Muni bond market

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MarkM's picture
MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 837
Muni bond market

I have spent the past ten years building a laddered muni bond portfolio as part of my asset base.  Old school - build laddered AAA insured munis and never have to think about it. 

Guess what?  I feel I should be thinking about it.  The muni bond insurance agencies are in the same shape as the FDIC and municipalities are having ever-increasing budget problems (h/t to saxplayer for the constant information about those).  I asked a good friend of mine (economics prof at SMU) about my dilemma.  His answer was that municipalities have the authority to tax their way out of problems.  He just doesn't see it, IMO.  My response was, "Yeah. like blood from a turnip."

My concerns have elevated to the point that I am considering liquidating all or part of this account.

A recent article here 

http://economicedge.blogspot.com/2009/10/dark-vision-coming-collapse-of-muni.html

really cemented my concerns.

Any thoughts?  My first thought is to move these assets into the form of an operating farm or ranch. I have most other preps that are communicated on this site taken care of.

I have to be honest and say that I am increasingly dismayed about the pulling back of the curtain on the apparent illusions I had about preparing for my future. 

docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Re: Muni bond market

My father in law is in the same boat as you.  He is just hanging on to his. He doesn't listen to me.  If you hang on to them and the issuers don't default you will get your principal and interest back.  If you have any that might default,  I don't see any thing good coming of waiting for them to default.  Get rid of them.  The bond market is in pretty good shape pricewise right now, but I don't see any more room for interest rates to fall causing bond prices to rise.

The advice I gave my father in law was to start selling the longer term bonds about 20 percent of his holdings a week for the next 5 weeks and go into cash or 6 month treasuries.  Municipal tax revenues are plummeting and many will default in the next 12 months.  They are not 'too big to fail' like the banks.

 if they are less than 2 yrs to maturity keep em and hope for the best.

My 2c

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1148
Re: Muni bond market

FWIW, we sold our VA. Muni ladder 3 yrs ago(sorta lost cuz all else was hot).

We paid off the farm, bought farm equip., lotsa diesel storage cap. We sleep

soo much better,

robie

notta worry in the world a cold beer in my hand ,life is good today...life is good today

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