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Low yields keep investors on the sidelines when it comes to the municipal bond market and when he sent him late in -- is here.
He's the co-founder of latent -- company he's been selling municipal bonds cents.
Author -- Lleyton now islands and I'm glad to be here.
Looking at your -- missiles which is what individuals -- -- and what they're yielding today.
Are they a bad investment compared treasury.
I had a little -- the world to answer that at a quarter of one per -- for a one year tax free municipal bond.
It's a parking lot.
It's not a great investment but it serves the purpose of taking money out of harm's way and then six months or a year from now you can be reinvested at what are you -- whatever you think interest rates are going to be.
The twenty year bonds that we're seeing already a lord only 4%.
Hardly a temptation.
For the guy in the lower tax bracket to extend maturity.
If that individual is convinced.
That interest rates are going to go up.
This is going to be a year of waiting wait a year of waiting for interest rates to go up and it doesn't happen this year next year will be a year of waiting for interest rates to go up.
So I'd have to live with the market that exists now.
And there are ways of investing in -- not very exciting market.
And protecting yourself against your bonds -- -- price.
And missed opportunity.
If you and only -- our money in the mattress -- one thing is to buy to divert from number one diversify maturities.
By some of those one year bonds that pay virtually nothing and staggered maturities.
So that as bonds come due you -- roll them over into whatever the new interest rates are the other is to go for the highest coupon rate.
That you can -- your hands on a 5% because it is those coupon rates from yesteryear and even some of the new bonds coming out.
Have 5% coupons that they're selling it they premiums.
Those sponsor called cushion bonds they all less.
When interest rates rise and the bombs in your portfolio and to plummet.
And the other thing in my book is because -- -- pressures out there there is the problem.
Declining property values.
And lower tax collections in the municipalities.
So there's going to be pressure on ability to pay.
As budget deficits.
-- hit the Muni market they haven't really yet they've been no significant defaults.
There may be -- and payment over the next year it.
And that will impact interest rates in general -- -- second Iraq I mean mark is it going to rock the Muni market has a Muni market is sensitive.
If a bond in -- -- Arizona the -- it makes.
Headlines even though nobody knows where that Al and I just made up -- -- month.
-- -- -- but that might exist.
Cody Willard is actually got up.
The big problem also is pensions some people say pensions are underfunded by couple hundred billion moon the cover story the FT today two trillion dollars citing one New Jersey official.
If pensions -- that big of a problem and you could let us know -- think they are.
That could also rock the -- mark.
If pensions aren't that big a problem and they aren't that big a problem -- just you RJR I think they are I think they're part of that deficit.
-- That over promising.
And that politics have.
-- -- -- What I now stand up on my hind legs and scream about is using municipal bonds to fund pensions.
That to me is that's happening on.
Courses I -- just been a horse called Arizona if it out but you might as well -- there because nobody seems to be listening anyway.
Well they did it in New Jersey.
Governor Whitman did -- New Jersey whatever that was time flies when you get on in years.
I guess it was about a decade ago.
And it didn't work out.
They -- -- -- bonds invest the money in the stock market the fund pensions and so they got whiplash both ways.
Some people say -- would talk about whiplash let's talk about when the bush tax cuts expire this year could that happen.
Opposite effect you pocket with a tax rates gone you mentioned.
And get one I was sitting in the green room you mentioned the tax cuts the tax cut that I'm aware of expiring this year -- the estate tax cuts.
I don't know of any tax cut coming.
In income taxes and -- only acts that Munis are exempt from nine may be asleep at the switch -- The bush tax cuts expire on -- -- capital gains and dividends at the end of this year.
They start -- If tax brackets.
I promise you as I sit in front of my crystal ball that those taxes will be raised right back up.
We are not going to have a period of tax cutting for a long while to com.
Great to be here and -- -- -- founder co-founder my own company the book and now anything one.
I read the Chicago Sunday Tribune started interject there are 7000.
Governments in the state of Illinois.
Who's a cover editorial about tax and how would they call -- tax and splurge but -- spending is out of control -- a -- 7000.
Governments in the state of Illinois 2000 more than the next highest state.
That's according to Chicago Tribune.
Unbelievable I don't know the numbers for the New York metropolitan region which covers 50% to many but that is a problem and you have more governments one day.
You'll have more governments than there are people that govern -- -- encouraging bad behavior I've I mean.
No that's not got to come back from the --
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