In last week's Wall Street Journal Burton Malkiel writes that investors should refuse to buy U.S. Treasuries and instead should buy Muni bonds, foreign bonds in countries like Australia that have better finances, and dividend paying stocks.
The reason I disagree with his recommendation to buy Munis is because they have credit quality risk that does not make them comparable to Treasuries. Also they have the risk of being refinanced into lower rates whereas Treasuries are non-callable (no prepayment allowed). Munis are thinly traded and subject to expensive Broker-Dealer markup-Markdown costs that are opaque and difficult to judge.
Australian bonds …Read More