Municipal Bond Forum

On ACA Financials Cheer Bondholders

Feb 28, 2007

You cheerfully tell us how great ACA insurance company is. I am 92 years old and I pay absolutely no attention to the fact that a bond is insured. Why? You say ACA has $6 billion in assets. What do the assets consist of? How many municipals have ACA insured? What is the total amount of insurance? How big are the individual responsibilities? In a financial crash, worst-case scenario, California would bankrupt ACA. I realize that there is some safety in spreading the risk, but a general financial collapse would create chaos in the insured municipal market, and only several separate individual municipals collapsing might create tremendous problems for insurance companies.

D.J.

Residency and interest

Feb 28, 2007

For health reasons, I move in the summer to one state where I have property, and in the fall, I move back to the other state. If you own bonds from one state with state taxes and move to another state that doesn’t have state taxes, what happens to the interest?

A.F., Arizona

On Big Brother Expands Reach(Cont’d):

Feb 28, 2007

Mr. Klotz answered one question about the “Big Brother Expands Reach” article in the Bond Investors’ Forum, but his response has raised another question for me. Here is the last paragraph from Mr. Klotz’s answer: “Incidentally, there is a method to this madness. Although the interest is not taxable, certain levels of tax-free income can reduce other benefits you receive, such as Social Security.” My question is: How can I determine if the amount of tax-free interest I earn is at a level that will reduce other benefits?

T.O., Maryland

Resident of one state, bonds from another

Feb 28, 2007

If I live in North Carolina but want to buy a tobacco bond in New Jersey, will my bond still be tax-free in North Carolina?

C., North Carolina

On Kentucky Court Says State Can’t Tax Interest on Out-of-State Bonds

Jan 24, 2007

What is the latest on the Kentucky case? I now live in Wyoming, a state with no income tax. If I understand correctly, if the Kentucky case is won, I, as an older retired person, could relocate to Minnesota to be closer to the Mayo clinic and would not have to purchase Minnesota bonds. I could keep what I have now and obtain a higher yield than on Minnesota municipal bonds, or maybe even relocate to Vermont, a state that just does not have municipal bonds. When do you think this case will be settled?

S.M., Wyoming

On Hidden Gems in the Muni Market (Cont’d):

Jan 24, 2007

I evaluate bonds based on yield to maturity. But on rare occasions, I’m faced with a conundrum: If a bond has an early call (2010) but the agency offers 102 or 101 to make the prospect of the lower yield to call less threatening, I ask myself, “Why would they pay more to retire the issue if, by waiting a year or two, they can retire it at a lower cost?” My answer is, it doesn’t make sense to pay premiums to retire bonds. Am I wrong?

S.O., California

On Big Brother Expands Reach

Jan 24, 2007

Regarding your article on financial institutions now being required to report bondholders’ tax-exempt interest to the IRS: What’s the reasoning behind this move? If the interest isn’t taxable, this doesn’t make sense to me. Can we withhold this information on our tax forms, since providing it appears to serve no purpose?

A., Massachusetts

On GM Steals Spotlight at Auto Show

Jan 24, 2007

The problem with GM and Ford is not with the cars, but with the quality of service after the purchase. They are too focused on making a profit for the shareholders. They should put the customer first. GM can’t even sell a Toyota as a Chevy Prizm because everyone can still remember the bad service of the 1970s.

You are really going out on a limb! I called on these buffoons for years and they never got the message. The most mismanaged company I ever called on in my 30-plus years in industrial chemical sales. Now I’m retired and they’re still trying to get their act together. When I spoke to GM CEO Rick Wagoner back in the 80’s, all they wanted was the supplier to cut their prices to make up for their inept ability to run a company. They will go the way of the horse and buggy!

M.N., Hawaii G.C., New Hampshire

Tobacco bonds fueling NAV rise

Nov 30, 2006

I own two high-yield, tax-exempt muni funds with Oppenheimer (no load) and Vanguard. I have these for yield, but have noticed that the Oppenheimer fund chart shows a steady growth in NAV while Vanguard fund is flat (which is what I would expect). Why would such a fund have a growth curve in NAV?

F.B., North Carolina

Would a flat tax affect munis?

Nov 30, 2006

Recently one of your brokers recommended a muni-bond that matures in 2037. I wondered what would happen to its core value and the relative value of the interest it paid if, by some outside chance, there were meaningful tax reform (like a flat tax) during that period. I was told that the idea of such a thing happening was laughable. It may be far fetched, but impossible? I don’t think so.

R.E., Michigan

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On ACA Financials Cheer Bondholders

Residency and interest

On Big Brother Expands Reach(Cont’d):

Resident of one state, bonds from another

On Kentucky Court Says State Can’t Tax Interest on Out-of-State Bonds

On Hidden Gems in the Muni Market (Cont’d):

On Big Brother Expands Reach

On GM Steals Spotlight at Auto Show

Tobacco bonds fueling NAV rise

Would a flat tax affect munis?

Start here.