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Old 08-15-2012, 05:28 PM
junkyardrules junkyardrules is offline
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Default Tax free municipal bonds



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Does anyone on here have any experience with tax free municipal bonds for long term investing?

pros/cons?

Any states to avoid other than California?

Thanks for your input!
Old 08-15-2012, 07:46 PM
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Hick Industries Hick Industries is offline
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Quote:
Originally Posted by junkyardrules View Post
Does anyone on here have any experience with tax free municipal bonds for long term investing?

pros/cons?

Any states to avoid other than California?

Thanks for your input!
Avoid an state that voted for Obama and have Democrats in charge of the state legislature.
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Old 08-16-2012, 08:33 AM
Benjamen Benjamen is offline
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Quote:
Originally Posted by junkyardrules View Post
Does anyone on here have any experience with tax free municipal bonds for long term investing?

pros/cons?

Any states to avoid other than California?

Thanks for your input!
http://www.bloomberg.com/markets/rat...ment-bonds/us/

It looks like municiple bonds are not providing interest rates above 3%, which is lower than the current rate of inflation. This would give you a negative effective return on your investment.

When inflation is greater than interest rates, it pays to invest in commodities and real estate.
http://www.financialsense.com/contri...dity-will-flow
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Old 08-16-2012, 08:38 AM
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Municipal bonds are based upon the faith and credit of localities or states....not sure that inspires confidence to invest.
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Old 08-16-2012, 01:26 PM
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Quote:
Originally Posted by Benjamen View Post
It looks like municiple bonds are not providing interest rates above 3%, which is lower than the current rate of inflation.
Close
but
No cigar!!!
Quote:
Over the last 12 months, the all
items index increased 1.4 percent before seasonal adjustment.
http://www.bls.gov/news.release/cpi.nr0.htm
Old 08-16-2012, 01:35 PM
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Muni bond mutual fund??
http://money.usnews.com/funds/mutual...municipal-bond

Related article for your investment decision===>
Muni Bonds Not as Safe as Thought
Old 08-16-2012, 01:44 PM
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Unfortunatly, the official CPI number has been heavily "modified" of the past 30 or so years.
http://online.wsj.com/article/SB1000...050317610.html

Perhaps use the Everyday Price Index (EPI):
https://www.aier.org/article/7608-ep...elerates-march

Or use Shadow Stats inflation:
http://www.shadowstats.com/alternate...flation-charts

Thread on this board talking about the value of the dollar:
http://www.survivalistboards.com/sho...d.php?t=250708
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Old 08-16-2012, 02:16 PM
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Or perhaps the BPP?

or, Trimmed Mean PCE Inflation Rate.......
Old 08-16-2012, 02:27 PM
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My boss invests in a municipal bond muni, and he is getting about a 7% ROI.

However, i've also been reading that municipalities are understaing their debt and liabilities, so YMMV.

Personally, i've come to realize that the investment strategies of the last 20 years are rapidly going down the tube. What the best investment for the future will be remains to be seen.

If I had a lot of money right now, instead of having to cut back and trying to survive, i'd buy up as much residential and commercial real estate that I can get my hands on. It would cost time and money to maintain and pay taxes and insurance, but my bet is that inflation will go up, so those properties would be paid off using future inflated dollars.
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Old 08-16-2012, 06:41 PM
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Quote:
Originally Posted by Benjamen View Post
http://www.bloomberg.com/markets/rat...ment-bonds/us/

It looks like municiple bonds are not providing interest rates above 3%, which is lower than the current rate of inflation. This would give you a negative effective return on your investment.

When inflation is greater than interest rates, it pays to invest in commodities and real estate.
http://www.financialsense.com/contri...dity-will-flow
True although I've found several bonds that are paying 3-3.5%. Adjusting for my tax bracket I'd be getting a little over 4.5% which keeps me in front of inflation.

