Munis getting slaughtered!

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drk
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Re: Munis getting slaughtered!

Post by drk » Thu Mar 26, 2020 10:58 pm

reisender wrote:
Thu Mar 26, 2020 5:48 am
I used to think bogleheads was a conservative group but this thread seems a bit hyperbolic.

[...]

I don't equate a less than 10% drop from the peak to being slaughtered.
MUB dropped 15% from peak to trough. That counts as getting slaughtered.

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mrspock
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Re: Munis getting slaughtered!

Post by mrspock » Fri Mar 27, 2020 3:04 am

drk wrote:
Thu Mar 26, 2020 10:58 pm
reisender wrote:
Thu Mar 26, 2020 5:48 am
I used to think bogleheads was a conservative group but this thread seems a bit hyperbolic.

[...]

I don't equate a less than 10% drop from the peak to being slaughtered.
MUB dropped 15% from peak to trough. That counts as getting slaughtered.
Point of reference... VCAIX - CA Muni Fund, was down the least through this crisis vs national munis . Not bad for a “bankrupt” over taxed state. 8-)

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Re: Munis getting slaughtered!

Post by abuss368 » Sat Mar 28, 2020 6:56 pm

sf_tech_saver wrote:
Tue Mar 24, 2020 11:35 am
watchnerd wrote:
Mon Mar 23, 2020 11:29 pm
pascalwager wrote:
Mon Mar 23, 2020 11:18 pm
sf_tech_saver wrote:
Mon Mar 23, 2020 11:37 am
VCLAX and VCADX are nearly 100% of my bond holdings. Its been a first-hand education to watch, but the bond ETFs have been hit much harder. I also had VTEB and thankfully had to sell that portion to pay my taxes last month.

I've certainly been reminded that munis are not great for crisis AA rebalancing--but I largely bought them for their tax-free cash flows which I can DCA back into the market every month. I'm more than willing to hold them forever and focus on these cash flows.

If even super long term high quality and broadly indexed muni-bond holders struggle we will have much bigger problems as a country.
As I recall, Bill Bernstein recommended no more than a 1/3 municipals allocation in his books and no more than a 50% allocation (of the 1/3) in a state fund. The remainder: 1/3 CDs, 1/3 Treasurys.

But check for yourself if you're interested.
And I think Ferri was 25%?

The point being nobody advises putting a lot into munis.
Totally fair points. I'm hoping they remain a sound bet cashflow wise even if the volatility/liquidity of them are not ideal right now. When investing a windfall after-tax in California there are only so many options. California is a huge and economically diverse state (similar scale to the French economy). They've been a lot more stable than the VTI portion of my after-tax portfolio :)
Tax Exempt bonds work well and the investor should understand they (much like any other bond) are more volatile than a Treasury.

I have family who have invested in Vanguard Intermediate Tax Exempt forever and are fine and satisfied with the investment. They have been through the volatility over periods of time. Hard to beat that fund.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Munis getting slaughtered!

Post by Call_Me_Op » Sat Mar 28, 2020 7:03 pm

Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.

I am OK taking a lot of risk with stocks because there is tremendous return potential.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Munis getting slaughtered!

Post by gmaynardkrebs » Sat Mar 28, 2020 11:03 pm

Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.
It was a liquidity problem, not a "safety" problem. Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?

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Re: Munis getting slaughtered!

Post by mrspock » Sat Mar 28, 2020 11:12 pm

gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.
It was a liquidity problem, not a "safety" problem. Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
+1, you read my mind. If anything that's the entire point of holding such assets, I want my interests to be aligned with that of the federal government -- I want them to be forced to intervene and make me whole if things get ugly.

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Re: Munis getting slaughtered!

Post by watchnerd » Sat Mar 28, 2020 11:45 pm

mrspock wrote:
Sat Mar 28, 2020 11:12 pm
I want them to be forced to intervene and make me whole if things get ugly.
Wow.
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Re: Munis getting slaughtered!

