James Colby has more than 30 years of fixed income experience. Portfolio Manager of Municipal Bond ETFs at VanEck, he is known for his perspective on the U.S. municipal bond marketplace.
Without dispute, the superstorm named Sandy has, and will continue to deliver, wide-ranging repercussions to the communities of the Mid-Atlantic and Northeast United States. Below I mention only a few of the many issues our country will tackle, but I believe these points are indisputable:
Recoveries from Hurricanes Andrew and Katrina, however, were accompanied by a stronger national economy than what I believe we have now. The current financial strains on the government (federal, state and local) call into question just how rapidly a return to normalcy might occur. Even if the insurable recovery is 100% from the damage to the various physical infrastructures, such as the NY MTA (est. $20 billion), airlines or oceanfront communities, the country is still mired in a very low-growth period economically. Will Sandy become a tipping point for the creditworthiness of small, local governments?
History has demonstrated the resilience of municipalities in all types of business cycles and calamities. With some 60,000 issuers of municipal bonds from which to build diversified portfolios, I believe investors would benefit most from professionally managed products, such as ETFs. ETFs may help weather the storm through a process that generally seeks to avoid concentrating assets in a narrow region. In my opinion, municipal credit quality, while damaged in obvious ways from the likes of Sandy, should continue to hold its strength.
Senior Municipal Strategist
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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.
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Diversification does not assure a profit or protect against loss.
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Investing involves risk, including possible loss of principal. An investor should carefully consider investment objectives, risks, charges and expenses carefully before investing. This and other information can be found in the appropriate regulatory documents made available for a specified country as designated in this website.