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Muni Bonds You Pick to Cold Call

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Jan 3, 2012 3:47 pm

What are the parameters you guys use to pitch munis on your cold calls?  What are the hot buttons that have been working in this environment?  How much of a premium are folks willing to pay.  Many of the decent bonds are pretty pricey with an impending rise in rates.  I appreciate any info and help you will provide.  Thanks!

Jan 3, 2012 5:19 pm

I would be calling on dividend paying stocks - maybe even an equity UIT. 

If I had to call on muni bonds it would be a state specific tax free issue or an A rated 15yr or lower bond as close to par as possible.

Jan 3, 2012 10:30 pm

Something along the lines of A rated with the highest yield.

Highest yield attracts attention, which is of course the largest obstacle. From there you can backtrack based on what interests them. For example, let them tell you what state or maturity limits, but start at highest yielding with reasonable rating.

I too have thought about dividend paying stocks but not sure it has the same audience based on the risk and uncertainty elements. I'd be interested in hearing success stories though based on that approach.

Jan 3, 2012 10:44 pm

I called a guy today with AT&T, we set an appointment for next week (he was a warm call) .. it's really just a conversation starter.  My opinion on div. paying stocks is to use a blue chip company with a good dividend.  I've opened a handfull of accounts with it.  Perfect way to reconnect with prospects you've not contacted in awhile.

Jan 4, 2012 2:00 am

high yield at A- with a bid lower than 104.  High premium ones are a pain.  

UITs and stocks are fine, but its nothing they can't hear on CNBC.  Munis also do part of the screening for you as well.  If they buy munis, 75% chance they have real money.  

Jan 11, 2012 3:32 am

Like the others.....At least a 5% YTM and close to 5% YTC.   Has to have a credit rating.  Has to be a familiar name.  Know the story....why it is better than other bonds in your state.

For example....if it is a hospital bond, why is this hospital better (afiiliated with a unversity, teaching hospital, state non profit).   If it is an airport bond,  is total traffic up recently, are new airlines coming into the area.  You get the idea.

Dividend paying stocks maybe.

Higher yielding prefered woudl be better.  Lots of them out there at 7%+ and trading below par.  But again, choose a familiar name.

I created a portfolio of dividend paying utilities with a history of rising dividends.  10 stocks, after tax yield of 5%.  Total return over the past 2yrs of +29%.  ALL are household names in my area.  I use this as a CD alternative or for a second trade.  Works best face to face.

I have the portfolio printed on a sheet af paper...names, current prices and yields.  I hand them the paper and we go over it together.  If they are considering a CD or other low yielding investment this portfolio almost sells itself.


Jan 11, 2012 9:22 pm

One criteria - High yield.

 Nothing else matters. You are trying to catch their attention, it's a conversation starter, nothing more. Believe me, if they are serious bond buyers they will find something not to like about the bond you are presenting. Which IS the point. Qualify them for a call back . Interest and money to invest NOW!!!! Anything short of that, with the clock ticking,  and you are kidding yourself out of a great career.

Jan 12, 2012 12:56 am
Jan 20, 2012 11:54 pm

[quote=FADavo]with a bid lower than 104.  High premium ones are a pain.[/quote]

Really? I always prefer the premium ones. Highest coupon usually are premium.

Also, if you do the math and compare to a similar YTM at par, the premium pays more. Show it to your clients and prospects, they'll likely change their prospective and be appreciative if nothing else. Especially if they're big time income buyers.

Jan 23, 2012 6:07 am

I like ZERO's

I'm not petrified about rates going up.

Today (1/12) you can still find a  20 year zero selling for 40 or better ; Preferably AA or AA+ rated (I still think the rating agencies are F$%$%$)

Mr Jones lets lock up over 5.5% tax free

$100,000 bond requires an investment today of $40,000 and you'll lock in over 5.5% tax  free for the next 20 years...

Equivalent to over 7.5% taxable.

In 10 years this bond will have only 10 years left to go and you can decide if you want to continue holding it.

But you should see progress...

Even if Rates skyrocket , the clients will make money AS LONG AS THEY UNDERSTAND this is a 5 - 10 year

program at least and it's not designed for a 3-6 month hold...

Over 10 years  it SHOULD?  be at 55 or 60 or perhaps more  but they SHOULD (lawyers)  see progress on their invested capital ...

Even though we are on the precipice of rising rates ; I think locking up 5.5% tax free for 20 years is not

that bad of an idea if  sold correctly...

and put the other 60m in some high dividend yielding stock funds and you'll be off to the races...

Yeah, I always liked combining zero's with good stock funds in a package.
I'd rather take my chances with a zero  with a maturity than a long bond fund with no maturity...

My 2c dash