Post by justsomeguy2018 » Sat Mar 28, 2020 11:58 pm

Until I move to a significantly higher tax bracket I am done with munis. I would rather keep a smaller bond allocation in taxable (and pay a bit more in taxes) and have more money in stocks instead of munis. Maybe I am overthinking it. Just seems like any systemic risk to equities is going to spill over into munis.

cks
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Re: Munis getting slaughtered!

Post by cks » Sun Mar 29, 2020 7:07 am

watchnerd wrote:
Sat Mar 28, 2020 11:45 pm
mrspock wrote:
Sat Mar 28, 2020 11:12 pm
I want them to be forced to intervene and make me whole if things get ugly.
Wow.
+1. Can someone cite an example of the courts and/or politicians stepping in to make bond holders whole ahead of pensioners and government employees when these bonds sour? I believe the Puerto Rico constitutionally-protected bond holders stand to recover 13 cents on the dollar which makes Detroit bond holders' 41 cents look great in comparison.

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Re: Munis getting slaughtered!

Post by Call_Me_Op » Sun Mar 29, 2020 7:34 am

gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.
It was a liquidity problem, not a "safety" problem. Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
There is a fundamental difference between treasuries and other securities, which is the borrower owns the printing press. No comparison, in my opinion. The reasons that treasuries had a liquidity problem was that people were hoarding cash - an issue that will always be addressed by the Fed/Treasury. In the case of muni bonds, people couldn't dump them fast enough and a fed bailout was uncertain. The risk is simply not comparable.
Last edited by Call_Me_Op on Sun Mar 29, 2020 7:39 am, edited 1 time in total.
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Re: Munis getting slaughtered!

Post by Call_Me_Op » Sun Mar 29, 2020 7:36 am

watchnerd wrote:
Sat Mar 28, 2020 11:45 pm
mrspock wrote:
Sat Mar 28, 2020 11:12 pm
I want them to be forced to intervene and make me whole if things get ugly.
Wow.
I agree with Spock. What he is saying is that they are required to intervene by law.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Munis getting slaughtered!

Post by Call_Me_Op » Sun Mar 29, 2020 7:38 am

justsomeguy2018 wrote:
Sat Mar 28, 2020 11:58 pm
Until I move to a significantly higher tax bracket I am done with munis. I would rather keep a smaller bond allocation in taxable (and pay a bit more in taxes) and have more money in stocks instead of munis. Maybe I am overthinking it. Just seems like any systemic risk to equities is going to spill over into munis.
I agree with you. Take your risk on the equity side because at least that risk comes with the possibility of enormous gains.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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birdog
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Re: Munis getting slaughtered!

Post by birdog » Sun Mar 29, 2020 8:29 am

Call_Me_Op wrote:
Sun Mar 29, 2020 7:38 am
justsomeguy2018 wrote:
Sat Mar 28, 2020 11:58 pm
Until I move to a significantly higher tax bracket I am done with munis. I would rather keep a smaller bond allocation in taxable (and pay a bit more in taxes) and have more money in stocks instead of munis. Maybe I am overthinking it. Just seems like any systemic risk to equities is going to spill over into munis.
I agree with you. Take your risk on the equity side because at least that risk comes with the possibility of enormous gains.
This has caused me to better limit my muni exposure but not forsake it altogether.

"So, to get the true benefit of the municipal asset class, you need to be a long-term owner. It’s all about generating tax-free income, and the only way you get to generate that tax-free income over time is by holding it over time and looking through any bits of price volatility. So you’ve got a really unique opportunity now to lock in some pretty high yields tax-free income for the long run."
https://investornews.vanguard/should-yo ... ond-funds/

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Re: Munis getting slaughtered!

