Quote of the Week
“Totally mad. Utter nonsense. But we’ll do it because it’s brilliant nonsense.” ~Douglas Noel Adams
Beauty in the Bonds
Municipals – Not the Ugly Duckling
Few asset classes have been picked on more than municipals since 2008. Expert after expert has predicted massive defaults. They are not the ugly duckling of the investment world. There is beauty in them. Here are my top reasons for encouraging investors to look at them.
1) We have seen few defaults. “States are doing the right things though it took longer than the private sector because of the political process.” ~C. Ryon, Thornburg Investment Management
I believe in supporting those that have cleaned their act up. Same reason we began supporting equity investing – corporate America did it faster and, for the most part, did it well.
2) Municipal bonds come in many forms. At the state level, you lend money for the completion and maintenance of highways, sewer systems, and projects for the public good.
As stated before, infrastructure investing is, in my opinion, incredibly important for our recovery.
3) Even though our present tax rates are relatively low, investors frequently tell me that they pay too much. Well, you can get some of it back by collecting the tax-free interest from these bonds.
When investors complain about gasoline prices, I often suggest buying oil company stock. If you’re paying taxes, why not see what a municipal interest payment may do for you?
Things to know: Bonds are subject to market and interest rate risk. Municipal bond interest may be subject to alternative minimum tax, are Federally tax-free but may be subject to other state/local taxes.