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Hot damm, maybe we'll get another chance to load up like a couple of weeks ago, when the hedge funds had to unload their Muni's to raise cash

http://www.thestreet.com/s/mortgage-crisis-spreads-to-muni-bond-funds/funds/mutualfundmonday/10377475.html

rk
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Aren't muni bond revenues tied to property taxes? If so, one might think a real-estate crash would effect the ability of the municipality to service the debt, right?
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Hi ranshdow,

Yes, the taxing authority depends on all the different taxes to pay their debts. But remember, property taxes trump all other positions, so any forclosure requires the maintenance of the taxes, or the bank would lose the property to a tax auction. Obviously not going to happen...

rk
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I'm in the 33% tax bracket in CA. I'm very curious what kind of advice there may be or what research I should be doing to look at munis - either for short-term or long-term e-fund, place to stash cash, etc.

thank you
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Hi FoolStreet,

You might look at Muni-CEF's for Cal. I have several for AZ. Go to www.nuveen.com Then click on Closed-end funds. In there you can click on 'find a fund' and it will let you input various things (including state) and list the CEF's that match. There are quit a few for Cal. specific folks.

One that I recommended to a friend a while back is NKX. It is a triple-tax-exempt (fed; state; AMT) for Cal. that is yielding around 5%..

Spend some time surfing the site, they have many useful articles concerning Muni-bonds; allocation %, etc.

rk
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You might look at Muni-CEF's for Cal.

thank you for the link and pointers... Can you comment on what kind of a time horizon is appropriate for such an investment? ie, would interest rate risk preclude it from being used as an e-fund for money needed in the first few months of an emergency? Would it be ok for later months in the e-fun? Or would it only be good for non-efund? or low-need cash in one's taxable portfolio that can be invested for 1yr? 3yrs? 5yr? etc?

I also am sure some on the board would suggest buying individual triple-tax exempt bonds and buying and holding directly...?

thanks again
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thank you for the link and pointers... Can you comment on what kind of a time horizon is appropriate for such an investment? ie, would interest rate risk preclude it from being used as an e-fund for money needed in the first few months of an emergency? Would it be ok for later months in the e-fun? Or would it only be good for non-efund? or low-need cash in one's taxable portfolio that can be invested for 1yr? 3yrs? 5yr? etc?

I also am sure some on the board would suggest buying individual triple-tax exempt bonds and buying and holding directly...?


There are a bunch of issues involved here.

It does sound like, from a tax perspective, California muni bonds make sense for you. But remember Treasuries, TIPS, and Savings Bonds are all exempt from California taxes, so you do have options where the main difference is your federal tax rate. (Typically, the cut off for where munis pay off at a federal level is around the 28% bracket.)

The problem is neither a fund not individual munis works well for emergency funds. Muni funds are subject to interest rate risk, and high paying leveraged funds are even riskier. It is going to be pretty hard to get enough liquidity with individual munis.

Vanguard has a California Tax Exempt Money Market, which probably will do better for you than a conventional money market (I'm assuming you mean you are in the 33% Federal tax bracket, plus pretty high California income taxes).

https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0062&FundIntExt=INT

You might also, despite the low current fixed yields, be a good candidate for US Savings Bonds for the contingency part of your E-fund (i.e., money you think unlikely you will need to use). You are young, so delaying taxes for 30 years is possible, and you may be in a much lower tax bracket when you retire, though what the world will look like in 30 years is a crap shoot.

You could also try laddering California munis for long term bond/fixed-income allocation in taxable account. This is not easy or cheap.
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I'm in the 33% tax bracket in CA. I'm very curious what kind of advice there may be or what research I should be doing to look at munis - either for short-term or long-term e-fund, place to stash cash, etc.

Be sure to do your due diligence, just as you would for corporate bonds.

Here's a general report that mentions defaults through the 1980s
http://www.publicbonds.org/public_fin/default.htm

Here's a Standard & Poors report about defaults in the 1990s
http://www.kennyweb.com/kwnext/mip/paydefault.pdf

Vickifool
P.S. If that's only 33% total US + CA taxes, you might be better off with Treasuries.
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Vanguard has a California Tax Exempt Money Market, which probably will do better for you than a conventional money market (I'm assuming you mean you are in the 33% Federal tax bracket, plus pretty high California income taxes).

https://flagship.vanguard.com/VGApp/hnw/funds/snapshot?FundId=0062&FundIntExt=INT



It looks like this MMF is yielding 3.78% So, that's 3.78%/.60 = 6.3%!?

Not bad...
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