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
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.
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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
Price rise beside the point
I read an article that said it’s time to get out of munis. It said although they’re up 8.30% this year, interest rates are about to rise and investors are going to sell to protect their gains. What do you think?
A.G., Illinois
New Rule Should Allow Banks To Carry Certain Munis
Regarding your article, “Push is on to Include Munis in New Banking Rule,” shouldn’t banks, as part of the new liquidity rule, be allowed to hold pre-refunded bonds, bonds insured by strong insurers and short-maturity bonds in compliance with their covenants?
C.K.
Insurance refund for called bonds?
My understanding is that municipalities generally pay an upfront fee to bond insurers to “”wrap”” their bonds until maturity. If a municipality calls a bond early (for example, to refinance), does it get a pro-rated refund or does the bond insurer get a windfall profit?
M.M., Tennessee
Good news or bad news?
Is your article, “Puerto Rico Moves To Strengthen Bank, Defend New Law,” good news or bad news?
M.B., Texas
Insured vs. uninsured Puerto Rico bonds
With regard to the fiscal situation in Puerto Rico, do you believe there will be any difference between Puerto Rico municipal bonds that are insured and those that are not?
J.P.
Puerto Rico question marks
Regarding your article, “Moody’s Downgrades Puerto Rico G.O. Debt“: Obviously the new law and downgrades are jolts to investment sanity after recent ups and downs. Puerto Rico has no revenue upside, their society has too many entitlements, etc. Do you envision them stopping payments on certain bonds or defaulting?
R.B., Arkansas
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