With all of the caution over potential municipal default by industry experts such as Meredith Whitney and others, conservation on the
part of certain investments may be warranted.
Illinois was the latest of the State concerns over default and
bankruptcy. Many other states are in serious financial trouble - California, Arizona, Michigan, Nevada, Pennsylvania, New Jersey
- to name just a few.
States float municipal bonds to raise revenue for many purposes.
There are many different types of muni bonds - revenue and
general obligation bonds are some of the most popular. These
bonds depend on specific monies collected (like tolls on a bridge
or taxes ) to repay the bond interest and eventually principal.
The budget of most States is comprised of a great variety and
number of expense line items including debt repayment.
Decisions about investing in any investment can only be made
with a full understanding of the potential economic of the
investment, after a careful reading of the Financial Statements
and footnotes, a careful understanding of the risk/return
characteristics and thoughtful consideration of other suitable investments.
Sheila McKinney
