Sunshine

“Sunshine on my shoulder makes me happy.”

John Denver recorded that hit over 30 years ago. Whatever he meant, I’m pretty sure he did NOT intend it as a commentary on the municipal bond market. But that’s what’s needed in muni bond land: sunshine.

By sunshine, I mean transparent disclosure of current financial conditions. The kind of disclosure we get in the stock market. The kind of information we get on the general economy. Because US companies have to report their revenues, expenses, and earnings every quarter, there are very few genuine surprises. Yes, you get the occasional fraudulent Enron, but in general, in the equity market the best surprise is no surprise.

There are some areas of the muni market where this is the case. In California, for example, the State Controller provides monthly updates (about 10 days after each month-end) regarding the State’s revenues and disbursements. Contrary to what you might read in the media, that State’s credit rating is still A1 and is not close to junk.

But there are many places where disclosure is sadly lacking. Not every issuer has tens of millions of dollars to spend on financial analysis, and accrual accounting in the public sector can be tricky. Nevertheless, if small companies with around 300 employees can produce financials 90 days after the quarter closes, cities like Chicago or Miami ought to be able to come up with preliminary numbers on a regular basis. The problem is, the current political leadership may not want to.

There are problems in the muni market. But they’re problems that can be fixed. In order to fix them, we need to see them. And in order to see them, we need sunlight.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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By | 2014-01-08T15:59:28+00:00 December 29th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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