The Knowledge Vault
Newsletter Sign-up >>>

 

Municipal Market Newsletter Archive

My Daily Travels

November 4th, 2016 by Kurt L. Smith

Working in the municipal markets on a daily basis is like having the opportunity to travel the country each and every day. I visit California and Texas most often as they are big states with numerous debt issuers. But by the end of each day I have generally made a wide swing across many states and then tomorrow I will get up and do it all again.

Change doesn’t occur rapidly across the country but change does occur. Growing areas, primarily the biggest cities along the east and west coasts and in Texas, continue to grow. Everywhere else, and that’s a lot of everywhere else, seems to be doing a lot of nothing.

If municipalities were stocks, odds are you would only buy the top five or so. Think of them as the Apple, Amazon, Facebook or Google of municipalities. That’s how few areas of the country are growing. Not that growth solves all problems, but lack of growth, particularly if you were counting on it, can add unforeseen risk to the situation. (more…)

Tags: , , , ,
Posted in Municipal Market Letter

The Coming Change

October 15th, 2016 by Kurt L. Smith

If you frame the world in the context of long-term financial trends, you may see a world without change. Thirty five-plus year bull markets for stocks and bonds are where we have been and where we currently are. Not only have interest rates fallen from all-time record highs in the early 1980’s to all-time record lows lately, but the prospect for lower interest rates longer is the consensus for as far as the eye can see.

Market moves of this historic magnitude are what books are made for, not a monthly letter. After thirty five-plus years, what’s another one year, or five years? The consensus is lower longer. In other words, the consensus is for no change.

Yet the conditions for change continue to swell. Some people are angry, very angry, about our economic situation. Sure we have had one of our worst rebounds from a recession possibly ever. Some young people are asked to assume more and more debt while facing an insecure economic time. But angry?  We are discovering the business model for pension funds is not working.  Older workers, increasingly teachers, police, firefighters and other municipal workers are becoming increasingly aware how the ongoing lower longer outlook will impact them dramatically. (more…)

Tags: , , , , , , ,
Posted in Municipal Market Letter

Thankfully, You Own Municipals

September 9th, 2016 by Kurt L. Smith

While interest rates may appear they will be low, perhaps forever, we are always encouraged when we look back over the past months and years and discover we’ve actually fared well. Municipals are indeed unique and that is why we can continue to scratch and claw, but most importantly make headway by investing in them.

Bonds, particularly municipal bonds have participated in a multi-month rally that was over-extended months ago. As a consequence, we believed stocks would also rally, continuing the tandem performance that has been a hallmark of the financial markets these past thirty-plus years.

Indeed the major stock averages have set many new all-time high marks this summer. Stocks may have a few more months to rally, but the bond rally may be over.  As conviction and certainty for low rates (forever) continued, the bond market appears to have made a top in price that may stand for many, many years. (more…)

Tags: , , , , ,
Posted in Municipal Market Letter

First Bonds, Now Stocks

August 8th, 2016 by Kurt L. Smith

The bond market has performed well of late and municipal bonds added to their top ranked performance last year. Yields seem to move in only one direction, down, making prices appear to only go up.

Around the world bond prices have gone up so much, yields on trillions of dollars of bonds are now negative. The trend in bond prices has continued for so long (thirty-plus years) and has produced seemingly consistent returns for so long, investors seem loath to do anything except buy more.

Whatever the reason, whatever the narrative, almost all pundits are on the same side of the boat: low yields and high prices will continue. Money managers may be buying high priced negative yielding bonds now because they are judged on their current performance, not the negative performance calculated if they hold the bonds to maturity in five, ten or more years. Good performance seems to beget good performance, so enjoy the ride!

If you liked the bond market rally this year then I think you will really enjoy the stock market rally which appears to be gathering steam. Stocks rebounded from their early season low in February and new all-time highs are being set regularly of late. Like bonds, as the rally continues to gather momentum, expect stocks to generate excitement, the excitement previously held for bonds. (more…)

Tags: , , ,
Posted in Municipal Market Letter

We’re Not Going To Take It….Anymore

July 21st, 2016 by Kurt L. Smith

Britain decided it no longer wanted to be a member of the European Union. Britain had enough of Europe or precisely 52% of British voters had enough. The reasons why they had enough was not an issue. The result however is clear: Britain will no longer be a member of one organization bigger than itself: The EU.

Soon Britain may not be a part of another larger organization, the one that makes it Great. So blow the winds of change, especially when the issues that trouble many are seemingly ignored by those who hold the power.

