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THE BERNARDS-RIDGE CONNECTION
NOVEMBER 2012
This material is for general information only and is not intended to provide specific advice for
any individual. To determine what may be appropriate for you, please contact me prior to investing.
ONE QUESTION
Richard A Girgis, CRPC
Partner
36
Cattano Avenue, Suite 200
Morristown, New Jersey 07960
(973) 984-6800 • (866) 262-2802
richard.girgis@lpl.com
www.lpl.com/richard.girgis
www.mwmllp.net
Ask yourself just one question! Are you truly
pleased with the investment guidance you are
receiving?
If you even hesitated for a moment in saying “Yes
I am pleased”, then you owe it to yourself, your
family, and your hard earned assets to explore
another investment avenue.
At Morristown Wealth Management we employ a
tactical approach to investing our clients’ assets.
We work to ensure that our clients’ portfolios are
constantly monitored in an effort to potentially
take advantage of market opportunities.
Let’s face it for the past 10 years many traditional
investment strategies have not generated returns.
While no strategy can assure a profit or protect
against a loss, you know you can’t afford another
10
years of missed opportunities?
Give us an opportunity to earn your trust.
MORRISTOWN
WEALTH MANAGEMENT
From a broad perspective,
there are two distinct factors
supporting the municipal
bond market. First, the new
issuance of municipal securi-
ties in 2012 is expected to
remain about 20% below
what it was in 2010.
*
Second,
despite the reduced supply,
tax-equivalent yields across
the muni market remain
above those available on sim-
ilarly rated corporate bonds.
A closer look at these factors,
however, reveals potential
opportunities within the tax-
exempt market. For example,
not only do tax-equivalent
yields exceed those on taxable
corporate bonds with similar
credit ratings, but investors
can also pick up more yield by
taking on more credit risk in
the municipal market than
they can in the corporate
market.
By moving from municipal
bonds with ‘AA’ credit ratings
to those with ‘BBB’ ratings,
investors could pick up an
additional 310 basis points
(
bps) in tax equivalent yield. In
contrast, the potential yield
pickup from a similar move in
the corporate bond market is
limited to 150 bps. Tax-
exempt spreads are still wider
than they have been histori-
cally, as the market continues
to work through the widen-
ing from several years ago.
Another factor supporting
lower-rated muni bonds is
that the issuance thus far in
2012
has been concentrated
in the higher-rated segments
of the market. In the lower-
rated parts of the market with
‘
BBB’ ratings and below, the
supply is low, and is expected
to remain low because there
are not a lot of projects need-
ing financing that are being
launched, given the economic
conditions. This is another dif-
ference from the taxable mar-
ket, as high-yield corporate
issuance in 2011 was the sec-
ond-highest on record, sec-
ond only to the issuance in
2010.
*
2012
estimate sourced from JPMorgan.
Municipal bond market supply equals the sum of new capital and refunding.
Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold
prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative min-
imum tax. Municipal bonds are federally tax-free, but other state and local taxes may apply. Bond yields are subject
to change. Certain call or special redemption features may exist which could impact yield.
Securities offered through LPL Financial, Member FINRA/SIPC
EVEN AMID LIMITED SUPPLY,
LOWER-RATED MUNICIPAL BONDS HAVE
MORE POTENTIAL TO OFFER MORE
YIELD PICKUP THAN CORPORATE BONDS
By: Richard A. Girgis, CRPC
®
,
Partner
Morristown Wealth Management
www.theconnectionsnj.com