Post by gmaynardkrebs » Sun Mar 29, 2020 8:31 am

Call_Me_Op wrote:
Sun Mar 29, 2020 7:34 am
gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.
It was a liquidity problem, not a "safety" problem. Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
There is a fundamental difference between treasuries and other securities, which is the borrower owns the printing press. No comparison, in my opinion. The reasons that treasuries had a liquidity problem was that people were hoarding cash - an issue that will always be addressed by the Fed/Treasury. In the case of muni bonds, people couldn't dump them fast enough and a fed bailout was uncertain. The risk is simply not comparable.
"Owning the printing press" simply means that the government can avoid default by paying you back in dollars that now worth less -- quarters, dimes, and in extreme cases, pennies. It's not a default, but it might as well be. Note also, that even in a muni default, the recovery rate on bonds is a very high percentage. In that regard, they are far safer than corporate bonds, to say nothing of equities

I truly do not follow the logic that the potentially large rewards of stocks makes them safer than munis. Obviously, the potentially large reward exists only because the risk of loss with equities is far greater. One could argue that you get paid to take the risk, but that's another discussion, along with whether munis have been pushed on Mom & Pop investors as safer, or at least less volatile, than they really are, which I suspect is the case to a considerable degree.

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watchnerd
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Re: Munis getting slaughtered!

Post by watchnerd » Sun Mar 29, 2020 9:02 am

Call_Me_Op wrote:
Sun Mar 29, 2020 7:36 am
watchnerd wrote:
Sat Mar 28, 2020 11:45 pm
mrspock wrote:
Sat Mar 28, 2020 11:12 pm
I want them to be forced to intervene and make me whole if things get ugly.
Wow.
I agree with Spock. What he is saying is that they are required to intervene by law.
By law?

How so?

The Feds didn't bail out the Stockton muni bankruptcy.
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Re: Munis getting slaughtered!

Post by Call_Me_Op » Sun Mar 29, 2020 10:12 am

watchnerd wrote:
Sun Mar 29, 2020 9:02 am
Call_Me_Op wrote:
Sun Mar 29, 2020 7:36 am
watchnerd wrote:
Sat Mar 28, 2020 11:45 pm
mrspock wrote:
Sat Mar 28, 2020 11:12 pm
I want them to be forced to intervene and make me whole if things get ugly.
Wow.
I agree with Spock. What he is saying is that they are required to intervene by law.
By law?

How so?

The Feds didn't bail out the Stockton muni bankruptcy.
I am talking about treasuries. Principal and interest on treasuries is guaranteed by statute.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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watchnerd
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Re: Munis getting slaughtered!

Post by watchnerd » Sun Mar 29, 2020 10:40 am

Call_Me_Op wrote:
Sun Mar 29, 2020 10:12 am


I am talking about treasuries. Principal and interest on treasuries is guaranteed by statute.
Oh.

It being the muni thread, I thought it was a muni comment.

My bad.
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Re: Munis getting slaughtered!

Post by Call_Me_Op » Sun Mar 29, 2020 1:14 pm

watchnerd wrote:
Sun Mar 29, 2020 10:40 am
Call_Me_Op wrote:
Sun Mar 29, 2020 10:12 am


I am talking about treasuries. Principal and interest on treasuries is guaranteed by statute.
Oh.

It being the muni thread, I thought it was a muni comment.

My bad.
It is a muni thread, but we have been contrasting munis to treasuries.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Munis getting slaughtered!

Post by abuss368 » Sun Mar 29, 2020 1:43 pm

NYCPete wrote:
Thu Mar 19, 2020 2:12 pm
"Slaugthered?" Is that word really appropriate here? At yesterday's close, Vanguard Intermediate Term Tax Exempt was down less than 3% this year. The global stock market is down almost 30% this year.

If you need this money soon, shouldn't it be in cash?

Best,
Peter
This has been my thoughts with Muni bonds. I am aware they are a little riskier than Treasuries (as are any other type of bond - question is by how much). We had the Muni Bond "crisis" a decade ago that never showed up. I can live with a temporary decline of a few percent. I am not up at night over that. Stocks fell off a cliff.
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Re: Munis getting slaughtered!

Post by Latestarter » Tue Mar 31, 2020 5:59 pm

Let's be kind to those of us who are shell-shocked rather than tossing off self-satisfied variations on the theme of "Well, you should have known the risks." I count myself a reasonably well-informed Boglish investor, and when I checked the carnage for the first time just now - end-of-the-month tally - I confess I, too, was warbling, "Munis, you broke my heart." Yes, I know they're not Treasurys, but I thought they were nearly as safe as long as one stayed with intermediate, high-rated, nationally diversified bonds (e.g., VWITX). Sure, my emergency fund is in cash, but bonds are my primary stabilizer and it's painful to see them down 3-4% in a single month, which incidentally, is also true of the conservative taxable bond fund in my retirement account, DODIX.

