Skip to comments.Idea for a mutual fund that will make the lefties explode!
Posted on 10/12/2012 7:07:32 AM PDT by Fido969
Everyone knows what a black hole of finance the "democratic strongholds" have become. Municipal bonds used to be a good investment, but with democrats having driven so many cities and states to the economic brink, I'd be leary.
How about a tax-exempt mutual fund of Republican municipalities only? I'd guess the investors would flock to those because they would be safer, and we'd make it clear that democrats are a lousy investment.
that’s racist !
that’s racist !
I like it.
What happens when a municipality goes from red to blue? Does that mean you’d sell of those bonds and replace the holdings with other “red” bonds? How would the transaction costs affect the returns by the fund?
In my experience local government is only marginally better under Republicans. Many Republicans are just as spendy as their Democrat opponents. They may spend on different things but they are just as happy to raise tax rates and spend as the Dems.
Just because a politician registers as Republican doesnt make him conservative.
When you get down to brass tacks it is the Public Workers Unions, their benefits and pensions that are the big budget killers. The Republicans are just as afraid to tackle those issues as the Democrats.
It would also be a fund with a high maintenance cost because the manager would have to track every election and the local news for every bond in the fund. Control of city councils and mayor/city manager can change at any time.
It’s somewhat harder than that, because many, even the majority, of municipal funds are not actually for cities themselves, but for major projects that are wanted by the cities but are economically segregated from city finances.
So the bonds are issued based more on the reasonableness of the particular project to be done on time and on budget, and accomplishing a realistic and useful goal. Right behind that, of course, is the ability of the municipality to pay both the bond yield and eventually to repay the principal.
Unless, of course, it is a long term, ongoing issue, in which the value of the bonds at re-issue is important.
Finally there is tax-exempt yield versus taxable bond value. This is based on the projection of whether, over time, the value and yield of the bond will fluctuate.
Instead of basing it on the party in power it would make more sense to base the decisions in the same manner as deciding companies in which to invest- look at balance sheets, spending decisions, etc. That way investors can reward sound governance regardless of party affiliation.
Today that’s not always a guarantee they are well-run districts.
I’d rather have a mutual fund based off the stocks of the leading gun and/or ammunition manufacturers. Talk about making the liberals sh1t bricks.
The Bond Ratings services like Standard and Poors is supposed to do that but mostly what they do is (at least they say they do) rate cities on their ability to repay bonds.
The trouble is that once you own a bond that rating can change rather quickly.
A citys ability to pay off their bonds is highly dependent on the financial climate of the city, the state and the country.