yeah, and when all these 6% munis get called and all that is out there is 4% they’ll love that…

[quote=Chuck]

two things we can count on; death and taxes…

wow, you must be a CFP

Munis were off 6 or 7bps today.  Assured and FSA got downgraded to AA2 by moodys and the evals on bonds insured by them dropped 20pts in some cases.  The pricing services are a little whacky, the actual bonds didn’t drop that much. I expect you will see evals adjust.

Does anyone here think that a couple of years from now inflation will be way higher?
There is no pressure on prices now because of lack of demand. But as the economy ultimately gets stronger and demand rises, at the same time that the treasury is printing money to pay for all this shit we are going thru now, seems to me that inflation will be a big problem. Whih makes me a bit nervous about going out 10 -15 years to snag 4 1/2 to 5%

but what is the tax equivalent yield on that 5% for your clients in high tax brackets…7.5, 8%, that will definately keep you above inflation.

I think @15 yr. “A” or better munis (non-AMT, WITH insurance, such that it is) are yielding more like 5.25-5.65%, that’s not an insignificant tax-free difference.
 More to your point, it may take several to many years for the economy to begin to heat up enough to cause inflation, in which case, you may be a good bit of the way to maturity or a call date, which would limit your price volatility. I think you skin that cat when you get to it.

Default stats are a bit misleading…Those default rates are when the bonds WERE rated AAA/AA/A.  It does not count the bonds that were first downgraded to a lower rating and then defaulted.  Don’t get me wrong, I am not predicting muni default problems.  Predicting the opposite.  Just giving out information.

IMHO, in most times (these are not most times), the bond insurance provides more than just default protection.  It “can” provide better pricing and liquidity because it is a “safer” bond.  I know, I know, if you have a seat belt and an airbag, a helmet does not really make you safer in a car wreck…but it kind of does.

ytreg,
 I agree with your assessment of muni bond insurance, for this reason also: If, for example, a AA, by S&P (for example), issue seeks out and buys insurance, then, not only have the books and/or plan been analyzed by the rating agency(ies), but also by the insurance company who then (as you said, in normal times) has a vested interest in the issue not defaulting. At the very least, the issue has gone through one additional round of "vetting’ and analysis.

Good point YHWY.  Question?  Correct me if wrong but I believe that no organization can legally issue any municipal bonds if they already have another issue in default?  ie they must pay off the old bond before issuing new ones.  They cannot just “go bankrupt” and start over.  Anyone know the answer?  Also, big news now is that municipal ratings are essentially based on the same criteria as corporate ratings.  Supposedly industry is working on new ratings so that munis are rated based on the fact that they are safer and have less defaults than corps…Anyone heard about this?  I am an equity guy but these tf bond yields are insane.  10% Tax Equivilant.  Other than reinvestment rate why buy stocks?

You may know this already, but the mkt gives us an estimate of what it thinks inflation will be.

You all realize inflation is a made-up number by the government so that we don’t freak out about how much prices really go up by, right?  Or are you still relying on 80-page computer printout “financial plans” to give advice?

All the more reason to trust the mkt and not the gov’t

there was a Pimco/California cef that was down 25% today because they suspended the divy. One more reason to stick with the individual bonds or the open end version.  However, if that discount gets to be 40% or so, it might be a buy (but probably not for me).

sold a ton of a TX tf this wk that was selling at 93 with a coupon of 5.625 yielding 6% callable anytime at par with a premium call of 104 in 2018.  my clients getting a killer tf rate and raking it in if it gets called… Aaa rated also… these opportunities won’t last for long.

how about good ole ornax (11% yield). have about 1mill in that fund. getting slaughtered. though I know it will come back in a huge way

Oppenheimer is like Kevin Bacon at the end of “Animal House” right before he gets stampeded - all is well, no need to panic! The tag line for that fund should be “all the volatility of a cef in an open ended fund”.

[quote=Gordon Gekko]Oppenheimer is like Kevin Bacon at the end of “Animal House” right before he gets stampeded - all is well, no need to panic! The tag line for that fund should be “all the volatility of a cef in an open ended fund”.

When a fund is “on sale” for over a year, you have to wonder if they have more problems than they let on to. They claim they are seeing net inflows which is hard to believe.

at this point with a cost basis of 10.70 for my personal money, about 100k. I have no other choice but to take the nice tax free income and hope for it to get better. It will.