*sigh* Only when the tide goes out, I guess...

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Re: Munis getting slaughtered!

Post by Random Poster » Tue Mar 31, 2020 7:08 pm

Latestarter wrote:
Tue Mar 31, 2020 5:59 pm
Let's be kind to those of us who are shell-shocked rather than tossing off self-satisfied variations on the theme of "Well, you should have known the risks." I count myself a reasonably well-informed Boglish investor, and when I checked the carnage for the first time just now - end-of-the-month tally - I confess I, too, was warbling, "Munis, you broke my heart." Yes, I know they're not Treasurys, but I thought they were nearly as safe as long as one stayed with intermediate, high-rated, nationally diversified bonds (e.g., VWITX). Sure, my emergency fund is in cash, but bonds are my primary stabilizer and it's painful to see them down 3-4% in a single month, which incidentally, is also true of the conservative taxable bond fund in my retirement account, DODIX.

*sigh* Only when the tide goes out, I guess...
Quite honestly, sometimes I wonder if those who say such a thing even knew about all of the risks themselves. I further wonder if some of them aren't even invested in said security for reasons having nothing to do with the presumed or apparent risk thereof.

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Re: Munis getting slaughtered!

Post by drk » Tue Mar 31, 2020 7:22 pm

Latestarter wrote:
Tue Mar 31, 2020 5:59 pm
Let's be kind to those of us who are shell-shocked rather than tossing off self-satisfied variations on the theme of "Well, you should have known the risks." I count myself a reasonably well-informed Boglish investor, and when I checked the carnage for the first time just now - end-of-the-month tally - I confess I, too, was warbling, "Munis, you broke my heart." Yes, I know they're not Treasurys, but I thought they were nearly as safe as long as one stayed with intermediate, high-rated, nationally diversified bonds (e.g., VWITX). Sure, my emergency fund is in cash, but bonds are my primary stabilizer and it's painful to see them down 3-4% in a single month, which incidentally, is also true of the conservative taxable bond fund in my retirement account, DODIX.

*sigh* Only when the tide goes out, I guess...
I hold healthy chunks of MUB and VWIUX, and I've been thinking about it this way: they're good funds for income in a taxable account, but poor funds for re-balancing.

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Re: Munis getting slaughtered!

Post by BlackcatCA » Wed Apr 01, 2020 6:04 pm

Seems muni funds are getting hit again, after some recovery the last few days. What happen today?

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Re: Munis getting slaughtered!

Post by gmaynardkrebs » Wed Apr 01, 2020 6:51 pm

BlackcatCA wrote:
Wed Apr 01, 2020 6:04 pm
Seems muni funds are getting hit again, after some recovery the last few days. What happen today?
Market is disappointed that Fed has not started buying munis of longer duration as required by CARE Act. They have until April 10, but some thought it would start sooner.

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Re: Munis getting slaughtered!

Post by Starfox » Wed Apr 01, 2020 6:55 pm

Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.

I am OK taking a lot of risk with stocks because there is tremendous return potential.
+1

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Re: Munis getting slaughtered!

Post by BV3273 » Wed Apr 01, 2020 7:53 pm

Starfox wrote:
Wed Apr 01, 2020 6:55 pm
Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.

I am OK taking a lot of risk with stocks because there is tremendous return potential.
+1
+2

1130Super
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Re: Munis getting slaughtered!

Post by 1130Super » Mon Apr 27, 2020 12:06 am

Any ideas on whichever states Munis are most at risk and should be avoided with lost tax revenue from Shutdowns?

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Re: Munis getting slaughtered!

Post by typical.investor » Mon Apr 27, 2020 12:28 am

BV3273 wrote:
Wed Apr 01, 2020 7:53 pm
Starfox wrote:
Wed Apr 01, 2020 6:55 pm
Call_Me_Op wrote:
Sat Mar 28, 2020 7:03 pm
Based upon the behavior of muni bonds during this crisis, I am not thinking of these as "safe" bonds. The fact that federal government intervention kept them from being truly slaughtered doesn't alter my view. It could have been really bad.

