03.23
I was reading some investment literature from T. Rowe Price today* and came across a very interesting statement that to me says quite a bit on the confidence of investors in local governments.
According to the T. Rowe Price Winter 2010 newsletter,
At the same time, he (Hugh McGuirk, head of T. Rowe Price’s municipal bond group) expects concerns about the health of state and local budgets to increase over the next year, so he has been tilting T. Rowe Price’s municipal bond portfolios away from direct government bonds in favor of essential service revenue bonds issued by water and sewer authorities and utilities—entities with stable revenue streams.
So perhaps what we are seeing is investors shying away from putting their (or your) money into established municipalities. Entities that probably won’t go away anytime soon. But they could go bankrupt. They could overspend and not have enough income. Then, what we could see is them cutting back services. Either that or selling established services to private companies. Companies that will be so ingrained in our social fabric, they might as well be government. And democracy will only be in the hands of the shareholders.
But I’ll make a few bucks on the dividends.
* Yes, I do some investing. Don’t laugh. I have mad cash invested in Disney.
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