What’s the advantage of munis if tax-free income is now being added to social security, which may make munis very unattractive?
Social security and tax-free income
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Municipal Bond Forum
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-FMS-BOND (1-800-367-2663) or e-mail us.
California’s health
A majority of my retirement savings is in California muni bonds. In 2005, the unexpected increase in state income tax revenues has been a pleasant surprise. I would like to believe that, as your recent articles state “California’s move rewards bondholders“, California’s economy is strong. However, a fiscal analyst warned that with even a mild recession, California’s financial outlook would be very bleak. Because of Prop 13, the state’s economy does not have a steady source of revenue from property taxes. Instead, the state income tax is the main source of revenue. The New York Times recently had an article on the under-funding of state retirement benefits. The article highlighted what it termed a looming problem. This under-funding has occurred in California. California’s constitution requires that state government pension benefits, once committed to, cannot be diminished. I realize that the constitution sets as a priority, just below payment of pension benefits, the funding of GO bonds. Given California’s aging population, the radical increase in the cost of medical benefits and California’s dependence on income tax revenue, how will the state’s economy withstand a recession?
J.C., California
Santa Rosa Bay Bridge zeros
I was wondering if the Santa Rosa Bay Bridge Zero Coupon Issue CUSIP 802576BU1 (AAA MBIA-IBC Insured) bonds are in default and if this issue is subject to an extraordinary redemption where they can be called at their original issue price of 23.449?
S.W., Florida
On “Kentucky court says state can’t tax interest on out-of-state bonds”
What effect do you think this will have on bond yields if all states passed a similar law?
A.F., Connecticut
CDs vs. tax-free bonds
In today’s market, I can get a four- or five-year CD for 4.50%, AAA, with no risk and no premium. If I’m buying an A-rated muni bond, I want at least 2.5% to 3.0% above prime.
J.Z., New York
AMT and tax exposure
I thought bonds subject to the AMT could open one up to taxes, which is why they have a slightly better rate. Is that the risk one takes with the AMT?
G.S.
Comparing bond funds
Please compare these two funds, Federated Municipal Securities A and Columbia Municipal Income Fund Z. In today’s market, which one would be more favorable and why?
D.B.
Compensation of bond firms
Bond companies seem to be reluctant to reveal the compensation cost they get for handling transactions. Therefore, buyers are unable to compare bond total costs from one broker to another. I would like to get a straightforward answer to the cost the brokers fee adds to the total cost.
J.T., Oklahoma
Call protection
What is meant by “call protection”?
J.G.
The ‘FMS’ in FMSbonds
Just wondering, what does FMS stand for? I found your Web site a good one to talk about in my Business Reference class in graduate library school.
J.N., Massachusetts
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