Avoid Corporate Bonds

Forbes: Do you guys have any thoughts about the viability of corporate bonds, and if so, what are some areas investors might want to look at? What are some good, safe, corporate bonds that actually have decent returns? And do you like these as investments?

Roseman: The corporate bond market is suffering from liquidity issues just like other parts of the market. As a consequence the yields on many corporates are attractive but caveat investor--corporate liquidity (bankruptcy risk) is still going to reign supreme.

Singer: We have seen a widespread re-pricing of all debt in recent months and, more critically, we have seen tremendous doubt and discredit placed upon the once venerated rating agencies. I think the lack of even the once rudimentary reference points of Moody's (nyse: MCO -news - people ) or Standard & Poor'shas brought far more uncertainty to the valuation of corporate debt.

Further, given the uncertainty surrounding Detroit, the recent stress upon General Electric (nyse: GE - news - people ) and the interregnum that we will likely face between the departing Bush and the arriving Obama administration, I think folks need to be very careful before investing in too much corporate debt. Similarly, while equities seem to remain somewhat tarnished for the near term, that doesn't necessarily make debt more attractive simply as a result of the more favorable comparison. For those who do their homework and are prepared to undertake educated risk, there is much corporate debt that will likely prove a superior investment years from now.

Froehlich: I don't like any bonds except munis. While one can make the case that investing in corporate bonds carries with it two risks, interest risk and credit risk. And with the current economic landscape there is little if any interest rate risk that over the next 18 months rates will go up. That means in theory that as an investor you should be willing to take on more credit risk. Except that this bear market has proved all of the theories wrong.

Until liquidity returns to the corporate bond market I would not be a buyer. Sometimes you don't want to be on the "bleeding" edge or the "leading edge" and this is one of those times. Go buy a muni bond.