Municipal Bond Forum
On “For Income Investors, It’s All Bull”
Q
I read your article and cannot agree with your investing principals. First, I own PIMCO shares, which have the lowest returns in my portfolio. So far this year, my cash flow is up 33% by buying (mostly bond funds) at their lows, drawing the 8% to 10% returns and selling when they hit “premium” status, which produces a little bonus. I then do it all over again. My broker is exceptionally adept at picking discounted bond funds that are poised to climb and also have a good return (7.5% and up) We have checked the tax-free stuff and can’t find one that will keep up with what we’re doing. I don’t know bulls from bears when it comes to investments, all I know is that I buy low and sell high only those investments with 7.5% return (rent for using my money) or better. When the shares hit a high, I collect my bonus and many times, less than one week later, I buy the same shares at a discount. The year so far has been on fire. I hope we can maintain the pace through the last quarter. You might want to re-look at your advice to investors. To my thinking, you are losing a lot of profit for your clients.
A
James A. Klotz responds:
We are pleased to hear that you have been successfully trading bond funds. We appreciate your concern for our clients, but their focus is on income. Very few individual investors are lucky enough and nimble enough to make profitable trades all the time.
We are also averse to creating short-term capital gains situations, which can take a 35% toll on profits.
Frankly, if we thought we were as capable as your broker in identifying these special situations, we wouldn’t need clients at all.
We hope you will be equally forthcoming with us when you discover the pitfalls of this strategy.
Start here.
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