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.
I agree with you on your analysis of Ambac’s fall. The best I see is that the bonds they insured were actually pretty good, so they should be OK. It was their mortgage business that killed them. Greed.
J.W., California
I own some Ambac-insured bonds that, I am told, have technically defaulted, but so far have continued to pay interest. The bond I have is 100M of Alabama Water Pollution Control Authority (Jefferson Co.) 4.25 of 2/15/15, Cusip 010653QZ9. A Material Event Notice on this bond was issued on Oct. 4, 2010, regarding this default. The bond has not traded since this notice was issued. Any thoughts concerning this issue? Can Ambac bail me out if necessary?
W.L., Illinois
Will BABs continue after 2010?
R.S., Missouri
You write that muni bond investors should first be satisfied with the credit quality of the bonds they’re considering purchasing and then focus on maximizing their tax-free income by purchasing long-term bonds. What do you consider good credit quality in a muni bond?
L.C.
My wife and I have followed your advice about seeking high income in quality long-term bonds held to maturity and are happy with the results. Now, at age 67, we are still adding to our holdings and would like to have your thoughts on the factors that might go into a choice of maturity length. A 30-year-bond may well outlive us, for example, but provides a better yield than a 20-year bond and should be the better choice if, as we hope, we never have to sell it. Is this still the case if an unforeseen event should require us to sell in 20 years? Should we be buying some bonds with shorter maturities (10 to 20 years) or is longer term still the best choice?
R.K., Minnesota
I enjoyed your article about the Dow’s recent rise and how the TV talkers fail to mention how it’s only back to the level it was 11 years ago. These jokers like talking about bubbles. The bubble in the equity market explodes and is gone. A bubble in municipal bonds is different. If you are interested in fixed income, you keep the bond to maturity, never mind what the market value of the bond is. In the meantime, you earn income. Where is the bubble in this case? Compared to their alternative, their bubble is irreversible and I can show you the last 20 years. To make their blood-sucking point, they show you the performance since the Great Depression, not the last 20 years. There is a cycle of bust almost every 10 years but with no certainty on the exact time. A world-renowned professor friend of mine recently told me that the stock market is working perfectly — it is very large, liquid, efficient and competitive. Under these conditions, you should expect to make very little return. He answered my question beautifully. Thanks again.
Y.M., California
Your article on how laddering doesn’t work is another whopping example of misleading junk finance. I am not commenting on the “laddering thing,” just on your erroneous math.
B.C., New York
Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.