Buyers of municipal bonds might want to look over their portfolios very closely, says Marilyn Cohen, CEO of Envision Capital Management in Los Angeles.
Recently, Meredith Whitney, the independent banking analyst who correctly predicted the 2008 financial collapse, appeared on the CBS show “60 Minutes” to warn of hundreds of billions of dollars of future muni-bond defaults.
“I do agree there will be more defaults in 2011, but not hundreds of billions,” says Ms. Cohen. “Selective bonds have and will continue to weather the storm.”
She particularly likes bonds that have a specific stream of revenue dedicated to paying the interest on the security. Think water, municipal power, and irrigation bonds. She also advises sticking to states that are doing well. “Stay away from things that are not essential,” she says.