I am OK taking a lot of risk with stocks because there is tremendous return potential.
+1
+2
Risk free TIPS got slaughtered in ‘08 I believe.

I acknowledge that municipal bonds are riskier fromCOVID19, but don’t attribute movements in price solely to changes in risk.

Or else explain why a risk free asset like TIPS got slaughtered? It’s simply a function of liquidity demand.

Even long term treasuries got sucker punched this time around for a while. And they required intervention for the market to function as well.

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Re: Munis getting slaughtered!

Post by birdog » Mon Apr 27, 2020 3:16 am

drk wrote:
Tue Mar 31, 2020 7:22 pm

I hold healthy chunks of MUB and VWIUX, and I've been thinking about it this way: they're good funds for income in a taxable account, but poor funds for re-balancing.
I was thinking the same thing. Corporates obviously as well.

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Re: Munis getting slaughtered!

Post by aristotelian » Mon Apr 27, 2020 6:38 am

gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
Then why did Treasuries go up when stocks, muni bonds, and corporate bonds all went down (albeit to varying degrees)? The latter all had massive liquidity problems in part because investors were cashing out and flowing to Treasuries. If there was any liquidity issue it must have been on the supply side.

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Re: Munis getting slaughtered!

Post by Seasonal » Mon Apr 27, 2020 6:55 am

NY Long Term Tax Exempt is down 1.87% YTD. The national fund is down 1.7%. They seem to have un-slaughtered.

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Re: Munis getting slaughtered!

Post by gmaynardkrebs » Mon Apr 27, 2020 7:35 am

aristotelian wrote:
Mon Apr 27, 2020 6:38 am
gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
Then why did Treasuries go up when stocks, muni bonds, and corporate bonds all went down (albeit to varying degrees)? The latter all had massive liquidity problems in part because investors were cashing out and flowing to Treasuries. If there was any liquidity issue it must have been on the supply side.
Treasuries did go down with stocks, as institutions unloaded Treasuries to raise cash. However, it was just for a few days.

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Re: Munis getting slaughtered!

Post by aristotelian » Mon Apr 27, 2020 7:50 am

gmaynardkrebs wrote:
Mon Apr 27, 2020 7:35 am
aristotelian wrote:
Mon Apr 27, 2020 6:38 am
gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
Then why did Treasuries go up when stocks, muni bonds, and corporate bonds all went down (albeit to varying degrees)? The latter all had massive liquidity problems in part because investors were cashing out and flowing to Treasuries. If there was any liquidity issue it must have been on the supply side.
Treasuries did go down with stocks, as institutions unloaded Treasuries to raise cash. However, it was just for a few days.
I don't see anything remotely close to what was going on with muni bonds. At no point were they negative YTD.

https://imgur.com/a/UIGsi7z

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gmaynardkrebs
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Re: Munis getting slaughtered!

Post by gmaynardkrebs » Mon Apr 27, 2020 8:28 am

aristotelian wrote:
Mon Apr 27, 2020 7:50 am
gmaynardkrebs wrote:
Mon Apr 27, 2020 7:35 am
aristotelian wrote:
Mon Apr 27, 2020 6:38 am
gmaynardkrebs wrote:
Sat Mar 28, 2020 11:03 pm
Treasuries suffered from the same liquidity issues, and needed Fed intervention. Do you now think of Treasuries as unsafe?
Then why did Treasuries go up when stocks, muni bonds, and corporate bonds all went down (albeit to varying degrees)? The latter all had massive liquidity problems in part because investors were cashing out and flowing to Treasuries. If there was any liquidity issue it must have been on the supply side.
Treasuries did go down with stocks, as institutions unloaded Treasuries to raise cash. However, it was just for a few days.
I don't see anything remotely close to what was going on with muni bonds. At no point were they negative YTD.

https://imgur.com/a/UIGsi7z
Your post said "go down" not "go down YTD." Different question. They did go down very sharply for several days simultaneously with stocks, and it was a big deal. Not supposed to happen in the most liquid market in the world. But if your point is munis are not as safe as Treasuries, I 100% agree. But, they are still plenty safe compared to just about everything else. However, there are definitely some problems in the HY muni sector, which could get worse. Personally, I wouldn't go near HY anything unless the rates were much higher.

