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Ameritrade pimping CA Muni Bonds offering
Old 04-09-2012, 05:55 PM   #1
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Ameritrade pimping CA Muni Bonds offering

Is there something remarkable about this?

I have a few funds with them so I'm not sure why they sent this to me, other than my being a CA resident.
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Old 04-10-2012, 11:56 AM   #2
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Sir, I must report you to the moderators. To link Ameritrade with pimping is a serious slander on the honesty and integrity of pimps everywhere.

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Old 04-10-2012, 12:14 PM   #3
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Sir, I must report you to the moderators. To link Ameritrade with pimping is a serious slander on the honesty and integrity of pimps everywhere.

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Old 04-10-2012, 12:39 PM   #4
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OK but any other CA residents considering these?

Any advantage in buying these bond directly instead of some VG fund which has CA bonds?
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Old 04-10-2012, 12:54 PM   #5
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Personally, I go with the ultimate in safety with my fixed income. The Federal goverment has their own problems but they ultimately have the ability to print the money to pay me. What it does to inflation and purchasing power is anyone's guess. I think California has significant issues still to be resolved to remove my "credit risk" concerns.

That being said. I would expect anything sold by Ameritrade is loaded with several orders of magnitude in fees and transaction costs compared to Vanguard. Much of these costs may be hidden in the quality of the bond holdings and possible conflicts of interest in which bonds were purchased at what price.
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Old 04-10-2012, 01:00 PM   #6
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I believe it's actual bonds, not a fund with bonds. Minimum purchase of $5k on specific dates.

True, I think these are only rated 1A IIRC.
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Old 04-10-2012, 01:11 PM   #7
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+1

California's government finances are a train wreck.

Putting all of their decisions to direct vote has not led to wise decisions, IMO.

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Personally, I go with the ultimate in safety with my fixed income. The Federal goverment has their own problems but they ultimately have the ability to print the money to pay me. What it does to inflation and purchasing power is anyone's guess. I think California has significant issues still to be resolved to remove my "credit risk" concerns.
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Old 04-10-2012, 01:51 PM   #8
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I believe it's actual bonds, not a fund with bonds. Minimum purchase of $5k on specific dates.

True, I think these are only rated 1A IIRC.
Having once been abused (repeatedly) by Merrill Lynch, I can assure you that if they are making these available to small investors it is only because the big investors know better than to buy them. I wouldn't trust the ratings they have. They can change very suddenly and almost always not for the better.
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Old 04-10-2012, 02:01 PM   #9
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I received the TDA solicitation as well.

I will pass on it. California has massive problems which will very likely get only worse and worse.

Add to that low integrity, corruption, arrogance and poor morals in the state government, militant unions and largess to undocumented immigrants of all persuasion, and you have the makings of a financial disaster in the very near future.

I do not feel that the state is a good place for retirees, and am making plans to leave within the next couple years.
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Old 04-10-2012, 03:02 PM   #10
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Having once been abused (repeatedly) by Merrill Lynch, I can assure you that if they are making these available to small investors it is only because the big investors know better than to buy them. I wouldn't trust the ratings they have. They can change very suddenly and almost always not for the better.
The bond world isn't great for retail investors, but it is not that bad and it is steadily improving. You have to do research and protect yourself if you want to buy individual bonds, but it isn't a shell game and the theivery goes on is petty, at least at the discount brokers.

I have historically had zero interest in munis because I am not interested in taking credit risk for a small reward. The mentally challenged Meredith Whitney almost got yields to the pont where I would be interested, but not quite. You may have a different set of risk-reward requirements or may view munis differently tahn I do, so YMMV.
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Old 04-10-2012, 07:04 PM   #11
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Since I will soon be a CA resident, I am looking into investing in a CA-focused muni fund to minimize what will be a rather high state income tax bill but so far I remain unenthusiastic about such funds for all the reasons outlined above. I might stick with a national muni fund.
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Old 04-10-2012, 07:19 PM   #12
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Just to re-state the obvious...

Since California passed Proposition 13, Municipalities cannot unilaterally raise local property taxes to meet ongoing obligations. The story of public pensions has many a municipality on the edge of fiscal solvency. And to make matters worse, California has passed laws dis-allowing discharge of public pensions in bankruptcy, or even reduction of (to be earned) future pension benefits.

Guess who gets the short end, when this slow-motion train wreck happens.

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The mentally challenged Meredith Whitney almost got yields to the pont where I would be interested, but not quite.
Say what you want about Merideth Whitney. My personal opinion is that she (mostly) spoke truth to power and was villified for it.
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Old 05-01-2012, 11:47 AM   #13
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Since I will soon be a CA resident, I am looking into investing in a CA-focused muni fund to minimize what will be a rather high state income tax bill but so far I remain unenthusiastic about such funds for all the reasons outlined above. I might stick with a national muni fund.
I am a CA resident and have been following the 'Trainwreck' and 'huge muni defaults coming' banter for sometime.

A year and 2 weeks ago (4-15-2011), I invested in VCADX @ $10.72 and reinvested the dividends throughout the year. I closely tracked the fund price and each of my dividends. As of today, the overall return is 12.05% (dividends + appreciation). Add to that the tax benefits and I am pretty happy with the results

I realize there is risk, but I feel I am properly diversified and I wouldn't have seen the same return from putting that money in the overall market or even a broader bond fund.

---Mark
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Old 05-02-2012, 10:55 PM   #14
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California has passed laws dis-allowing discharge of public pensions in bankruptcy, or even reduction of (to be earned) future pension benefits.
Don't you just love to be one of those receiving CA pension payments.
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Old 05-03-2012, 08:22 AM   #15
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Don't you just love to be one of those receiving CA pension payments.
Most states have this sort of thing built into their legal machinery put in at the behest of the government worker unions. It's amazing how quickly they can be changed if the do-do really hits the spinning blades. I think Rhode Island had a similar law but it was amazingly modified when the entire state was faced with collapse. California may or may not avoid a similar debacle. I tend to think they won't but I also think the bond holders will ultimately be protected at the expense of the public employee pensions should the burden become unsustainable.

My reasoning is that if California defaults in any way on their bonds it will be a cold day in hell before they can re-enter the debt market. Maintaining access to the bond market is the only way they can hope to maintain whatever reduced benefits they may pay. That's true for any state, county or municipal government faced with insolvency.

I tend to think California is in our parallel universe of US states similar to the European PIIGS. It's just that nobody has come up with a similar catchy name for the US states facing the biggest problems. I really hope California can get its act together but I'm sure glad I don't have a California pension coming and that I am not part of their tax base.
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