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.
Do you know the creditworthiness of various state tobacco bonds, and which ones, from a risk/return standpoint, offer the best relative value? Also, I am a Massachusetts resident, so could you provide any information on the tobacco bonds of Massachusetts?
G.G., Massachusetts
I am taking a tax/investment real estate class at the moment and one of the students posted a comment on our discussion board talking about land bonds. I have never heard of a land bond before.
T.W.
With the current illiquidity in the market for ACA insured bonds it seems to me that their ability to write new municipal bond business is going to be severely hampered. I would also assume that any new Collateralized Debt Obligation (CDO) business is dead. How can they survive under these conditions? Where are the revenues going to come from?
B.P., New Jersey
I’d like to know what the common fee structure is when it comes to paying a broker to purchase municipal bonds. I just found your site and am not sure yet, but I may be able to buy bonds from your firm. Currently, I have about $1 million invested in muni bonds in the state of Ohio and pay a financial adviser to manage all my brokerage funds. If I had these funds in different stocks and mutual funds and was moving them around, I could agree with his fee structure. I am struggling with the fact that the majority of my investments are locked into long-term (7-10 years), low-risk bonds and I am paying his fees. With an approximate 5% return per year, I am paying almost .75% of that to the broker year after year in fees. In the next several years, I will have approximately $2 million more to invest in muni bonds. Is there a lower fee option?
P.F., Ohio
I am following the AMT situation closely because my husband and I are getting more burdened with it every year. Even in retirement, it gets worse. We were hoping for some relief by a one-time fix in 2007. Did you get a sense that this will happen before the end of the year?
M.S., Virginia
Are they trying to cheat the poor people again? How will this affect the average muni bondholder?
J.P., Florida
We have a family trust that is 100% invested in New Jersey municipal bonds, with a face amount of $1 million. The current market value of the bonds is way down and is fluctuating between $965,000 and $975,000. I am trying to understand the market conditions that are responsible for this, and my inquiries to our ML broker are not providing me with anything that I can readily understand or explain to my father.
R.K., New Jersey
I found your offering of a “tobacco securitization settlement bond” interesting. Can you tell me what it is? In the past, I’ve purchased AAA, insured tax-free munis. What is the difference in quality (i.e. reliability) between what I’ve owned and the tobacco bonds? Are tobacco bonds insured or insurable?
L.R., California
How will the potential hedging of the tender-option-bond-programs, or unraveling of these trades, affect the value of AAA-rated insured bonds? Will this seriously harm bond values and is it a transitory effect?
D.M., New Jersey
I am deeply concerned about what’s going on in the market. I find it hard to believe that “the bond insurers have mostly insured only the mid to higher levels of CDOs,” as you say, since it’s become clear that most holders of CDOs don’t really understand the risk profile. Furthermore, you say “a large segment of the CDOs would need to be in default before the insured layers would be impacted. This is not anticipated.” Well, I don’t think any of the experts anticipated we’d be in the turmoil we’re experiencing today, so I’m not convinced their judgment is credible. I, too, am concerned about what would happen to the insurers if we truly had a meltdown. I’ve never understood how the insurers could cover the potential calamity that could arrive. How could insurers protect us in a crisis?
A.S., New Jersey
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