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Re: Munis getting slaughtered!

Post by yoyo6713 » Mon Apr 27, 2020 4:28 pm

https://finance.yahoo.com/news/fed-exte ... 08718.html

Feds stepping in, deeper into the pool.

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Re: Munis getting slaughtered!

Post by UpperNwGuy » Mon Apr 27, 2020 4:32 pm

yoyo6713 wrote:
Mon Apr 27, 2020 4:28 pm
https://finance.yahoo.com/news/fed-exte ... 08718.html

Feds stepping in, deeper into the pool.
I consider that to be good news.

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Re: Munis getting slaughtered!

Post by gmaynardkrebs » Mon Apr 27, 2020 4:43 pm

UpperNwGuy wrote:
Mon Apr 27, 2020 4:32 pm
yoyo6713 wrote:
Mon Apr 27, 2020 4:28 pm
https://finance.yahoo.com/news/fed-exte ... 08718.html

Feds stepping in, deeper into the pool.
I consider that to be good news.
Yes, there was no reason for the population limitation, and I'm glad they removed it.

yoyo6713
Posts: 129
Joined: Thu May 10, 2018 8:48 pm

Re: Munis getting slaughtered!

Post by yoyo6713 » Mon Apr 27, 2020 5:06 pm

gmaynardkrebs wrote:
Mon Apr 27, 2020 4:43 pm
UpperNwGuy wrote:
Mon Apr 27, 2020 4:32 pm
yoyo6713 wrote:
Mon Apr 27, 2020 4:28 pm
https://finance.yahoo.com/news/fed-exte ... 08718.html

Feds stepping in, deeper into the pool.
I consider that to be good news.
Yes, there was no reason for the population limitation, and I'm glad they removed it.
They have not removed it yet.

User avatar
gmaynardkrebs
Posts: 2092
Joined: Sun Feb 10, 2008 11:48 am

Re: Munis getting slaughtered!

Post by gmaynardkrebs » Mon Apr 27, 2020 5:36 pm

yoyo6713 wrote:
Mon Apr 27, 2020 5:06 pm
gmaynardkrebs wrote:
Mon Apr 27, 2020 4:43 pm
UpperNwGuy wrote:
Mon Apr 27, 2020 4:32 pm
yoyo6713 wrote:
Mon Apr 27, 2020 4:28 pm
https://finance.yahoo.com/news/fed-exte ... 08718.html

Feds stepping in, deeper into the pool.
I consider that to be good news.
Yes, there was no reason for the population limitation, and I'm glad they removed it.
They have not removed it yet.
Yes, dramatically reduced, but not eliminated. Smaller entities will be aided by the support the Fed is giving at the state level.

lgs88
Posts: 428
Joined: Tue Jun 07, 2016 7:48 am

Re: Munis getting slaughtered!

Post by lgs88 » Tue Apr 28, 2020 8:19 pm

It is often said that highly-rated municipal bonds survived the Great Depression with very few defaults. I have taken heart in that assertion.

However, I was reading Matt Stoller's non-investment-related newsletter today, and it included a letter from a former bond fund manager:

"There were relatively few bond defaults during the Great Depression (Detroit, Miami and Arkansas were the big names), but that was a time when the municipal market was tiny, and revenue bonds scarce.

Every corner of the $4 trillion market has big problems today. Hospitals have lost nearly all their profitable lines of business. Many colleges and universities may never reopen, and those that do will have to get by with withered endowments. No income collected at airports, transit systems and highways. Revenue bonds engineered from slices of general government receipts, from sales taxes, to gas taxes to personal income taxes, will miss their coverage targets. And states dependent on capital gains taxes (California assesses a whopping 13.3% on gains realized by its wealthiest citizens) will see enormous holes open in their budgets in a magnitude much worse than they witnessed in the 2008 financial crisis."


