Pimco's Kiesel says: "sell your junk."


Mark Kiesel, at Pimco's Pacific Investment Management Company says it's best to sell your junk bonds now. Why is he saying this? The key factor is that economic growth is not there. Kiesel looks for only 1-2% growth in GDP next year.

All of this talk about "green shoots" simply is not materializing. Kiesel says the "green shoots" are turning to weeds. He further said that credit is not re circulating. Business financing costs range from 10-12%, making it difficult for some businesses to stay afloat.


So far, junk bonds have returned 29.6% this year. That beats most other investments by a country mile. So, again, do not let the "greed" monster take hold of your psyche.

The advice here is to stay in investment grade bonds, rated Baaa or BBB- by Moody's Investment Service and Standard & Poor's. The rate of return on these bonds is about 10-12%.

Kiesel points out that the government can print all the money they want, but that does not change you or your business. People are fearful that their house prices will fall. Only when people see the price decline ending will they decide to spend more freely.

Now for those who have a strong stomach US high default rate bonds may reach a yield of 18% this year.

What percentage of bonds should be in your portfolio? Hint. Use your age as a guide. If you are 50 years old, you should have 50% of your investments in bonds.

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