Higher mortgage rates are already starting to take a toll on housing and construction spending and there is a good chance that oil prices have already seen their peak. We think the same will be true for 1999. In 1994, as today, rates rose due to fear of inflation, which never materialized. There has also been a dramatic increase in productivity that is keeping prices subdued. Our point is very simple.
Bonds are cheap.
Tax-free bonds are a steal. It s a no brainer. That means that you can buy a municipal bond for virtually the same price as a Treasury bond, despite the fact that the yield on the muni is tax-free to the holder. Don t be distracted by the Fed. Trust your common sense.