Smarter Money: It's Too Early for Junk Bonds - TheStreet

Smarter Money: It's Too Early for Junk Bonds

Wait for a round of redemptions before committing money to this asset class.
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It is probably still too early to get long junk bonds. There is still too much carnage ahead, particularly in telco land, to avoid the residual hit that good bonds will take when the remaining telco-tech bonds go belly-up.

But if you do decide to wade back in, I second the advice of Marci Rossel from

Oppenheimer

(she was on

CNBC's

"Squawk Box" with me this morning) that you do it with a bond fund, not with individual issues. The chances of your picking the one bond that gets hammered because of poor cash flow is just too great these days, when so many companies are in trouble because of their overly rosy scenarios. So many companies raised money in the last few years that you could end up in the wrong one.

It is true that when the

Fed

is done easing, you want to move some of your assets to this class, because the worst should then be over. But I would not pull the trigger yet. There are too many people who are just now beginning to sell their good bonds to finance their bad ones (a constant problem, as the bad ones don't provide enough proceeds). Wait for a round of redemptions and then place your bets.

It is still too early.

James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to

jjcletters@thestreet.com.