"With the government set to bail out a trillion dollars in debt, what should you buy?" asks Neil George, editor of Personal Finance. "Bond funds are the foundation that steadies your portfolio."
"While the Fed and the Treasury work to bail out a trillion dollars in debt, other governments around the planet seems to be jumping on board this train; similar deals are being cut from the UK to Russia to Japan and beyond.
"The result is a big surge of short-covering and rampant buying as the markets trade and party like it's 1999 again. But is this a good thing?
"Although it might satisfy the political agendas of government leaders, these moves do pretty much nothing to restore normal risk and reward characteristics that make for a productive free market system.
"Meanwhile, bonds are what continue to perform. The rally in stock might continue for a time, but when more and more serious investors and traders begin to figure out the ramifications of the government's heavily expanded role in the formally private sector, it won't take long for another selloff to materialize.
"When it comes to bonds, the best place to start building your own portfolio continues to be our favorite collection of closed-end bond funds that trade as shares on the major stock exchanges just like stocks.
"Within the portfolio, this core group includes the Alliance Bernstein Global High Income Fund (NYSE: AWF), Blackrock Income Opportunity (NYSE: BNA), Pimco Strategic Global Government (NYSE: RCS), Templeton Emerging Markets (NYSE: TEI) and the Western Asset Emerging Markets Fund (NYSE: EFL).
"The group works well together because they're made up of government bonds from the US and around the globe. This is becoming more important as the US government continues to pile on debt, and governments around the world diversify their reserve holdings beyond just US Treasuries.
"Right now the average value of the underlying bonds and other assets of the collection are worth more than 13% more than that of the collected value of the stock shares for the funds.
"Meanwhile, each of the funds continues to generate tons of cash from the bonds inside them. And now with the stock prices down so much, the average dividend is running at more than 8.5%."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
12-09-2008 @ 1:45PM
Eric Manas said...
This joker Neil George touted this collection of closed end bond funds relentlessly. Go ahead and check out where their prices have gone since this 9/24/08 pump. Seriously down. Not exactly a way to steady a portfolio. And can you believe he charges for this advice!