How ObamaCare Will Gut Muni Bonds (Especially in These 7 States)

There is a reason that adults are told to don their oxygen masks before assisting children in the event of an emergency on an airplane. If the most capable people are disabled, the weakest are unlikely to be able to help themselves.

The same adage applied to the U.S. economy when Barack Obama took office in January 2009. In the midst of the worst financial crisis in a century, it was imperative that everything be done to address the causes of that crisis and to strengthen the fabric of the economy to position it for sustainable economic growth. That wasn’t done. Instead, the president made a historic decision that will rank among the great policy errors of the 21st century. He decided to pursue his dream of universal healthcare.

It’s been an economic and political nightmare.

The result, as you might expect, is the infliction of enormous damage on the American economy and tens of millions of Americans whose medical care has been turned upside down in the name of providing another entitlement without asking anything in return of the recipients. ObamaCare has increased medical costs, deprived Americans of their chosen physicians and treatments, and contributed to a culture of dependency that has no place in a land of liberty.

And now, in 2016, it’s about to gut municipal bonds.

Please keep reading.

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Warning: This High-Income Investment Just Got Doubly Risky

At this point of the credit cycle, a lot of securities look cheap. But the question is whether they really are cheap or whether they are cheap for a good reason.

One class of investment is looking exceptionally cheap right now – trading at 82.7% of their net asset value, and kicking off very high income of 10-17% at the same time. But in fact the whole class is in trouble.

It’s a group of companies known as Business Development Companies (BDCs). A BDC is a closed-end investment company that lends money to small and mid-sized companies. Due to their structure as closed-end funds that pay high dividends, BDCs are designed to appeal to retail investors. The problem is that investors often forget that high dividends come with a price – and that price is usually that the loans made by these companies are illiquid and high risk. And that means that when the economy weakens and the credit cycles turns for the worse, these companies tend to get into trouble. It happened in 2008/9 and it is happening again now, as I’ll show you in a moment.

But Congress just made the risk much worse…

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