No..I’m not kidding.
The majority of my portfolio consists of MFS Municipal Bonds.
I had along talk with my broker,a year or so ago. I was concerned, as we all are, about the default of municipalities holding the bonds. As we have seen lately,cities are turning of street lights,furloughing police officers...etc. The end is near for some.
Bottom line...In order to borrow our money, the municipalities must purchase and maintain insurance on the bonds they are selling. That is why they are so safe. As my broker concluded,” Muni Bonds are the second safest investment in the country,the only safer investment is Government bonds”. They aren’t flashy or sexy, but they will make you wealthy.
Muni’s are NO LONGER a safe investment. You need to rethink you comfort level for loses.
I’d take a long, hard look at which municipal bonds are contained within any fund, seriously. Jefferson County, Alabama is something to look at. Bond insurers themselves have not been immune to financial stress due to mortgage-related securities. Syncora Guarantee Inc. and Financial Guaranty Insurance Co., two of the major bond insurors, had their credit ratings reduced in 2008. Bloomberg has an informative article on this, I’d post an excerpt but I believe this is not permitted. It should come up easily on a search engine.
They are only as safe as the insurance they bought. Will the insurance entity be able to cover multiple defaults?
LOL. Until they aren't. Do you know what a black swan is?
Or, to echo the comment above, how many municipal bonds have to fail before their insurance fails as well?