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As I attempted in the first installment, I offer a high level overview to generalize my view on the credit quality of a vast expanse of states, cities and local issuers of municipal bonds. I believe ratings do matter because, not only do they represent a measure of differentiation and separation of value for some 60,000 issuers, but in the long run, they may serve as an affirmation of the soundness and strength of tax-exempt investments.
Authored by James Colby
Many portfolio manager commentaries from large, well-known investment companies have, over the past several weeks, generated thoughts about the murky future of the markets and economy. Several appear to lead with the suggestion that an unseen hand is poised to pull on a figurative lever to categorically change broad strategy (asset allocation) from bonds to stocks; this would be called "The Great Rotation." Others offer suggestions that the current strategy of asset allocation, which has taken us to significant returns over the past 24 months, is about to combust; this would be called "Bursting the Bubble." Because of the eye-catching phraseology involved, I fear that readers may feel that these potentialities are faits accomplis.
Let's give credit where credit is due: recently, Forbes published an article that to some might seem like the kind of article that sits on the shelf until there is a slow news day and the editor is looking for a filler piece. In fact, this article raises a number of important points that, in my opinion, all touch upon the national economic recovery and just may be the locus of the revival of small business and wealth creation.
Van Eck Associates Corporation does not provide tax, legal or accounting advice. Investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service.
Please note that the information herein represents the opinion of Jim Colby and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Global. © 2014 Van Eck Securities Corporation. MUNI NATION is a trademark of Van Eck Associates Corporation.
All indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.
Any discussion of specific securities mentioned in the commentary is neither an offer to sell nor a solicitation to buy these securities.
Municipal bonds are subject to risks related to litigation, legislation, political change, conditions in underlying sectors or in local business communities and economies, bankruptcy or other changes in the issuer’s financial condition, and/or the discontinuance of taxes supporting the project or assets or the inability to collect revenues for the project or from the assets. Bonds and bond funds will decrease in value as interest rates rise. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds.
The income generated from some types of municipal bonds may be subject to state and local taxes as well as to federal taxes on capital gains and may also be subject to alternative minimum tax.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR | 888.658.8287. Please read the prospectus and summary prospectus carefully before investing.
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