Compare and contrast. Here’s a DMN personal finance column from last summer advocating investment in municipal bonds.
[I]nvestment grade municipal bonds are relatively safe because the cities, counties, school districts, hospital districts and airports that issue this debt have the financial wherewithal — mainly tax revenue — to pay it back. It is true that there have been some high-profile municipal bond defaults in recent years, such as in Stockton, California, and Detroit, but overall the default rate for munis is exceedingly low.
Now here’s a column from ValueWalk yesterday that argues the Dallas fire and cop pension fiasco is a canary in coal mine and that municipalities across the country — heck, even states — will in coming years have to file for bankruptcy:
The next substantial fall in asset prices will sharpen the focus on budget deficits and pension underfunding, with the most indebted and underfunded states likely to find they are unable to rollover their debts at any price. Remaining residents will be negatively impacted, pensioners will see their payments slashed, and bondholders will recover little, if any, of their debt. As there is virtually no political will to take action to avoid these problems, investors should position their portfolios in expectation that these events will happen.
What’s in your wallet?