Cold Call: Dick O'Brien

You are the self-proclaimed “Bond Geek,” and do business the old-fashioned way, selling bonds, especially municipals, to retail clients. The knock against bonds is that pricing is rather opaque. Is this still true?

Thanks to the MSRB, municipal bond pricing is now more transparent and trade activity is available to the public. The NASD, through its TRACE program, now reports or will soon report activity on most corporate bonds.

Wall Street lore has it that bond guys are a lot smarter than stock guys. Is it true?

We are bigger than the equity market — and better. The bond market is so powerful that Clinton's campaign chief James Carville remarked that he would like to be the bond market in his next life.

If you could ask Alan Greenspan one question, what would it be?

Does the water temperature of your morning bath influence your economic outlook? Or, does the state of the economy affect the temperature of your morning bath?

As a former regulator — O'Brien worked for the MSRB in the 1970s — you said brokers should be governed by just two rules. What are they?

The broker should know his client, and the client should know his broker. Neither should be greedy.

Do you fear the inverted yield curve?

It presents opportunity to fixed-income investors and heartburn to stock jockeys.

Munis offer principal preservation, absolute returns, low volatility, low correlation to other asset classes and tax advantages. Why don't people talk about them?

They aren't fodder for cocktail party conversation unless it's a bond geek party. But astute investors continue to recognize their value.

Over the last five years, munis have outperformed (on an after-tax basis) the S&P 500 and the Dow, and matched the Russell 2000 with far less risk. Is the Golden Era over?

In my opinion, medium- and longer-term municipals will continue to shine.

Who predicted the death of fixed income, when and why?

Most equity-driven investors have been predicting the demise of the bond market forever. See the May 1969 cover of Institutional Investor with grazing dinosaurs and the caption, “Can the Bond Market Survive?”