Do you know about - White Paper on Municipal Bonds
2012 Tax Brackets! Again, for I know. Ready to share new things that are useful. You and your friends.With the turmoil in the markets, a historic shift has been observed in the yield spread on munis, particularly Michigan municipal bonds. Munis are selling at a vast selected to Treasuries on a yield basis. We think this selected is unusual and provides some opportunities. Most notably, we observe:
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• There is apparent mispricing of risk in Michigan municipal bonds. The entire store is being painted with one broad brushstroke. Michigan, as I can attest first-hand, is a very diverse state in geography and economy.
• Ratings are helpful, but not determinative. We're determined analyzing the issues and the municipalities individually.
• The municipal bond insurers are in turmoil. In fact, many of the insurers are junk rated.
• Tax rates are going up for many investors, and this makes municipal bonds more attractive. Of singular interest is the health Care Bill, which adds a 3.8% Unearned revenue Medicare gift tax on dividends, interest and capital gains in 2013. Municipal bond interest is exempt from these taxes also, making the tax-equivalent yield even more captivating to high bracket individuals.
• The current interest rate environment is unique. The yield curve is at a record steepness, and we see opening while staying reasonably short as security against inflation.
• quality is king. Not all municipal bonds posses the same level of risk, but the store seems to be pricing them that way.
• Liquidity is queen. Municipalities are facing revenue crunches, probably in the magnitude on mean of -10- 15% for 2011 and 2012 and possibly longer. They need money and will borrow. We think Babs are a short term clarification to the liquidity issue.
• The store is dislocated and somewhat inefficient. We are seeing 'fire-sale' prices on some issues. In addition, we see the lack of a central unified store presenting opportunistic buying. We buy on the bid (wholesale) for our portfolios: the spreads tend to be pretty big now.
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