Municipal Bond Forum
On “GM Proposes Multi-pronged Turnaround Strategy”
Q
I read your analyses regularly and thank you for them, but you have stumped me with the GM piece. Is FMS opening a corporate (taxable) bond division? Or has the muni market been so flat for so long that y’all are pushing into equities? Or is this a setup for munis from localities that GM is abandoning? It might help to connect the dots for your readers by explaining exactly how or whether GM’s recent share price and corporate bond prices make a difference to muni investors and to which investors, specifically.
A
James A. Klotz responds:
Tax-free municipal bonds are, were and always will be our specialty. However, we do provide taxable fixed-income securities to our clients for their IRAs, pensions and other qualified plans. We have always maintained a taxable trading desk for corporate bonds, CDs and Government Agency securities.
General Motors has received so much bad press recently that it is easy to forget its corporate debt carried an “investment grade” rating less than a year ago. Until that time, one would have been hard pressed to find an IRA or pension account anywhere in this country that did not have some exposure to General Motors securities. Many of these accounts were self-directed by individual investors. Naturally, as news of GM’s woes began to emerge, we received numerous inquiries regarding these securities.
Apart from its corporate debt, General Motors is also the obligor for a significant number of municipal bond issues. These Industrial Development Revenue bonds were issued primarily for pollution control.
Our intention is to provide information and assistance to investors who are either holding or selling GM and GMAC bonds, or viewing their depressed prices as a buying opportunity.
Start here.
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The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.