I wonder whether any knowledgeable Bogleheads might opine on the difference between the municipal bond market today and the municipal bond market during the Depression. Are we talking about the same animal here?

EDIT: My second question might be whether certain managers are generally considered to be more conservative than others when it comes to municipal bonds. I compared Vanguard's MA Tax-Exempt bond fund with Fidelity's MA Tax-Exempt bond fund, and here's what I found:

Vanguard (VMATX)
AAA 8.7%
AA 66.5%
A 8.7%
BBB 13.3%

Fidelity (FDMMX)
AAA 6.67%
AA 56.18%
A 19.52%
BBB 11.35%

Would any of you consider those differences material? Do you think the rating agencies have a good grasp on the risk of these bonds?
merely an interested amateur

typical.investor
Posts: 1886
Joined: Mon Jun 11, 2018 3:17 am

Re: Munis getting slaughtered!

Post by typical.investor » Tue Apr 28, 2020 8:32 pm

Many Universities will never reopen? Really? I see we are in the dark ages now.

lgs88
Posts: 428
Joined: Tue Jun 07, 2016 7:48 am

Re: Munis getting slaughtered!

Post by lgs88 » Tue Apr 28, 2020 8:36 pm

typical.investor wrote:
Tue Apr 28, 2020 8:32 pm
Many Universities will never reopen? Really? I see we are in the dark ages now.
I could certainly see non-flagship state schools -- many of which were already in dire straits -- failing to reopen should closures be extended through the fall. It's not inconceivable to me.
merely an interested amateur

fatFIRE
Posts: 306
Joined: Sat Feb 15, 2020 10:44 pm

Re: Munis getting slaughtered!

Post by fatFIRE » Tue Apr 28, 2020 9:55 pm

Of course, it's different. IT'S ALWAYS DIFFERENT THIS TIME. Sheesh... get a grip dude. Ignore the noise.

typical.investor
Posts: 1886
Joined: Mon Jun 11, 2018 3:17 am

Re: Munis getting slaughtered!

Post by typical.investor » Tue Apr 28, 2020 10:48 pm

lgs88 wrote:
Tue Apr 28, 2020 8:36 pm
typical.investor wrote:
Tue Apr 28, 2020 8:32 pm
Many Universities will never reopen? Really? I see we are in the dark ages now.
I could certainly see non-flagship state schools -- many of which were already in dire straits -- failing to reopen should closures be extended through the fall. It's not inconceivable to me.
It’s actually not inconceivable that the world ends in a nuclear fireball tomorrow either.

OK, I’ll bite... many Universities never reopen because the demand for education never returns to previous levels.

In such a severe contraction, US stocks which have been priced figuring future earnings will suffer horribly. Better sell them too.

International stocks return nothing. Dump them.

The US will obviously overspend to correct the situation, and default. Forget treasuries.

Sell everything and prepare a bunker and supplies!

Except a bunker strategy is too costly if it’s not needed.

I feel like munis have a place assuming there’s is a functioning America. And if not, then get a bunker.

finite_difference
Posts: 1748
Joined: Thu Jul 09, 2015 7:00 pm

Re: Munis getting slaughtered!

Post by finite_difference » Wed Apr 29, 2020 8:57 am

lgs88 wrote:
Tue Apr 28, 2020 8:36 pm
typical.investor wrote:
Tue Apr 28, 2020 8:32 pm
Many Universities will never reopen? Really? I see we are in the dark ages now.
I could certainly see non-flagship state schools -- many of which were already in dire straits -- failing to reopen should closures be extended through the fall. It's not inconceivable to me.
I think schools could be hurt if closures are extended through fall, or if it simply impacts international student enrollment. I could see many schools being in a situation where they have overspent/under-saved, and have depended on international students paying full price to keep their balance sheets in the black.

On top of that, a financial crisis could hurt both domestic and international enrollment.

Universities are not unique in being impacted, but I could see them being vulnerable since they are probably unprepared and may garner little sympathy.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh

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