Posted At : September 14, 2009 11:27 AM
The risk is rising for muni-bond investors, as states, counties, and cities are having to make deep cuts, in both jobs and programs. States cannot print money like the US can, so at some point they have to either raise taxes or cut spending to balance their budgets. Raising taxes just makes it less profitable for businesses to remain in your state. There is a very high correlation with high state taxes and unemployment. This will lead many municipalities into default. In 2007, there was $226 million in muni defaults. Last year 140 issuers defaulted on $7.6billion! You cannot just go by name and rating anymore, so be very careful and be sure to use an advisor that knows what they are doing.
Regards – Keith Springer
Radio host of Smart Money with Keith Springer