Marilyn Cohen is one of the country’s top bond managers. She began her 34-year financial career as a securities analyst at William O’Neil & Co, moved into bond brokerage at Cantor Fitzgerald, Inc., then founded Envision Capital Management 18 years ago. As Envision’s CEO, Ms. Cohen and her company specialize in managing bond portfolios for individuals. During this same 18 years, she has written the bond column appearing in Forbes magazine. Ms. Cohen is the author three books, her latest being Surviving the Bond Bear Market...Bondland’s Nuclear Winter (John Wiley & Sons, Inc., 2011), which shows investors how to survive the coming nuclear winter of the bond market and identifies the indicators that will tell you when to make strategic moves. She is a popular guest on CNBC, FOX Business News, PBS, and each of the major broadcast networks. Her comments--stated in plain English--guide individuals through the inner workings of the bond market.
Investors are still actively buying municipal bonds, and bond expert Marilyn Cohen mentions several states here that she likes, as well as a few she is avoiding.
Are munis back? We are here with Marilyn Cohen, who is going to talk exactly about that question.
Not only are munis back, munis are the fixed-income choice for individual investors. Even though interest rates are at generational lows in muni land, the voracious appetite does not seem to be satisfied.
Really? So what is happening in the states? We hear a lot of stuff recently about California, and the economy. How are munis dealing with these issues, and where is the demand coming from? Are there specific states where there's greater demand than others? What are you seeing out there?
What we are seeing now is demand is great in every state. Most states are getting their finances together very well...except California and Illinois.
California is at the bottom of the barrel. People have read in The Wall Street Journal about how the California deficit is going to be $16 billion-overnight we went from $9 to $16 billion-but because demand exceeds supply in muni land, nobody cares. When the announcement was made about California, it was just like, oh, this again? Prices stayed firm, demand stayed high, it is just a very interesting phenomena.
Where is the value in muni land? Boy, that is a toughy, because yields haven't been this low since LBJ was president. Believe it or not? You were a young guy back then. I was even young.
It has just been incredible. I think everybody is setting themselves up for the fact that we are going to see higher tax rates coming in 2013. The tax benefits of the Bush years, with dividends being taxed at 15% on capital gains, I think everybody thinks that is going to be extinguished. So what is the default type of investment? Municipal bonds.
That makes perfect sense. And I guess that is true with California, because I remember-what was it, in the late 80s early 90s-when there were issues with the government and funding and the muni-GICs and everything else that were out there, that California still chugged right along and the states were still funding themselves. How is Florida doing these days?
Florida is doing much, much better. Florida has worked very hard on getting their deficits down. Most every state in the Union has except Illinois and California. Even Texas had some deficits that they have been working with, but they understand the gravity of the situation. But California doesn't. California keeps on spending. We have to cut back; there is no question about it.
I am a native Californian, and I have to tell you I have grown to hate the politics of my state, and certainly detest the finances. Deficits matter. Eventually this will catch up to California-it's got to.