John Carney and I don’t agree on many issues…I was kicked out of Ayn Rand’s Objectivist Summer Camp long ago for lighting fires and sneaking over to girls’ side in a purloined canoe. But politics aside, John has posted an incredibly well-researched and helpful series on muni bonds that is a must-read for investors and pros alike.
His latest in the series at CNBC NetNet, Part 6, concerns contagion, the biggest risk factor for muni bond investors right now…
While muni bond optimists come in a variety of flavors, they all miss one important factor: the risk of municipal debt contagion.
Reading through the various publications put out by banks and bond fund managers, you frequently come across two strategies.
Wells Fargo, for example, advises clients to have a diversified portfolio so that isolated defaults won’t have a large impact on the overall returns. Pimco, on the other hand, tells clients that the key to success in muni investing is picking the highest quality muni credits.
Both of these strategies will fail, however, if muni debt defaults go viral.
John has done something really special with his work on this topic. He’s talked to bulls and bears, sourced info from both issuers and analysts and has spent the time and digital ink to give readers the total picture. This is a great resource for those of us counseling clients and attempting to navigate these waters for ourselves.
Bravo, great work.
- Part 1: The Bulls and Bears Agree: Muni Default Risk Is Greater Than Ever
- Part 2: There’s No Such Thing as a Muni Expert
- Part 3: The Uses and Misuses of Knowledge and Math in Muni Bond Markets
- Part 4: Fund Managers Are Playing the Wrong Game With Munis
- Part 5: The Myth of Markets Shunning Muni Defaulters