Sorry to double up on you with videos here, but Jeff Gundlach, Founder of DoubleLine Capital was on CNBC earlier today and provided an excellent overview of the bond market. In summary he says:
- High yield corporates are VERY expensive.
- Investment grade corporates are relatively attractive.
- Municipal bonds are unattractive due to the potential for future turmoil.
- US Treasuries are more attractive than all three of the above on a relative basis.
- Government backed mortgage debt remains attractive.
I might add that I agree with Gundlach’s sentiments regarding the muni market. Despite the fact the fact that I do not see major crisis ensuing in the muni market the clouds that are currently circling overhead do make this a market where the potential risks could outweigh the rewards. Investments should be selective and taken on a case by case basis. For instance, California munis obviously require a great deal more due diligence than Texas munis. As Gundlach says, there are simply better options in the current environment if you can’t justify the risk/reward of even owning munis. Of course, if you want someone with superior expertise to handle the bond portion of your portfolio you can’t really go wrong with Gundlach’s fund. His broad market outlook can be found here if you missed it earlier this month.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.