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This is our take on what's happening in the world, along with tales of wisdom and carefully selected articles and videos.

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Webcast Recording: Testing Your Mettle: Headlines, Market Swings and Your Financial Plan with Larry Swedroe and Jared Kizer

Investors often hear about the importance of focusing on the long term when it comes to meeting your financial goals. But when the market shows its volatile side like it has recently, and the headlines scream ‘Panic!,’ it can be hard for even the most disciplined among us not to second-guess our plan.

Meredith Boggess (Marketing Director at The BAM ALLIANCE) moderates a proactive discussion and Q&A with Director of Research Larry Swedroe and Chief Investment Officer Jared Kizer. Using the current market swings as just a starter for broader discussion, Larry and Jared provide perspective for those tuned into the market activity and discuss how equity activity can and should be viewed through the lens of our investment policy and overall approach to financial planning.

Copyright © 2015, The BAM ALLIANCE. The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.

Jon Sonnen & David Lindau recognized as lifetime members of the Texas Society of CPA’s

El Paso, Texas, July 20, 2015 – Jon Sonnen, CPA/PFS and David Lindau, CPA, CFP® of Lauterbach Financial Advisors, were recently recognized as Lifetime Members of the Texas Society of CPA’s. The Lifetime Membership is granted to individuals that have completed 40 consecutive years of membership in the organization. “When I started my career in accounting, I never imagined the changes that the field would experience”, said Jon Sonnen. “However, never forget that while technology might change, our job is to serve as our clients’ most trusted advisor, something that a computer might never be able to do”. Jon Sonnen serves as President and David Lindau serves as Senior Advisor at Lauterbach Financial Advisors, a Fiduciary Investment Management Firm based in El Paso, Texas .

Morningstar: DFA’s Disciplined Approach Earns It a Top Mark.

Dimensional Fund Advisors (DFA) is among the fund families we recommend our clients. Morningstar recently issued a new Stewardship Grade for them.
From the report:
"The firm's overall grade--which considers corporate culture, fund board quality, fund manager incentives, fees, and regulatory history--is an A."

 Continue reading on Morningstar’s Website.

What Kind of Risk is Present in Municipal Bonds?

A lot of municipal credit risks were exposed when the financial crisis hit in 2008, with municipal insurance companies failing, merging or getting downgraded. This brought scrutiny to the municipal market as some investors began to question the safety of muni bonds. It’s important, however, to remember that not all municipal bonds carry the same amount of risk. The market, after all, offers a variety of types and legal pledges.

There are two main types of municipal bonds: general obligation and revenue bonds. General obligation bonds carry the full faith and credit of the issuing municipality and are typically paid through property taxes. Revenue bonds, which cover sectors such as water, sewer and education, are funded by the revenues of that specific project and typically do not carry the full-faith backing of the municipality. 

With revenue bonds, certain projects are more essential than others. Projects like water and sewer systems or public university improvements are considered essential in purpose. No matter the state of the economy or project itself, a municipality cannot afford to default on these types of programs because they are vital services for a community. However, projects such as housing and health care systems tend to have limited purposes and resources and are generally not viewed as being essential services. Therefore, municipalities are much more likely not to intervene when these projects become insolvent. This is shown in the default table below. As you can see, housing and health care projects make up the vast majority of municipal defaults over the past 40-plus years. Defaults in general obligation and essential service revenue bonds remain rare occurrences, as evidenced by the default statistics for education, cities/counties/states and water/sewer projects.

 

Municipal Default by Sector, 1970–2012

SECTOR

# of Defaults

%

SECTOR

# of Defaults

%

Housing

29

39.7%

Water & Sewer

2

2.7%

Hospitals/Health Svc. Providers

22

30.1%

Counties

2

2.7%

Infrastructure

4

5.5%

Special Districts

0

0.0%

Education

3

4.1%

State Governments

0

0.0%

Cities

3

4.1%

Pool Financings

0

0.0%

Utilities

2

2.7%

Other

1

1.4%

Source: Moody’s

Bottom line: We don’t believe in taking risks with fixed income. We focus on high-credit-quality general obligation and essential service revenue bonds, such as water/sewer, university revenue and highway/transportation. These sectors have historically shown low-default rates. On the other hand, we strictly avoid unstable sectors such as health care, housing and industrial development.

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Copyright © 2014, The BAM ALLIANCE. This material and any opinions contained are derived from sources believed to be reliable, but its accuracy and the opinions based thereon are not guaranteed. The content of this publication is for general information only and is not intended to serve as specific financial, accounting or tax advice. To be distributed only by a Registered Investment Advisor firm. Information regarding references to third-party sites: Referenced third-party sites are not under our control, and we are not responsible for the contents of any linked site or any link contained in a linked site, or any changes or updates to such sites. Any link provided to you is only as a convenience, and the inclusion of any link does not imply our endorsement of the site.



 

Disclaimer: By clicking on any of the links above, you acknowledge that the links provided are solely for your convenience, and do not necessarily imply any affiliations, sponsorships or endorsements. We make no representations whatsoever regarding such third party websites. You should review the privacy policies of other websites carefully before providing any information to such sites. We are not responsible for the content or availability of third-party websites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through such third-party websites. These selected readings are being provided for informational purposes only and do not constitute investment advice and do not necessarily represent the opinions of Lauterbach Financial Advisors. Nothing in these materials should be interpreted as implying the performance of any client accounts or securities recommendations. Lauterbach Financial Advisors does not provide any guarantee, express or implied, that the information presented is accurate or timely, and does not contain inadvertent technical or factual inaccuracies. The past performance of securities is no guarantee of their future result.