State bonds

Early to Rise - Investor's Edition
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Market Minute:

What Happened: A report published this week by the Pew Center says that states
are $1.26 trillion in the red on their pension and retiree health obligations.

What It Means: It's a ticking time bomb. States will have to pay for the
shortfall by increasing property and/or income taxes.

Why It Matters: Concerns over state budgets have raised municipal bond interest
rates to take into account higher risks. But you can't talk about states as a
whole. Some states pose much less risk than other states. For example, New York
has 101% of their pension funded. No risk there.

Suggested Action: Stay away from states that have less than 80% of the pension
obligations funded. Municipal bond investments in the other states are safe and
the tax-advantaged interest rates you'd be getting are the best buy in town.