Municipal Bond Forum

Thank you for the GM article, but I still do not understand what you mean when you say bondholders “will receive 10% equity in the new GM along with warrants for an additional 15%.” If I own 100 of the 9.40% bonds, how many shares of stock and warrants will I receive?

J.C., Florida

I read your article on GM, I recently purchased GMAC smart notes B/E monthly survivor option. coupon 7.50% due 11/15/17. How is this bond impacted by the things mentioned in your article.

W.N., Florida

I have an account with your firm and all is going well! But I read a story in The New York Times recently quoting a hedge-fund manager who lays out a depressing sequence of events. He says governments can’t borrow much more and are being forced to print money. He says that will be followed by a new bubble in long-term bonds, which in turn will cause currencies to collapse. If that happens, how could municipalities cope? I realize your view that long-term bondholders keep bonds to maturity and collect the interest, but if currencies are in bad shape, doesn’t that undermine the merit of holding municipal bonds?

J.D., Virginia

I’m about to turn 60. Because I’m past 59 1/2, I was able to annuitize some of my IRAs without paying penalties. I need the income from my IRAs because I can only work part-time now and am not able to make as much money as I could before. Does it make any sense for me to invest my remaining IRA funds to purchase tax-free municipal bonds or invest in a tax-free municipal bond fund? Because all of my IRAs are pre-tax qualified funds, I assume I would have to pay income taxes on any funds that I take out of my IRAs to purchase or invest in anything else.

D.E., New Mexico

With bonds currently high priced, is this a good time to sell some and buy stocks? The Federal Reserve is expected to buy bonds over the next eight months. Would it be better to hold bonds until the Fed stops buying?

S.B.

I liked your article on the Dow’s recent rise past 11,000 and how it first broke that mark 11 years ago, and I see the logic of it. I have a nice size portfolio of long-term bonds, most of them purchased through your excellent broker, Michael DeStefano. Now I am worried. With the Fed pumping so much money into the economy and then buying Treasuries, what’s the effect on long-term municipal bonds, especially if municipalities cannot pay their bondholders? Bonds have provided a good income for me and enabled me to bridge the gap because of my forced retirement six years before I was eligible for Social Security. Now that I am on Social Security, I do have money to invest, but I’m not sure it should go in bonds because of the Fed’s policies.

I.S., New York

Great article on the Ambac situation, but where does this leave the individual investor? Your article mentions “scrutinizing” the individual issuers, but that is very difficult if you are not a financial analyst by nature. I am an avid investor and a past analyst and even I have to dig through hundreds of pages just to make a judgment call on these issues and issuers.

T.C., Maryland