Bogleheads

[am]

Not sure why munis have been doing so poorly. Today for example taxable bonds increased in price but munis are down again.

[gassert]

When there is uncertainlty in the market and invesotrs as a whole are seeking safety, then they move to governament bonds becausd they are considered a "risk free" investment. Munis are obviously safe, but still considered riskier. For the main street investor munis and govt bonds are equally as safe, so you may not act the same way as the market, but from a broad view this is the reason.

[mvm]

if you believe that munis are being unfairly valued because of fear, then this is a time to buy.

many experts think this is so.

[jh]

...

[am]

Thanks to all who replied.

[bobcat2]

Here is a link to the threads on Auction-Rate Securities resets.
Link:http://www.diehards.org/forum/....00dff954a9

Bob K
_________________
The real difficulty in changing any enterprise lies not in developing new ideas, but in escaping from the old ones. - JM Keynes
Good questions outrank easy answers. - PA Samuelson

[DaveS]

I agree with the folks who say that this is a buying opportunity. Basically muni bonds in some way finance every high school, sewage system, etc. in the country. There is no way the system is going to be alowed to self destruct. The problem, which is temporary, is that some of the folks who insure munis from smaller issuers, such as a high school in a small county somewhere, also insured subprime mortgage bond issuers. After the system sorts out the impact of those idiodic investments, things should return to normal. The default rate in munis is so low that one hesitates in using the word risk to describe them. Dave

[malloc]

The bond insurers are stressed because of exposure to CDO's. If the insurers are downgraded, the muni's which they insure may well have a problem. To quote John Markman at MSNBC today:

[stratton]

[Valuethinker]

[Valuethinker]

[larryswedroe]

Value thinker

BTW-even in Orange county situation the investors were EVENTUALLY paid back. A municipality simply cannot afford to have its credit raising ability wiped out--so they will go to almost any length to keep it.

That is why the default rates on GO bonds of high quality is so low, almost zero. A single A muni is 10x less likely to default than single A corporate for example.

The key is to make sure the UNDERLYING rating is strong, as I have always warned investors--never make the mistake of treating the unlikely as impossible.

[baw703916]

[Valuethinker]

[astroturf]

[baw703916]