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Old 04-03-2013, 02:21 AM   #21
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I bought CA munis about 8 years ago. I remember my Edward Jones advisor telling me then that having CDs only was too conservative. So I bought some individual munis which will mature in 10 years +. Their interest is about 4-5 % per year.
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Are these individual munis?

I guess I'll 'answer' the question with another question: If you are looking to sell now, what went into your decision to buy earlier?



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Old 04-03-2013, 09:56 AM   #22
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There are more Stocktons out there.....in California and in a few other states.
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Old 04-03-2013, 07:05 PM   #23
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There are more Stocktons out there.....in California and in a few other states.
Here's one list: http://www.governing.com/gov-data/mu...-defaults.html
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Old 04-03-2013, 07:42 PM   #24
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I bought CA munis about 8 years ago. I remember my Edward Jones advisor telling me then that having CDs only was too conservative. So I bought some individual munis which will mature in 10 years +. Their interest is about 4-5 % per year.
If these make up enough of your portfolio to be concerned about (diversification), it seems like a rather risky position.

What led you to individual issues rather than a bond fund with managers that work within a specific range of credit ratings, and can provide a great deal of diversification?

I don't know too much about evaluating bond safety, but googling these terms for the past year brought up a lot of concerned sounding headlines:

california bonds safety - Google Search << not sure how to specify 'past year', but you can select that

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Old 04-04-2013, 11:37 AM   #25
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I saw the list of bankrupt cities.

I also saw a much, much longer list (forgot where) of cities that are headed to bankrupcy in the near term.

My understanding is that the new financial reporting requirements (within two years) will change how the accounts are presented. The revised statements will include the value of underfunded obligations for pension funds, retiree medical plans, etc.

If this is so, there may well be a number whose audited accounts indicate liabilities far in excess of assets AND a basic inability to cover the shortfall even over an extended period while still maintaining public services. Should be interesting.
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Old 04-04-2013, 11:44 AM   #26
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The fact that there are lists of cities in trouble means that this is a well documented problem that is already priced in the market.
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Old 04-04-2013, 12:33 PM   #27
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The fact that there are lists of cities in trouble means that this is a well documented problem that is already priced in the market.
Good point. Getting back to the OP - What is the current NAV of these issues, compared to your purchase NAV 8 years ago? That would tell us something about that the market says about the risk in these issues.


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Old 04-05-2013, 07:46 PM   #28
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As long as the middle class income keeps going down, there will be less money from taxes to pay gov. employees. Plus, more people are going onto disability, which I think they don't have to pay taxes.

So...I really think this is the beginning of a hurtful event.
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Old 04-05-2013, 08:05 PM   #29
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As long as the middle class income keeps going down, there will be less money from taxes to pay gov. employees. Plus, more people are going onto disability, which I think they don't have to pay taxes.

So...I really think this is the beginning of a hurtful event.
The problem isn't a lack of revenue. Government revenues have been on an upward trend for at least 30 years, and they are pretty much back on track despite the recession. The problem is not on the revenue side . . . .

Total State Revenues (Constant 2005 dollars)






Total Govt Revenues (Federal, State, Local) in Constant 2005 dollars




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Old 04-05-2013, 10:05 PM   #30
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I agree the revenue is increasing, but not as much as costs. Take a look at Ca. in this map. You just can't spend more than you take in.

Comparison US State and Local Government Spending - GSP - Population 1992-2017 - Charts
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Old 04-05-2013, 10:11 PM   #31
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I retired from a Calif Muni - the Sacramento Municipal Utility District (SMUD). The electicity supplier for (essentially) Sacramento County. It is an independent District. Their Bond Indenture contains a a requirement that rates be set at a level sufficient to provide (IIRC) NET revenues (after expenses) of 1.2x Debt Service requirements.

The point is, you have to know your muni. Like any company.

When the State of California General Obligation Bonds were downrated to a smidgen above Junk status some years ago, SMUD made a huge effort to educate the investing community that SMUD is different from the State.
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Old 04-05-2013, 11:43 PM   #32
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Nice return!
I'm from Penna.(our capital almost went bankrupt!). After I hear Obama on the 10th, I will want to look for some muni bonds within the state as long as he doesn't change the tax status on muni bonds.

Western Pa. has a lot of building going on. When the pipeline passes, there will be more.
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Old 04-06-2013, 10:06 AM   #33
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What is going to help CA cities is the housing recovery (boom) that has started. Higher property taxes means more money for cities.
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Old 04-06-2013, 10:48 AM   #34
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What is going to help CA cities is the housing recovery (boom) that has started. Higher property taxes means more money for cities.
Does it? Different municipalities are different, but in every one that I've paid taxes in my property value was used to determine my slice of the pie, not the overall size of the pie.

Example: they levy a tax of $1,000,000 in a community of 1000 homes which are all equal in value. Every home is charged $1,000. If home values all double, or half, every home is still charged $1,000.

IMO, this (using values to allocate the expense, not to determine the expense) is the better way to do it. Municipal expenses really don't change much with the whims of the housing market. A boom or bust doesn't affect the cost of maintaining a police or fire department, or the cost of re-paying a bond. But it makes some sense to split expenses based on the value of the property - I'm surprised I have not heard much talk about making this tax rate 'progressive', as every case I'm aware of this is a flat rate tax.

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