How many Brits voted for an exit because of fear of immigration and the fear of more, seemingly out of control, immigration? We don’t know. We do know that immigration has been an issue longer than a European Union has been a dream. If times are good and spirits rising odds are we can ignore the issue or simply praise the benefits of immigration. Times are not that good now, the mood has changed and leadership needs to change with the times. (more…)

Tags: , , , , , ,
Posted in Municipal Market Letter

Our Plan Continues To Come Together

June 14th, 2016 by Kurt L. Smith

There has been no letup in the municipal bond market this year. Yields are low, prices high and firm. Yet we continue to find worthwhile bonds which I believe is a testament to our approach.

Thankfully, the municipal bond market provides a tremendous amount of variety. We have fifty states plus Puerto Rico, Virgin Islands and Guam. We have general obligations, revenue bonds of an almost endless variety, along with debt secured  by countless types of assets. All this variety and that’s before we throw on the essentials for fixed income: a coupon rate and maturity.

This variety, the anti-generic, is a crucial component of our approach. It is unique in the investment world and this is tremendously important as the world of investing has largely become one big, high-priced, low yielding world in which returns are piddling, that is when values aren’t plunging.

Asset classes, across the spectrum, are struggling, some plunge and pop, but overall it is downright tough to have a plan to diversify a portfolio and feel comfortable that you are making progress with your investments. Traditional thinking has failed to work, or just plain failed, while unconventional thinking seems to be …conventional. Where are the ideas that work? (more…)

Tags: , , , , , , , , , , ,
Posted in Municipal Market Letter

Over The Top

May 16th, 2016 by Kurt L. Smith

For the past several months we have discussed the manic moves of municipal bonds. As one of the best performing asset classes last year, it looked like we would be poised to experience follow-through this year with additional new money flowing into municipal bonds.

Indeed this has been the case. Money flows into tax free municipal bond funds continues week after week. Not only are new deals like the one’s presented at the bottom of each month’s newsletter selling well in the marketplace, we are also seeing intense competition for bonds in the secondary market. In a word, the market in my opinion is “hot”. But after several months of “hot”, the market seems to me to be “over the top”. (more…)

Tags: , , , , , , , , , ,
Posted in Municipal Market Letter

Blessed Are Municipals

April 11th, 2016 by Kurt L. Smith

Rare is my newsletter with good things to say.  How about “it is good to be an investor in municipal bonds!”  As I wrote several months back, municipals were one of the top performing sectors last year.  Now we are going to discover how long the ride may be.

I am not recanting my position that Bonds peaked in price (bottomed in yield) way back in 2012.  I stand by my position.  But after a quick swoon in 2013, municipal bond prices have been rising and have remained quite firm (low volatility) as they have made their way back towards the highs of 2012.

Low volatility and rising prices…in this market!?  This is certainly a recipe for those not familiar with municipal bonds to get acquainted.  Municipals appear to be a bright spot, not only in the fixed income markets, but in investing in general. (more…)

Tags: , , , , , , , , , ,
Posted in Municipal Market Letter

Another Step Closer

March 3rd, 2016 by Kurt L. Smith

Markets go up and markets go down.  We all know this.  We should also know that we are fortunate to live in an era in which markets have trended higher for decades.  Unfortunately we now live in an age of asset bubbles with the largest bubbles of all, Stocks and Bonds, on the verge of a massive popping.

We have watched the popping of two asset bubbles over the past several years: According to Bloomberg, Precious Metals (Gold & Silver) and Oil.  Gold peaked in September 2011 at $1920 an ounce, falling 45% over the following four years to a $1046 low.  Silver almost touched $50 an ounce for the second time in its history and sold off to below $14.  Oil peaked at $147 in 2008 but sold at $107 just nineteen months ago and below $27 last month.  Markets do go up and down, but in today’s age of asset bubbles, one must be ever mindful of the tremendous downside risks that exist. (more…)

Tags: , , , , , , , , , ,
Posted in Municipal Market Letter

We Have Top Men Working On It

February 10th, 2016 by Kurt L. Smith

In late January the Federal Reserve’s Open Market Committee voted to do nothing.  Unfortunately they had to say something and it was that something that reminded me “we have top men working on it.”  Here the top man is a woman, Chairman Janet Yellen.

The Fed’s luster was destined to pale from the days in 2000 when Chairman Alan Greenspan was dubbed Maestro for his deft maneuverings.  Chairman Ben Bernanke was Time Magazine’s Person of the Year in 2009, having saved the world, or at least us, from certain financial ruin.

So from Chairman Yellen we ask “what have you done for us lately?”  Stocks swooned in August but recovered by December only to have the Federal Reserve vote to hike interest rates for the first time in ten years.  Now that stocks have swooned again to begin 2016 we find the Fed to be hesitant in its plans to normalize, I mean raise, short-term interest rates. (more…)

Tags: , , , , , , , , , , ,
Posted in Municipal Market Letter

NEWS FEED

Tweetomatic error: Could not authenticate you.