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<h4 class="dechead">On One Hand: Traditionally Safe Investment
According to Richard Lehman of Forbes Magazine, municipal bonds traditionally have been thought of as one of the safest investments, where money could be placed as a hedge against inflation, even in periods of high market volatility, and ensure a steady return on the investment. Municipalities are considered unlikely to collapse and default on their debts.
On the Other: Not as Safe as They Used to Be
These bonds are insured by companies that may have problems of their own, as has happened in the past. In April 2009, the Wall Street Journal reported that U.S. Rep. Barney Frank of Massachusetts even suggested that the federal government should step in to insure the bonds.
Bottom Line
Forbes says most municipalities aren't likely to default, but they're not infallible.
Source:
Ambac, MBIA Finally Get the Rating They Deserve; Graham Summers; Seeking Alpha, April 8, 2008
The Muni Bond Safety Mirage; Richard Lehman; Forbes; 1/28/08
Barney Frank's Double Indemnity; Wall Street Journal, April 17, 2009
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