California Municipal Bonds

[JerseyGrl]

With the problems/recent cuts in credit rating for AMBAC, should I pull my money out of California municipal bonds? Am I the only one worried? My Edward Jones friend says not to worry but I’m still confused about what action, if any, I should take.

[DCRogers]

Remember, this is just the insurance for the bonds that is reduced in value (and is just reduced in value, not eliminated)… the bonds themselves, unless they and the insurance defaults at some future date, will continue paying as normal. You would likely lose more paying the cost of selling them than just holding to maturity.

[drunkle]

hmm… the bond insurers go under, investors pull out of bonds that have become too risky for their standards. prices go down, yield goes up…

what happens to the bond market and mortgage rates as a whole? is this the start of the upward climb in rates? despite the fed?

if the central banks continue cutting rates and libor continues down, will ARM’s be better than fixed?

[drunkle]

hmm… the bond insurers go under, investors pull out of bonds that have become too risky for their standards. prices go down, yield goes up…

what happens to the bond market and mortgage rates as a whole? is this the start of the upward climb in rates? despite the fed?

if the central banks continue cutting rates and libor continues down, will ARM’s be better than fixed?

[drunkle]

hmm… the bond insurers go under, investors pull out of bonds that have become too risky for their standards. prices go down, yield goes up…

what happens to the bond market and mortgage rates as a whole? is this the start of the upward climb in rates? despite the fed?

if the central banks continue cutting rates and libor continues down, will ARM’s be better than fixed?

[drunkle]

hmm… the bond insurers go under, investors pull out of bonds that have become too risky for their standards. prices go down, yield goes up…

what happens to the bond market and mortgage rates as a whole? is this the start of the upward climb in rates? despite the fed?

if the central banks continue cutting rates and libor continues down, will ARM’s be better than fixed?

[drunkle]

hmm… the bond insurers go under, investors pull out of bonds that have become too risky for their standards. prices go down, yield goes up…

what happens to the bond market and mortgage rates as a whole? is this the start of the upward climb in rates? despite the fed?

if the central banks continue cutting rates and libor continues down, will ARM’s be better than fixed?

[DCRogers]

Remember, this is just the insurance for the bonds that is reduced in value (and is just reduced in value, not eliminated)… the bonds themselves, unless they and the insurance defaults at some future date, will continue paying as normal. You would likely lose more paying the cost of selling them than just holding to maturity.

[DCRogers]

Remember, this is just the insurance for the bonds that is reduced in value (and is just reduced in value, not eliminated)… the bonds themselves, unless they and the insurance defaults at some future date, will continue paying as normal. You would likely lose more paying the cost of selling them than just holding to maturity.

[DCRogers]

Remember, this is just the insurance for the bonds that is reduced in value (and is just reduced in value, not eliminated)… the bonds themselves, unless they and the insurance defaults at some future date, will continue paying as normal. You would likely lose more paying the cost of selling them than just holding to maturity.

[DCRogers]

Remember, this is just the insurance for the bonds that is reduced in value (and is just reduced in value, not eliminated)… the bonds themselves, unless they and the insurance defaults at some future date, will continue paying as normal. You would likely lose more paying the cost of selling them than just holding to maturity.

[stansd]

I’ll throw in my 2 cents: I’ve stayed away from munis because I think the housing contagion has a real likelihood of spreading to CA municipalities since so much of their revenue is property tax/sales tax dependent. I also think there will be a number of OC style casualties as losses from the excesses of the last few years are fully realized.

That’s the pessimistic side: On the optimistic side, municipalities often have the power to tax, cut spending, etc., and those powers can be used to offset a multitude of sins.

Remember, though, that it isn’t only the risk that they won’t pay. It’s the risk that their will be risk that they won’t pay that can put the bond prices at risk (as default risk increases, bond yields will rise and prices will fall).

Long story short, I’m staying away from them right now, but certainly they are safer than many other asset classes

Stan

[stansd]

I’ll throw in my 2 cents: I’ve stayed away from munis because I think the housing contagion has a real likelihood of spreading to CA municipalities since so much of their revenue is property tax/sales tax dependent. I also think there will be a number of OC style casualties as losses from the excesses of the last few years are fully realized.

That’s the pessimistic side: On the optimistic side, municipalities often have the power to tax, cut spending, etc., and those powers can be used to offset a multitude of sins.

Remember, though, that it isn’t only the risk that they won’t pay. It’s the risk that their will be risk that they won’t pay that can put the bond prices at risk (as default risk increases, bond yields will rise and prices will fall).

Long story short, I’m staying away from them right now, but certainly they are safer than many other asset classes

Stan

[stansd]

I’ll throw in my 2 cents: I’ve stayed away from munis because I think the housing contagion has a real likelihood of spreading to CA municipalities since so much of their revenue is property tax/sales tax dependent. I also think there will be a number of OC style casualties as losses from the excesses of the last few years are fully realized.

That’s the pessimistic side: On the optimistic side, municipalities often have the power to tax, cut spending, etc., and those powers can be used to offset a multitude of sins.

Remember, though, that it isn’t only the risk that they won’t pay. It’s the risk that their will be risk that they won’t pay that can put the bond prices at risk (as default risk increases, bond yields will rise and prices will fall).

Long story short, I’m staying away from them right now, but certainly they are safer than many other asset classes

Stan

[stansd]

I’ll throw in my 2 cents: I’ve stayed away from munis because I think the housing contagion has a real likelihood of spreading to CA municipalities since so much of their revenue is property tax/sales tax dependent. I also think there will be a number of OC style casualties as losses from the excesses of the last few years are fully realized.

That’s the pessimistic side: On the optimistic side, municipalities often have the power to tax, cut spending, etc., and those powers can be used to offset a multitude of sins.

Remember, though, that it isn’t only the risk that they won’t pay. It’s the risk that their will be risk that they won’t pay that can put the bond prices at risk (as default risk increases, bond yields will rise and prices will fall).

Long story short, I’m staying away from them right now, but certainly they are safer than many other asset classes

Stan

[stansd]

I’ll throw in my 2 cents: I’ve stayed away from munis because I think the housing contagion has a real likelihood of spreading to CA municipalities since so much of their revenue is property tax/sales tax dependent. I also think there will be a number of OC style casualties as losses from the excesses of the last few years are fully realized.

That’s the pessimistic side: On the optimistic side, municipalities often have the power to tax, cut spending, etc., and those powers can be used to offset a multitude of sins.

Remember, though, that it isn’t only the risk that they won’t pay. It’s the risk that their will be risk that they won’t pay that can put the bond prices at risk (as default risk increases, bond yields will rise and prices will fall).

Long story short, I’m staying away from them right now, but certainly they are safer than many other asset classes

Stan

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