Four minutes. Terrific.
TWO INVESTMENT IDEAS
Puerto Rico is in rough shape. It’s triply tax exempt (federal, state, and city) “general obligation bonds” are perceived as so risky that they yield about 9%. A very smart, politically savvy pal — not rich — is so persuaded the U.S. won’t allow the Commonwealth to go broke that he’s put almost everything he has into them. I recently bought some of the “8s of 2035 callable in 2020 for 92,” meaning that I paid $920 for each bond, and that each one will pay me $80 a year until sometime between 2020 and 2035, when they will be redeemed for $1,000. All that income (except for the gain from $920 to $1,000): entirely tax-free. The risk, of course, is that some of those interest payments may be delayed — or that the issue may default entirely. But the bonds are backed by the taxing authority of the Commonwealth, so his guess — and mine — is that they will probably be made good (and all but certainly not be subject to total loss).
Because we could be wrong, he probably has more of these than he should. (Diversify!) I bought a more modest number so I don’t have to worry in case it goes wrong.
Another really smart friend persuaded me that Home Depot is a smart long-term holding. It could better than double over the next five years, he thinks. I bought that, too. If the market falls out of bed and one day I can get shares on sale for 40% off, I’d buy more.
Oh? Wait? You mean the stock prices can go down? There’s certainly reason to be somewhat cautious here, with the S&P at an all-time high, and definitely reason not to be borrowing to invest on margin. Here is Nobel-prize Laureate Robert Schiller’s perspective and good advice. Most of it is about what the stock market might do, why British stocks might be a better buy, how you should be thinking about your retirement, and so on. But there are important policy insights as well, even though Sarah Palin and John Boehner see it differently. E.g.:
So what we need is governments to get out of austerity and get into more stimulation and that will help people save more. We have to have a collective decision to expand the economy and ultimately that’s what will help people save more.