Bogleheads

[brainstem]

From Bloomberg service:

[Rick Ferri]

That is great news for long-term buy and hold municipal investors who buy high quality bonds and bond funds. It means you can buy municipal bonds at historically high yields compared to Treasuries. In my 20 years managing municipal bond portfolios, this buying opportunity is as unprecedented as it is unsustainable. If you are considering buying high quality municipals or an investment grade municipal bond fund, do it soon.

Rick Ferri

[daniel]

This may be a dumb question but would it also be a good plan to buy a municipal bond ETF (like the new iShares MUB) ? Or is the buying opportunity mostly there for individual bond issues?

Thanks!

[Rick Ferri]

Vanguard municipal bonds funds are broadly diversified and have low fees. I prefer them over ETFs, especially if you qualify for Vanguard Admiral shares.

Rick Ferri

[daniel]

[rickster52fl]

Rick
I agree that this is an incredible buying opportunity for munis and am looking to add to my position. Of the Vanguard (national) muni funds,do you have any preference and duration? I current own shares of both Limited Term and Intermediate funds.Thanks
Rick

[jh]

...

[alpha88]

What about something like VCAIX or VCITX (California Muni bond funds) for a CA resident?

[allenmickers]

Playing devils advocate (Because I did purchase a large amount of munis on friday) - why is it OK for us to market time these muni bonds now, but in general market timing is terribly bad? I hear so many people making claims about why its so amazing to buy muni bunds now, and they all make perfect sense, but if EMH is true, then why isnt that factored into the current price of munis since everyone has access to the same info?

Is it then OK to say, "well market timing is usually bad but once in a while its OK"

Was I lucky that I saw muni bonds on sale last week and bought them on friday? Or was it skillful for me to analyze the market and make 2% short term NAV cap gains plus 0.5% tax exempt dividend in 2 days?

I find it somewhat poor to compare the fact that muni rates are now about 80 basis points above treasuries, because munis are tax exempt, so that would mean that munis are 107 basis points above treasuries if you are in the 25% bracket.

Or is what I did considered poor investing, because of opportunity cost, in that for all I knew, if I put that $10k into a stock fund, I could have made several percentage gains higher than the muni NAV over the same time frame? In that sense, adjusting your asset allocation just when you see a buyin opportunity would be considered poor, because of opportunity cost and lost market exposure.

In my case, I will admit that I need to use this $10k cash this year and it was just going to sit in a taxable MMF for the rest of the year so I couldnt afford a risk in equities, but a near guaranteed few percentage point gain in munis seems like low risk to me.


I guess the 50 various municipalities that my Muni ETF invested in could all declare BK today at the same time, but I dont find that to be likely.

Really I bought them at such a low NAV, that if the NAV drops any more, these things will be yielding 5 or 6% tax free on a AAA bond, which would be crazy and the market would adjust it back. So I ran a risk-reward calculation in my head and said I can tolerate this small risk for a very plausible reward.

[indexfundfan]

I was wondering about this too. In fact if anyone were playing to get the short term cap gain (i.e. expecting the return to come mostly from cap gain rather than dividends), perhaps it makes sense to buy it in the IRA and then sell it without paying any cap gain tax when it bounces back.

Just a thought.
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[allenmickers]