"Street Critique"-Marilyn Cohen, President of Envision Capital Management
Wednesday, July 02, 2008PAUL KANGAS: With ratings downgrades and questions about capital continuing at municipal bond insurers like MBIA and Ambac, what's a muni bond investor to do? Tonight's "Street Critique" guest says most importantly -- do your homework. She's Marilyn Cohen, president of Envision Capital Management. Marilyn, welcome back the NIGHTLY BUSINESS REPORT.
MARILYN COHEN, PRESIDENT, ENVISION CAPITAL MANAGEMENT: Great being back.
KANGAS: Since your last visit with us in February, the picture for the bond insurers and for the municipal market overall has been deteriorating. Now you've written a new 10 commandments for muni bond investing. Let's start with the bond investors. What's the key there?
COHEN: The key is do not count on the bond insurers if you are a municipal bond investor. Only FSA, Berkshire Hathaway and Assured Guarantee seem to be the good quality issues out there. The rest, forget about it. Make sure your bond can stand on its own and that it has a good credit quality by itself without any of those insurers.
KANGAS: Marilyn, since the lion's share of muni bonds are owned by individual investors, how do they get the best price?
COHEN: That's a great question. First of all, there is a reporting system, Paul. It's called the trace system and that reporting system reports bonds that are trading in the secondary market. It reports their prices, the amount that is traded and the time in which it's traded. So if a broker is offering for you to buy a bond or you decide to sell a bond, you would go on to this absolutely free system, which is online. It's investing in bonds.com and see where that particular bond that you're trying to sell or buy just traded so you know whether or not you're getting the right price.
KANGAS: Investinginbonds.com, that's the address?
COHEN: That's it, www.investinginbonds.com, totally free. We professionals use it, too.
KANGAS: Now what about the impact of the economic downturn and the housing crisis on states, counties and cities which issue these bonds?
COHEN: Well, that's a big question with a very negative answer. That is everything is getting worse. As the housing crisis continues to be bad, as the state's revenues continue to deteriorate, because we are in an economic recession, we have to connect the dots and connecting the dots means that our states are going to have less money, bigger budget deficits, people have their homes that they see the values are going down are trying to get their property tax reduced. So it means that we're probably going to see downgrades in state and city and municipalities and we're going to see bigger budget deficits.
KANGAS: We have less than a minute, Marilyn, but with interest rates appearing poised to rise, why would you invest in any bond right now?
COHEN: Well, particularly municipal bonds have already anticipated higher interest rates because they've repriced a couple times this year and also no matter what your political persuasion is, Federal tax rates are going up, so we're going to all be in high marginal tax rates and that makes municipal bonds more valuable to individual investors, not less valuable.
KANGAS: Very interesting. We just hit the highlights tonight. Our viewers can find more of your muni bond ideas on our web site, NBR on pbs.org. And Marilyn, I thank you for being with us.
COHEN: It's my pleasure.
KANGAS: My guest, Marilyn Cohen of Envision Capital Management.
