Monday, August 11, 2008

Muni Bonds

As most of my (VERY FEW) readers know, I like individual muni bonds. I do believe that well-chosen individual bonds can provide for diversification, credit quality and a stream of income that will ultimtely be required for retirement. Some however raise the issue of the credit quality of individual municipalities, and so I follow an approach that attempts to mitigate that risk by:

Diversification: GOs, Airports, Mass Transit, Universities, Utilities and States

Maturity: A range of maturities but tending towards 20 years to maximize income

Call Protection: Issuer call option at least 5, but ideally 10 years away

Underlying Credit: At least BBB+ but most in the A+ to AAA range

Insurance: I will take it, but don't count on it


AUSTIN TEX CMNTY CO 5%30REV DUE 08/01/30DIST PUB FAC CUSIP: 052405AW7, a AA- underlying in the properous Texas State capital

BROWARD CNTY FLA 5.25%27REV DUE 04/01/27EDL OID SUBJ CUSIP: 115015DA4, a BBB+ but I believe that Nova University will continue to do well as the largest private university in the country

CONROE TEX INDP 5.125%30GO UTX DUE 02/15/30SCH DIST CUSIP: 208418AZ6, A Texas School which is guaranteed by the AAA State Permanent School Fund from the State

DALLAS TEX AREA RAP 5%32REV DUE 12/01/32TRAN SALES T CUSIP: 235241FB7, another AA- for the rapid transit system in Dallas

FLORIDA HSG FIN COR 5%35REV DUE 07/20/35REV CUSIP: 34073N5F3, a AAA, GNMA-backed even if many tend to stay away from housing

NEW JERSEY ST EDL 5%33REV DUE 07/01/33FACS AUTH RE CUSIP: 646065JA1, our very own AAA-rated Princeton university

NEW JERSEY WASTEWAT 7%11GO DUE 07/01/11TREATMENT TR CUSIP: 64614MBR5, does anyone seriously believe that the wastewater business in NJ will suffer?

PENNSYLVANIA ST TPK 5%23REV DUE 12/01/23COMMN OIL CUSIP: 709221PR0, if you have been there you know the toll revenues aren't going anywhere... not with that kind of traffic

PUERTO RICO COMW 5.25%30REV DUE 07/01/30HWY & TRANSN CUSIP: 745190ZM3, tax free in all fifty states even if it carries a BBB+ undelying

You may correctly point that these don't tend to provide for capital growth but zero-coupon munis, which do, will be the subject of another post. In the meantime, I like the site

See you soon