Stick to munis ya think?

**jIM_Ohio** · 09-02-2010, 05:17 AM

There is a counter argument to using muni's.

1) some funds are combining states inside one muni fund, so you get tax free from fed, but some interest is taxed by state

2) municipalities are in budget crunches too- its possible some defaults happen (more defaults happen) because of the economy

3) the defaults are the reason fund companies are doing #1.

**Broken Arrow** · 09-02-2010, 05:44 AM

Huh, there's actually a lot to your post....

I don't have any objections to muni bond funds per se, but please don't buy something simply because it's been doing SO great so far.... Past performance is no guarantee of future performance, even with bond funds.

XOM is not a bad play at all. The whole oil sector has been beaten down, and it doesn't have BP's baggage. Rather, it looks like the losses you are currently taking is due to timing, and unless there is an urgent reason to sell it, I would just set a stop of some kind, shelf this stock, and let it run in the background while it pays you dividend.

Long term, my retirement funds are still the same, and I keep it very simple and very passive. In fact, I'm currently 100% in Fidelity's target retirement fund.

**KTP** · 09-02-2010, 06:45 AM

Originally posted by Broken Arrow View Post

Huh, there's actually a lot to your post....

I don't have any objections to muni bond funds per se, but please don't buy something simply because it's been doing SO great so far.... Past performance is no guarantee of future performance, even with bond funds.

XOM is not a bad play at all. The whole oil sector has been beaten down, and it doesn't have BP's baggage. Rather, it looks like the losses you are currently taking is due to timing, and unless there is an urgent reason to sell it, I would just set a stop of some kind, shelf this stock, and let it run in the background while it pays you dividend.

Long term, my retirement funds are still the same, and I keep it very simple and very passive. In fact, I'm currently 100% in Fidelity's target retirement fund.

Well, point taken, but before 2008 everyone quoted past performance as a reason to be long in the stock market (Historic return was ~10%).

Historically, the default rate on A rated muni bonds is less than 1%, but then again, that is past performance.

I certainly am not selling the XOM, but if you calculate your net worth at any particular time, you do have to take into account that you have on paper lost $$$ in it. Someone who had stored their money in a matress could easily buy more shares of XOM than you have for the same initial investement cost.

The real plus side of muni is the government can't get their stinking greedy hands on the gains. My wife just bumped to over 200K a year (bye bye Roth eligibility

) and I am expecting some real pain as the Bush tax cuts expire (we have no kids or other welfare deductions to offset the income and we live in a extremely high cost area of the country).

Edit, oh Jim, thanks for the points, but we live in a state that (currently) has no income tax, so that takes care of situations where the Vanguard fund buys muni bonds from our state.

I still like stock long term, even though it has been rude to me for the past few years. I would prefer the companies start doing stock buyback instead of raising dividends though. I am leaning toward a 50/50 allocation of stock/muni bond where before I had been thinking 70/30

**Broken Arrow** · 09-02-2010, 07:44 AM

Another point to consider is that the federal interest rate is currently at about 0%. When (not if) it does increase, bond funds in general will take a hit. I'm still not against bond funds in general, but it's important to focus on muni funds strictly as a way to reduce your tax hit, and not chase after it for performance sake, because if that's the case, then I am bearish on it for the reason above. But now that you mentioned your wife's gross, I'm inclined to think that's not a bad idea for you at all.

As for XOM, the question I constantly ask myself is, "Would we have known back then?" Because, I tell you, if I knew for sure that XOM, or any other stocks for that matter, would lose out, then I would not only avoid buying it, but I would definitely short it. But that's the thing, right? We don't know. Otherwise, our trades would be entirely different to reflect that. Seriously, I wouldn't feel bad about net worth calculations in that sense, because it's a paper loss right now anyways. Or, if holding individual stocks really does cause you too much discomfort, then feel free to consider selling it in favor of more diversified investments.

For what it's worth, I am also holding a very substantial amount of stocks right now (been buying it on its way down these past 2 months) and I too feel the pinch.

**KTP** · 09-02-2010, 08:02 AM

Well this is just dandy for my oil stocks:

Gulf oil rig explodes off La. coast - Yahoo! News

(I do hope the 13 guys are ok, but seriously? another rig explosion?)

**Broken Arrow** · 09-02-2010, 10:24 AM

Ah, yeah, I was just reading about that. Mariner Energy (ME) went as far down as 13% today, but bounced right back and is currently only suffering a 2% loss, relative to the market's fairly upbeat mood today (0.6% gain). The energy sector didn't seem to blink an eye either, with 0.5% gain. Just goes to show how irrational the intraday stock market can be. XOM is holding steady.

**Broken Arrow** · 09-03-2010, 06:15 AM

Relevant article on muni bonds.

Stick to munis ya think?