I read this headline this afternoon. It confirms what I have been talking about for several months. “BONDS PLUNGE AFTER FED STATEMENT – RATES CHALLENGE RESISTANCE” It goes on to mention that defaults in the muni bond market were on the rise. For example,
“The Clay Gas and Utility District of Clay County, Tennessee, didn’t file disclosures for 10 years, until one in November saying it didn’t expect to make future payments. Or how about . . .
A retired journalist in Chevy Chase, Maryland, spent $25,000 10 years ago on Maryland Health and Higher Education bonds. She said she checked regularly for updates online and didn’t see anything amiss. But then in October, she was stunned to get a letter from a broker offering 50 cents on the dollar. The letter said the issuer could not promise to pay more in the future. She searched for information and found none and couldn’t reach the issuer. Confused, she took the deal. Or how about . . .
Chowchilla, California, defaulted on its bonds used to renovate city hall earlier this month. The city, which bills itself the “Gateway to Prosperity,” had never filed documents notifying investors that a default was coming. The city’s most-recent financial statement currently on file is for the fiscal year ending in June 2009.”
Apparently there was an article in the Wall Street Journal quoting Peter Schmitt, CEO of DPC DATA. He was talking about how little financial disclosure muni bond issuers had to make and how some issuers failed to file any reports for years at a time.
Given this disturbing information, you need to change your investment tactics if you are a “buy it and forget it” investor. You need to actively check your portfolio once a week with a look at the Yahoo! Finance chart section to get an idea of the direction of your portfolio.
Enough said.
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For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!
Jeremiah John
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