Bill Gross suggests municipal bonds

Posted Feb 6th 2008 6:25PM by Zac Bissonnette
Filed under: Magazines

In the world of fixed income, as in the world of markets in general, there is almost no one whose predictions are worth listening to.

Bill Gross is an exception and, in an interview with Kiplinger, he gave his bleak outlook on the economy and a tip for investors: We are probably in a recession, and it's not going to be a quick easy one. And what should you do with your money? Well it isn't as exciting as what most gurus will tell you:

The most attractive area, the one that's been tossed away for a number of reasons, is the municipal-bond area. There are hundreds of closed-end municipal-bond funds that trade on the New York Stock Exchange. Many trade at 5% to 10% discounts to their net asset values and at yields of 5%, plus or minus.

Municipal bonds have been tossed away for several reasons. One: they're not bought by the Chinese or by the Saudis. The Saudis have no use for a municipal bond and its tax advantages. That's one of the reasons they haven't gone up in price and down in yield.

His rationale, as always, seems to make great sense. To lean more about how to think like Bill Gross, check out The Bond King: Investment Secrets From Pimco's Bill Gross.

Tags: Bill Gross, BillGross, Bonds