Do you still believe in the premise of your article, “Muni Supply to Remain Tight in 2015“? CNBC today made it sound quite the opposite.
M.
Factors in muni supply
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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.
Premium bond called before maturity
In your article, “The Best Play for Today,” you say that the best values are premium bonds, even though it may seem “counterintuitive to many investors” (myself included). You have said in the past that one cannot claim a capital loss when a premium bond matures, even though one must pay tax on capital gains when a discount bond matures. My question is, can one claim a loss if a premium bond is called well before maturity, leading to the so-called “yield-to-worst”?
M.M., Tennessee
Determining outstanding value
In an e-mail to me, you recommended a “AA”-rated premium bond maturing in 2043 and callable in 2020, with a yield-to-call of 2.60%. You said it represented “outstanding value.” I don’t agree. We’re in a 3.30% market for that quality of bond, and it’s almost certain to be called on its call date in five years unless interest rates rise dramatically.
E.O., Alabama
Capitalizing on an ill-advised prediction
Please don’t deride Meredith Whitney’s powers of prediction (“Know Your Expert“)! I thank her and FMSbonds for the greatest muni bond buying opportunity of my lifetime. I have her picture hanging in my office and eagerly await her next prognostication. My only complaint: The bonds are being called before I am interested in losing them.
A.B., Florida
Low volume, attractive yields
I had another thought after reading your latest article (“Know Your Expert“): I agree on continuing to buy tax-free bonds regardless of what the so-called gurus say. The only problem is, there are no bonds to buy. A perfect example is the bond offerings on your Web site. There used to be six pages, now there are fewer. What’s the secret of buying quality bonds at fair prices in today’s market?
L.S., Texas
Negative outlook on most tobacco bonds
You’ve moved away from tobacco bonds (“Clouds Darkening for Tobacco Bonds“), but they have differing parameters depending on the issue. Do you dislike the higher-rated ones (“BBB,” “A”) as well?
D.L., New York
Going long with no worries
Your message (“The No. 1 Sin of Muni Investing“) is right on. My friends always ask me why I hold long paper. I tell them I have consistent returns of 5.00% and no worries.
S.D., Florida
Munis and the Affordable Care Act
It’s my understanding that under the new tax rules, those in higher brackets may get hit twice on “tax-free” income. If modified adjusted gross income rises above $200,000 for a single filing taxpayer, a 3.8% surtax is imposed on all investment income, regardless of source.
R.C., Illinois
Is rating important on insured municipal bonds?
If I buy only insured muni bonds, do I still need to be concerned with the bonds’ rating?
G.E., Louisiana
Insurers responsible for interest and principal
I have many Puerto Rico munis and they are insured by Assured Guaranty. If the commonwealth restructures these bonds, what will happen afterward? Will I lose value? Will the insurer pay me back what I lose?
B.C., California
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