FMSbonds, Inc.’s Municipal Bond Forum is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years, and other members of the firm as noted.
Postings are listed by date. If you have any questions, please call us at 1-800-367-2663 or e-mail us.
Regarding your article, “Embrace the Headlines,” I do not believe one can compare California with Puerto Rico. Yes, California had problems, but it has always had a thriving state economy and is now running a surplus, where Puerto Rico never has been. I’m just thankful I chose to not buy Puerto Rico bonds.
N.S., California
With the selloff of municipals, particularly those issued by Puerto Rico, there was been a reduction in the market value of individual bond portfolios. I think this is panic selling by bondholders fixated on the events in Detroit and Stockton. I don’t think these people belong in municipals in the first place. While no one wants the value of their portfolio to decline, this should not be a paramount consideration for bondholders, who get it all back upon redemption.
N.M., New Jersey
Can you use municipal bonds in an IRA?
C.M., North Carolina
What is your view on the likelihood of Puerto Rico defaulting on any of its bonds – general obligation, highway and electric, etc.?
R.Y., Connecticut
The insight in your article (“Amid Detroit Crisis, a Key Player Emerges“) applauding the virtues of bond insurance brings to light that with the exception of AGM, National and BAM, all other bond insurers are still in a serious financial state. This is largely due to their ill-advised venture into insuring toxic mortgages. Would you care to comment?
N.M., New Jersey
“Buy-and-hold” strategy — impacted by the Detroit bankruptcy?
S.T., Washington
Is your strategy always to buy the best yield possible and hold? Is there ever a reason to sell or wait to buy for better yield? In the current environment, conventional wisdom says that I should construct a bond ladder, don’t go too long in search of yield, etc. But if I am buying for income and a better return for the amount of risk, is there an argument for buying shorter-term munis, maybe less than seven years?
K.K.
We are New York residents. Currently, our muni bonds are decreasing in value. Since January 2013, our portfolio has lost about 3% of its value. Our advisor has instructed us to stand pat as we are still receiving dividends. What would you suggest we do?
C.M., New York
Do you think, theoretically, that the muni market would be better off, or at least far less volatile, without muni mutual funds? Watching outflows from munis based solely on what amounts to an equity-market mechanism seems to negate much of the advantage of owning munis. Fund managers start selling to cover potential redemptions, and share prices fluctuate like a roller coaster, having nothing to do with the underlying assets.
P.H., Oregon
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