Butter!
  - pupeno 17y ago
    I think the issue is not only inflation, but the price fluctuations that happen all the time, that are much bigger. If one day, at the supermarket, you see toilet paper in a two for one offer, and you buy a whole year of supply, you'll be saving 50% over the year. I think the goal is not playing against inflation but to play against the stock issues of supermarkets (if you have a way to have the stock locally).
- WingForward 17y ago
  If you had a house, and a mortgage, you could put money into the principal. Mine is 5.675%. What investment is going to guarantee me that return?

jakarta 17y ago

Munis depend on the insurer. I'd feel very comfortable with Berkshire insured munis.

steveplace 17y ago

I just got done talking for an hour on my show about crap like this, so I'm in the right frame of mind to discuss this. Munis are working right now because people with deeper pockets (pensions, institutions) are forced to allocate capital here. Essentially, cash is not an option. The risk for Munis on the short term is pretty fair, and we're probably not going to see a crash in the asset right now solely for the fact that it's so blindingly obvious. Define "cash." Holding onto the dollar may not make sense in this interest rate environment because our printing presses are the fastest on the planet. Gold sucks when the yield curve is this steep. You could try a carry trade and pick up some AUD or NZD... follow the ticker DBV to see how that's doing. Also, you could try LT government bonds-- the feds have had a crapton of auctions, and with the deficit is going they have an interest in keeping 30year rates low. The joe-retail trader way to play this is TLT, which is looking technically healthy. But with all this financial rambling, this is Hacker News. I absolutely agree with you-- the best asset you have right now is your business, so I would claim diversification is stupid, don't focus on the market because you can get much higher returns doing something that doesn't require yield curves. Odds are, you don't have enough cash to worry about munis.

lionhearted 17y ago

It's not sexy, but if you have the space for it, picking up a long term supply of necessities isn't a bad place to put your money. Various sales and firesales happen, picking up canned goods, toiletries, and so on is a decent hedge against inflation and the bulk savings from buying a year's worth is probably going to exceed anything you'd get on the market. Of course, this is more for people with low tens of thousands of cash around, not quite as applicable to people with hundreds of thousands and higher in cash trying to figure out what to do with it. But if I had a house, I'd go pick up a year's supply of the basics whenever I saw them come moderately to deeply on sale. It's going to save more money than you'd make on any bond in the near future.

encoderer 17y ago
For this to be true, you'd have to imagine the investment as at least 1 year, wouldn't you agree? So probably several years? And you'd have to purchase goods that would last that long. The reason I say that, is that you can still find 3% FDIC insured savings and money market accounts (look at your local Credit Unions). For me to get a better return on canned pears and chicken stock, we'd need real consumer price inflation > 3%. If you take a look at the consumer price index and remove energy costs, it's been quite some time since we've experienced 3% annual inflation. (Removing energy costs is the key here). Now.. if you hold it for 3 years, it would probably be a no brainer. As long as you don't mind actually eating what you bought over those years -- eg no 40 cases of Peanut Butter!
- pupeno 17y ago
  I think the issue is not only inflation, but the price fluctuations that happen all the time, that are much bigger. If one day, at the supermarket, you see toilet paper in a two for one offer, and you buy a whole year of supply, you'll be saving 50% over the year. I think the goal is not playing against inflation but to play against the stock issues of supermarkets (if you have a way to have the stock locally).
WingForward 17y ago
If you had a house, and a mortgage, you could put money into the principal. Mine is 5.675%. What investment is going to guarantee me that return?