I don't think rising interest rates should be of too much concern anytime soon with the Fed making it clear they will continue to do what they can to keep rates down. To protect against rising rates I have hedged by buying a little of an ETF which shorts treasuries and goes up when rates go up. The danger to the price of MAV and other Muni ETF's is the talk of reducing the tax exemption fo Mun's. The odds of this are about 30% according to most analysts of some reduction being passed in the future. I'm willing to bet against any major reduction being passed for now.
As I expected the Tax exemption for muni interest remains safe for 2013. Now with the higher tax rates MAV is a great buy even in the high 15's. In my experience and as one of my advisors in a recent article stated it sometimes does no good to look at lengthy analysis of fundamental issues when at the end of the day it is about whats going on in the market and what the market is saying. The market has been saying high yield muni ETFs like MAV still has legs in this perfect storm for Munis.
MAV closes the year above $15 as I expected and will continue to trade above $15 in 2013. There will be temporary dips to $14 when talk of amending the tax benefits of Muni's scare investors but we could also see a spke above $16 when these fears are resolved. My other Muni investments have done well over the years but MAV has been my best high yield Muni investment.
Sentiment: Strong Buy
That was the dip I was hoping for and knew was a possibility. However I don't expect it to last long and prices already are rebounding. There was a broad sell off of most assets on Thursday and it included Munis. Many Muni investors were nervous after Obama' speech. There is an expectation that the Muni tax exemption will be reduced but the smart money knows those fears are overblown. The fact is tax rates will go up next year but any change to the muni exemption will not take into effect until 2014 if ever. If there is a change to the exemption it will not be a massive one and worst case is it will just involve changing the exemption limit up to the 28% bracket instead of up to the 35% bracket. I think another reason for the selloff is because after Obamas speech many investors are taking their profits now before the new year and higher tax rates.
Sentiment: Strong Buy
Tax rates are expected to rise which is fueling this perfect storm for Muni bond demand. Unless Obama passes a bill to greatly reduce the tax exempt benefits of Muni's then I can see MAV trading over 16 next year. I'm hoping for a dip so I can continue to add more shares.
MAV is on the high end of my expected range for the year. Does anyone think it will hold? I think it could now breakout to mid 16's based on my experience with other similar muni ETF's but I'm hoping it will dip to the low 15's so I can continue to add to my position. This environment for Muni Bonds is more powerful than most analyst expected.
Sentiment: Strong Buy
Back when MAV was trading below 14 over a year ago it was my expectations for MAV to be in this range by now which I think is reasonable I heard how others thought MAV was already high and would never trade so high well MAV has already proven them wrong over the year. Also I added to my position after Merideth Whitneys ridiculous claims. She still won't admit she was wrong and her backers say she just got the timing wrong only. Well in investing timing is everything.
MAV continues to ride the perfect storm for a Muni Rally but I think will stay in the 15's this year with the possibility of a temporary drop to the 14's. Does anyone think it will go to 16 this year?
You maybe right. We shall see although I think the sellers should not have sold so quickly in this environment below 15 before dividends. Although MAV is selling above NAV so are most others due to this low interest environment and higher tax rates expected next year. Any recommendations? I also own PMF, MFM, and HYD.
MAV will remain strong for the remainder of 2012 as most Muni bond funds and ETFs I am familiar with. I see no increase in the supply of Muni's and Treasury interest rates are set to remain low. Buy on dips in the 14's.
Mav will sell above NAV and range in the $15's in 2012 due to it's high yield and the record low treasury yields. As reported, Money Managers don't have other options but to buy these muni bond ETF's. There is a short supply in the muni market now. I will hedge by shorting treasuries slowly.
MAV and other muni bonds all trending up at this point even after ex-dividend dates. Looks like we are now headed over $14? Maybe tax bill going to Congress and low treasury rates are making muni's a convincing investment.
I don't think that the duration is the reason. People are still spooked and just now getting over the anxiety about Muni default fears. Also there were concerns about the Muni bond ratings being lowered I think. The smart money is moving into Muni's with each dip in price:
As CNN reported the rating agencies has warned that if the Federal rating is cut then the ratings of billions of dollars of Municipal debt secured by Treasuries will also be cut. Once this phoney false crisis created by politics passes shortly MAV will be back up where it belongs. Even Treasuries have been finding support despite the warnings and why would anyone want to own Treasuries over Munis?
Does anyone still take Merdith Whitney's prediction seriously? Also Treasury bond yeilds continue to go down and equities up. Hopefully the "dumb money" will sell muni's for more bargains for me. Good article in Forbes today:
Also with Treasury yield at such low levels, Muni bonds are increasing in demand as CNN reported today:
With the economy and equities continuting it's recovery, does anyone really think Muni's are not a good buy? Eventually MAV will be back to it's historical $14 to $16 range. Hopefully we can buy more on a dip if Meredith Whitney gives another one of her hilarious predictions.