AMODEO & DIMELLA: INVESTING IN MUNI BONDS

February 14, 2014

On this week’s WEALTHTRACK, the rising appeal of muni bonds. Despite some negative headlines, top fund managers Robert Amodeo of Western Asset Management and Robert DiMella of MacKay Municipal Managers say there are opportunities to be had in munis.

Listen to the audio only version here:
AMODEO & DIMELLA

WEALTHTRACK Episode #1034; Originally Broadcast on February 14, 2014

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ROBERT AMODEO

Head of Municipals, Western Asset Management

ROBERT DIMELLA

Co-Head, MacKay Municipal Managers

Consuelo MackTax payers are in for sticker shock when they prepare their 2013 tax returns. Federal taxes have gone up pretty much across the board, as have many state and local taxes. In a higher tax, income starved world the logical place to look for shelter is municipal bonds. However, munis have been hit with some nasty headlines which have caused investors to flee instead of buy.

Among the biggest and most troubling areas of concern are Detroit, which filed for bankruptcy last year; Chicago, which has suffered a credit downgrade; and Puerto Rico which has had difficulty in refinancing its debt. Puerto Rico is an especially big deal. Its $70 billion of debt outstanding, second only to California and New York, is widely held because its bond interest is triple tax free to investors.

Investors have been leaving the municipal bond market since the financial crisis for several other reasons as well.  Major municipal bond insurers like MBIA and AMBAC ran into financial difficulties, leading to a 98% decrease in the insured muni bond market. State and local governments came under financial pressure and there was a widely publicized prediction of widespread defaults by prominent analyst, Meredith Whitney which fortunately did not materialize.

This week’s WEALTHTRACK guests are two municipal bond pros who believe these headline risks have created unusual opportunities in the muni market. Robert Amodeo is Head of Municipals at Western Asset Management where he oversees about $28 billion dollars of muni portfolios.  He also co-manages several of its muni funds, including Western Asset Managed Municipals Fund and Western Asset Municipal High Income Fund, which have been among the best performers in their category for the last decade. Western’s muni team was named U.S. fixed income municipal manager of the year for 2011 by Institutional Investor magazine.

Robert DiMella is co-head of MacKay Municipal Managers where he oversees more than $7 billion dollars of muni assets. DiMella and his team run five municipal bond funds under the MainStay name, including MainStay Tax Free Bond Fund  which is ranked four- stars by Morningstar, and the five-star rated MainStay High Yield Municipal Bond Fund. Barron’s ranked MainStay funds among their “Top 5” in the tax-exempt category in 2012.

MainStay is a WEALTHTRACK sponsor but Bob DiMella was invited this week based on his outstanding long-term track record.

Both DiMella and Amodeo are students of behavioral finance. In our EXTRA feature on our website they will explain how psychology is affecting the muni bond market right now.

We hope you will be celebrating Valentine’s Day with your loved ones. Have a great President’s Day weekend and make the week ahead a profitable and a productive one.

Best regards,

Consuelo Mathews Asia

Consider Owning Municipal Bond Funds

  • Historically low default rates
  • Tax free interest
  • Competitive yields
  • Offer portfolio diversification
  • A “non-correlated” asset

Among Morningstar’s Recommendations: Fidelity Intermediate Municipal Income Fund (FLTMX)

No Bookshelf titles this week.

DIMELLA: U.S. INFRASTRUCTURE INVESTING

Look At Tax-Exempt Revenue Bonds Issued By Infrastructure Projects Such As Toll Roads, Airports & Desalinization Plants

AMODEO: GROWTH & INCOME

Buy A Basket Of Pharmaceutical Companies, for example:

  • Johnson & Johnson (JNJ)
  •  Merck & Co. Inc. (MRK)
  •  Amgen Inc (AMGN)
No Stock Mentions in this episode.
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December 14, 2012

AMODEO & BENZ: MINIMIZING YOUR TAX PAIN

Regardless of what happens with the “fiscal cliff”, the economy, markets or the deficit, you name it, you are looking at climbing tax rate over the next few years. Our guests this week are two pros who can help you plan ahead with a tax-efficiency plan. Christine Benz is Director of Personal Finance and Senior Columnist for Morningstar.com, where she gives sound advice on just about everything having to do with managing your finances. Our other guest is Robert Amodeo, Head of Municipals at Western Asset Management, who was named Municipal Manager of the Year by Institutional Investor Magazine in 2011. The taxman cometh, so you’d better be ready.

WATCH NOW…

 Irrational Behavior

Municipal bond investors fled the market in droves last year after scary headlines about bankruptcy in Detroit, credit problems in Chicago and Puerto Rico’s refinancing woes. Their indiscriminate selling created opportunities for this week’s guests. Muni fund portfolio managers Robert Amodeo and Robert DeMella explain why they pay so much attention to investor behavior.

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