I speak with John R. Mousseau, president, chief executive officer and director of fixed income at Cumberland Advisors. Mousseau is also co-author of the book “Adventures in Muniland: A Guide to Municipal Bond Investing in the Post-Crisis Era.”
We discussed how bonds are priced, and why the current crisis differs from the 08-09 crisis. The GFC was driven first by credit deterioration, and somewhat later by liquidity concerns. In the fixed income world today, the Pandemic is characterized mostly by liquidity drying up — not yet driven by defaults.
The high quality general obligation bonds from Municipals will be fine; however, a recent bond market melt down was driven not by fundamentals but by the 35% crash in stocks. People sell what they can. not what they want to, when they are desperate to raise cash.
He explains why credit quality is always relative, and what this means for total return bond management. The bond market is like a ship that has been hit by a torpedo but continues to sail on, with the support of Congressional fiscal spending and the monetary stimulus by the Federal Reserve.
You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Next week, we speak with James Montier, a member of GMO’s Asset Allocation team. Prior to joining GMO in 2009, he was co-head of Global Strategy at Société Générale. He is the author of several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance”; “Behavioural Finance: Insights into Irrational Minds and Markets” and “The Little Book of Behavioural Investing.”
John Mousseau’s favorite books
The Rise and Fall of the Third Reich: A History of Nazi Germany by William Shirer
Grant by Ron Chernow
Free to Choose: A Personal Statement by Milton Friedman and Rose Friedman