Sunday, April 14, 2013

SNIFFING AROUND

Sniff were it smells the worst.

And the odor in closed end muni-bonds funds is growing, especially for closed end funds that employ some leverage in their efforts to ramp up yield.

Bad smells usually indicate some decay. Fear about things like too much leverage, government interference and interest rate changes are just a few scaring muni bond investors away from these funds.

President Obama has mentioned more than once he'd like to cap the tax-free benefits of municipal bonds. It shouldn't surprise; that's what class-warfare generals do. And we're not saying it won't happen. 

But many of these states are essentially bankrupt. With the exception of most ideas from bureaucrats and policoes, nothing occurs in a complete vacuum, something these folks never seem to understand. 

Fewer buyers could mean less revenue and higher interest rates for state and municipal sellers. Few things are foreseen. In the meantime, here's an article to help you decide whether you want to start sniffing.



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