Thursday, December 09, 2004


I am T-Bond investor. Some of my best returns have come from buying treasury bonds when the 30 year rate is high enough to give a good yield and a capital gain. I currently do not own any treasury bonds.

At current yields in the face of a strong economy, I can't see buying a long bond. Investors who are looking for current yield should buy stocks like T. The stock is throwing off a cash flow yield of better than 13%. The dividend yield is better than 5%. Why earn taxable interest on a bond or take a reduced rate on a tax free bond when T will pay you 5% 85% tax free?

It is true that AT&T is not the company it used to be, but the excess capacity that caused big problems is being used up. T is more likely to go up in price than down and it is much more likely to increase its dividend than it is to cut it.

Experienced aggressive investors, who have balanced portfolios, can enhance their returns by using margin. Margin is a double edged sword. Consider setting up a monitored account before getting aggressive.

By the way, if you must own bonds, buy them in 401-K or other tax protected accounts. Hold tax advantaged stocks in regular accounts.