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Monday, July 8, 2013

Looks Like The Father of the Random Walk Down Wall Street Isn't Much of A Sector Picker

Malkiel: Dividend & EM Bond ETFs Place To Be 
By Olly Ludwig | March 21, 2013

Related ETFs: PEK And can you speak to some of the other additions—TIPS, munis and emerging market bonds?
Malkiel: Well, munis are still relatively cheap compared with Treasurys, and they do have a rate of return larger than the inflation rate, and probably larger than even a 3 percent inflation rate.
The other asset class which I think is important is emerging market bonds. That's again an asset class that, when you think about history, was risky, and bonds defaulted. Actually, investors ought to start to believe and think that that might not be the case in the future, because if you’re worried about defaults, I’m more worried about Italy than I am about some of the emerging markets. Emerging markets now tend to have low debt-to-GDP ratios; they tend to have a much better fiscal balance—by which I mean the government deficits are small or there are even government surpluses. You’re painting with a broad brushstroke there. You’re not parsing emerging markets and isolating, say, Brazil or China, are you?
Malkiel: No. You know me; I’m an indexer. And that’s of course what we are doing with these portfolios; we’re talking about a very broad brush where we’re using a broad emerging market fund. And we’re always looking for the emerging market fund that is the most cost-effective—we’re going to see this year a Vanguard emerging market fund which I expect will have a lower expense ratio than the ones on the market today.

Emerging Market Bonds Not Worth The Risk; Watch The Spreads

EMLC (local currency em bonds) and EMB ($ denominated) returns top volatility bottom last 3 months.

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