Municipal Bond Forum

I appreciate your interesting analysis of Florida Community Development Bonds. I am interested but concerned with risk assessment in the current environment. For example, your offering of Meadow Pointe ll. How do I determine the buildout/tax delinquency and general viability of the community other than through a physical visit?

T.B., Florida

What happens to bondholders if Bank of America is nationalized?

B.C.

I receive about $7,000 annually in dividends from stocks. I need this income, but the tax is killing me. Are there municipal bonds that pay a regular interest/dividend that are tax free? Should I consider selling some of my stocks to purchase them? I’m 61 and want to get more security but don’t necessarily want to sell stocks as a panic move. Should I consider mutual funds? My financial planner seems determined to keep me in stocks. My immediate priority is generating income from investments while reducing federal and state taxes.

J.B., Pennsylvania

What would happen to the bonds if a bond insurer, such as Ambac, had its rating cut to junk status or declared bankruptcy? Why should a municipality continue to pay premiums for bond insurance coverage if the bond insurer is bankrupt? Thanks for any light you can shed on bankrupt insurers and the future of the muni bonds they insure.

B.F., New Hampshire

We have several California muni bonds and tobacco bonds that have really taken a beating on their resale bid prices. These are bonds we were led to believe were secure, but apparently had no or inadequate insurance. This has been quite frustrating. In retrospect, we were told these are not the kinds of bonds we should have purchased. The question is, what should we do now? Also, the price or value is down on these bonds, but is the interest earned still on the original purchase value or today’s decreased value?

R.C., California

Since actual bonds are subject to market timing if you want to sell them, wouldn’t it make sense to at least partially put your muni money in good muni bond funds run by established companies like Vanguard and T. Rowe Price? Also, these funds are excellent and inexpensive vehicles for monthly reinvestment of the interest.

G.L.

I have a number of Ohio closed-end and open-end funds. They were down, but have recovered. I understand that the economic outlook for Ohio is pretty bad and I’m concerned about the funds. Will Ohio’s poor economic outlook affect them?

B.A., Ohio

As the author of the current best-selling bond book in the United States, “Bonds: The Unbeaten Path to Secure Investment Growth,” (Bloomberg Press, 2007), I want to thank you for your blog and the thoughtful information you share with your readers. An educated investor is the best client.

H.R., Pennsylvania

With federal tobacco taxes increasing 62 cents per pack to help pay for the S-CHIP program (State Children’s Health Insurance Program), what is the outlook for tobacco bonds? Will this be the end of new issues coming into the market? And what about MSA (Master Settlement Agreement) payments on existing bonds? Thanks for your help. Your Web site is always informative.

S.W., North Carolina

With the recent bailouts and apparently more to come, do you think the increased debt will lead to spikes in higher inflation? If so, would you recommend deviating from an income strategy of purchasing long-term municipal bonds that produce higher yields? If so, what strategy do you suggest given our current economic climate and possible significant expansion of future debt?

H.F., Alabama