Cumberland’s Response to the “Muni Scare” June 18, 2010, John Mousseau, CFA, Managing Director & Portfolio Manager
This week there have been more in a series of articles highlighting the municipal bond market and pointing to what we think are overstated financial risks. The Wall Street Journal provided a good example on Monday, June 13, with an article entitled “Investors Looking for Red Flags in Muni Market.” We believe the article was inconsistent and did not reveal anything not already in the market.
Our View:
Thus, while we realize that municipalities are in the midst of probably the worst economic downturn since the Great Depression, we also recognize that their overall credit quality; extremely low long-term default rates; and their ability to cut expenses, raise revenues, and recognize a large depth and breadth of potential revenues will carry the day for most municipal issuers. The focus on credit quality and diversification is more important than ever, but American states, cities, and municipal entities are NOT going out of business.
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For a list of all equity recommendations for the past year, please contact Therese Pantalione at 856-692-6690,ext. 315. It is not our intention to state or imply in any manner that past results and profitability is an indication of future performance. All material presented is compiled from sources believed to be reliable. However, accuracy cannot be guaranteed.
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