Published August 31, 2012
While the debate about the safety of municipal bonds rages, the actual creditworthiness of major states, cities, and local governments continues to falter.
This week, the state of Illinois had its credit rating downgraded by Standard & Poor's from A+ to A. According to the numbers, Illinois has an unfunded pension liability that could top $93 billion by mid-2013. (VIDEO: Municipal Bonds: Myth vs. Reality)
National muni bond ETFs (MUB) and even certain state focused funds like California (CMF) and New York (NYF) have yet to show any signs of stress. All three muni bond ETFs are trading above both their 50 and 200 SMA. The $3.7 trillion municipal bond market has been calm, but that doesn't mean it's safe.
The Federal Reserve Bank of New York conducted a study showing how major credit rating agencies like Moody's (MCO) and Standard & Poor's have been understating historical default rates within the muni marketplace. The September edition of the ETF Profit Strategy Newsletter covers this along with an trading strategy for what's ahead.
Retirees Still Scratching for Money
Did you know that 45% of Americans would be at the poverty level if it wasn't for their Social Security payments?
This week's Index Investing Show podcast features an interview with Nevin Adams, Director of Education at EBRI Center for Retirement Research Income. I talked with him about why so many retired Americans are broke and how younger workers can avoid being in the same situation.
The podcast also discusses how Goldman Sachs (GS) pays 2% less to individual investors with three-year CDs than by selling corporate debt with a similar maturity. No wonder they want you to buy Goldman CDs!
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