As to investing in municipalities, I'm looking at states in the mountain west with the bonds backed by property taxes.
Old 08-16-2012, 06:46 PM
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Municipal bonds are based upon the faith and credit of localities or states....not sure that inspires confidence to invest.
Seems a little generalized. Many states, counties, and cities have excellent credit history.
Old 08-16-2012, 06:58 PM
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Quote:
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Muni bond mutual fund??
http://money.usnews.com/funds/mutual...municipal-bond

Related article for your investment decision===>
Muni Bonds Not as Safe as Thought
Good articles, thanks. The NY times article was interesting. General obligation bonds issued by municipalities with good credit ratings are what I'm looking at. Certainly a development bond (one example of many poorly backed bonds) issued by a non-rated locale is a bad idea.

I think the article highlights the need to research the bond before jumping in.

Last edited by junkyardrules; 08-16-2012 at 07:05 PM.. Reason: unfinished sentence
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Old 08-16-2012, 07:22 PM
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I have several revenue backed 30 - 35 year muni bonds that I have had for 8 - 10 years that pay 5%. I roll over the interest payments into a muni mutual.

Worked for me.
Old 08-16-2012, 09:11 PM
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Vangard Admirals Fund, tax free munis, Have been in it for years.
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Old 08-17-2012, 02:51 AM
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Lots of municipalities are having problems.

http://dollarcollapse.com/welcome-to...blic-services/
Old 08-17-2012, 04:48 AM
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Madoff was paying a good rate of return until he went to jail.

I wouldnt touch the muni market with Bobsmiths dosh.
Old 08-17-2012, 06:57 AM
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The other problem to consider is the negligence the bond rating agencies have been scandalized with over the past few years that is a major contibutor to the current financial upset.

You would also need to ask yourself how accurate or trustworthy the rating of the municipality really is?

From my standpoint we are in the early stages of municipal bankruptcies so I would be hesitant to take a chance with them. It may be prudent to allow a reasonable time to see where these dominoes are going to fall before considering them.

Of course you could invest a lot of your own time to investigate their debt load to determine risk assuming their financial reports are accurate.
Old 08-17-2012, 07:39 AM
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1) Muni bonds should be tax-free if you legally reside in the same state.
2) Muni bonds, like all other bonds, are rated for creditworthiness. Many towns and cities are in dire straits because they abused non-revenue financing or are experiencing decline. These communities are typically lower-rated and, while offering higher interest rates, are probably going to default on their debt at some point.
3) The main forces driving ROI isn't the interest rate so much as it is repricing due to either new ratings, new news items, or the effects of the greater fixed income market.
4) There are also different types of bonds and notes in this area. Some but not all are secured by incoming revenue (effectively an advance against future taxes).
Old 08-18-2012, 11:07 AM
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Quote:
Originally Posted by Aboutwhat80 View Post
1) Muni bonds should be tax-free if you legally reside in the same state.
2) Muni bonds, like all other bonds, are rated for creditworthiness. Many towns and cities are in dire straits because they abused non-revenue financing or are experiencing decline. These communities are typically lower-rated and, while offering higher interest rates, are probably going to default on their debt at some point.
3) The main forces driving ROI isn't the interest rate so much as it is repricing due to either new ratings, new news items, or the effects of the greater fixed income market.
4) There are also different types of bonds and notes in this area. Some but not all are secured by incoming revenue (effectively an advance against future taxes).
1. I assume you are referring to state income taxes? I believe all muni bonds, regardless of the state are federal income tax free.

2. Great point. I think this is why due diligence is so important. Could the rating agencies still manipulate the ratings? sure, but I believe this is less likely today than in years past.

3. Good point

4. This is why I'm sticking to general obligation bonds backed by known sources of income, i.e. property taxes.

Yesterday I made the decision and purchased 8 bonds in various amounts from Texas, Nevada, and Massachusetts. Half of them are school district bonds. Sure there are risks but it beats leaving money in a savings account earning .25%.

Thanks for all the input
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Old 08-18-2012, 11:38 AM
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Quote:
Originally Posted by Benjamen View Post
http://www.bloomberg.com/markets/rat...ment-bonds/us/

It looks like municiple bonds are not providing interest rates above 3%, which is lower than the current rate of inflation. This would give you a negative effective return on your investment.
If you're TAKING those dividend payments to live on in retirement now....how much better is 3-4% vs. a 6% dividend in stocks or such you pay income taxes on?
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