The hidden risks in bonds
Submitted by lucas20 on Sat, 10/13/2007 - 23:35.
(Fortune Magazine) -- Municipal bonds, used to fund everything from
bridges to hospitals, are sold as stodgy investments for moms and pops.
But in a speech last July, SEC chairman Christopher Cox delivered a
stark warning: Muni bond investors might think they "can rest assured
that their interests are fully protected by the same high standards
that operate everywhere else in the U.S. capital markets," Cox said.
"Not even close."
This is an interesting article that all investors should read to be fully informed on bonds as an asset class.
Rest assured.....
So say for instance you own some Syracuse City Muni's, now these bonds are triple AAA b/c they are MBIA insured, however Syracuse City's underlying credit is actually A+. Now lets take a look at the credit quality of MBIA and their ability to insure that bond...I think everyone can do the math from there.