Use access key #2 to skip to page content.

Catch a Falling Knife (and) Put It In Your Pocket (and) -ouch-

Recs

4

August 21, 2013 – Comments (1) | RELATED TICKERS: MIW

Yes, Detroit has filed (but not yet granted with many objectors) for bankruptcy, threatening a haircut for all Detroit bonds. Yes, I know that Detroit is in Michigan.

I swear to our lord and savior, The Oracle of Omaha and his sidekick Robin, that I have indeed done my due diligence, and do endorse this closed-end Michigan Muni Bond Fund.

Key facts:

yield = 6% = 10% taxable equivalent for those in 39% tax bracket

discount to NAV = 13%

 

at this link, I found this statement (it is, in fact, what convinced me to endorse MIW):

http://www.bloomberg.com/news/2013-08-20/insurance-ratified-as-detroit-fuels-biggest-rally-muni-credit.html

 

“Companies that back Detroit’s debt are on the hook for at least $1.9 billion of unsecured debt, and also insure most of the insolvent city’s water and sewer securities. Assured Guaranty and MBIA have said they would ensure bondholders receive full payment, reaffirming their value to individuals shaken by the nation’s biggest muni bankruptcy, said Alan Schankel at Janney Montgomery Scott LLC.”

 

HERE ARE THE TOP 10 HOLDINGS:

Michigan St Hse Representative Cops

Detroit Mich Wtr Sply Sys Re Rev Bds 5%

Reed City Mich Pub Schs Go Sch Bd 5%

Michigan St Hse Representative Cops

Michigan St Bldg Auth

Royal Oak Mich Ltd Go Bd 6.25%

Michigan St Hosp Fin Auth 5%

Okemos Mich Pub Sch Dist

Grand Rapids Mich Wtr Sply S Rev Bds 5%

Michigan St Trunk Line St Truck 5%

I see Detroit only once, even then it is a revenue bond that is 4.34% of portfolio, not a GO bond.

Yes, I plan to add it to my real portfolio. Yes, it is a thinly traded, puny sized bond fund. Yes, the ask/bid spread is larger than comfortable.

 

 

1 Comments – Post Your Own

#1) On August 22, 2013 at 2:08 AM, awallejr (81.55) wrote:

Or buy AINV with less risk.

Report this comment

Featured Broker Partners


Advertisement