Word: altria
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Dates: during 2003-2003
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...trouble started in March, when an Illinois court left the Marlboro Man (Altria, formerly Philip Morris) gasping over the prospect of having to post a $12 billion bond before it could appeal an adverse verdict over its marketing of "light" cigarettes. Altria threatened Chapter 11, its corporate-bond ratings were slashed, and state-tobacco bonds reeled, losing 10% of their value. Virginia postponed a $767 million tobacco-bond sale--and that highlighted the real problem...
...upshot: if tax-free income is what you savor, this is a great time to buy munis. Altria is just blowing smoke about bankruptcy; indeed, at the urging of a large number of states, Illinois has dramatically reduced Altria's appeal bond so that it can keep making settlement payments. Even in bankruptcy, the payments would probably continue as an operating expense. And even in the unlikely event that the tax on stock dividends is erased, there will be no massive flight from munis toward stocks. The typical muni investor values stability above...
...holdings, with a little more risk, are telecom and tobacco. I own SBC [4.5%] and Verizon [4.3%]. You have an interesting tension in terms of whether they get into the long-distance business or lose their local businesses. But there is a lot of yield there that compensates you. Altria Group, formerly Philip Morris [6.7%], is one of my top-10 holdings...