Wednesday, January 11, 2006

If it ain't fixed, don't break it.

A few years ago I read somewhere that this is a good time to buy the safer high-yield stocks, since as my fellow baby-boomers near and enter retirement, they'll want more yield and be willing to sacrifice growth, which will make safe high-yield stocks more expensive later. That seems reasonable, and by the same logic, this may also be a good time to buy bonds and other income securities.

I have been buying Treasury notes and other bonds for years. A fixed-income advisor I once had introduced me to such oddities as exchange-traded income securities and even "structured products". Like everything else, they have good years and bad years, but the current round of IPOs looks better than average, and there are also some older securities which look good. The listings at QuantumOnline.com show some tolerably safe new income securities are trading have reasonable yields and are trading at a discount - a point always worth considering in a callable security. (Quantum Online requires free registration. Those who are afraid to register might want to start by browsing through http://www.amex.com/?href=/strProd/prodInf/SpPiMain.jsp , since many of these securities trade on the Amex.) Examples worth considering are a bunch of exchange-traded bonds issued by GE Capital (or the third-party securities based on them), a bunch of preferred stocks issued by Gabelli closed-end funds, and some exchange-traded utility bonds, many of which are rated AAA and have coupons over 5.5%, sometimes over 6%.

CMOs are also worth looking at for people who don't know them, but with the exception of those which are government-guaranteed, it probably demands very steady nerves to buy them right now.

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