Mark D. Goldstein, CFP®
Certified Financial Planner
NEW MEXICO OFFICE
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El Paso, TX 79912
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Rolling Meadows, IL 60008
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Friends, that may be the craziest headline line I've ever written. But, I wanted to come up with a really creative response to a client's question yesterday...
"Mark, what do think of Municipal Bonds?"
So, here goes...
Fact. Self-Driving Vehicles (SDVs) are the wave of the future and will cause the loss of millions of jobs. No argument there, right?
The problem is that we're not just talking about the jobs of cabbies and truck drivers. Self-Driving Vehicles also eliminate the need for parking valets, driving schools and garage attendants, just to name a few.
The End of the "Crash Economy?" Self-Driving Vehicles ultimately mean no more automobile accidents. With no accidents, will there still be a need for automobile insurance? Auto insurance accounts for about one-third of all insurance premiums collected annually by the Property-Casualty insurance industry... so that industry could be in serious trouble, couldn't it?
The CEO of Allstate, Tom Wilson, told the Wall Street Journal that "change is coming and we need to get ahead of it." That's why Allstate created "Arity" and hired over 200 scientists and tech experts. Their goal is to figure out how to keep Allstate in business!
And Allstate's not alone. A 2015 survey of insurance company executives found that 84% believed that Self-Driving Vehicles will negatively impact their businesses greatly by 2025... and 90% of them actually admitted that they have no strategic plans to deal with it!
What about the automotive aftermarket parts business? How about claims adjusters? Collision repair companies? Auto paint shops? What will happens to those businesses if the number of vehicles involved in accidents and the number of cars being repaired severely declines?
Why stop there, folks? According to the Mayo Clinic, more than 35% of spinal injuries are caused automobile accidents. Will the elimination of auto accidents force a large number of chiropractors out of business?
Where Will the Dominoes Stop Falling? State and local governments currently generate over $6.5 billion per year in revenue from moving violations, parking tickets and towing charges. And I don't think it's any big mystery that small towns all over America depend on "speed traps" to generate the revenue needed to provide basic community services.
Well, Self-Driving Vehicles don't speed. They don't run red lights or ignore stop signs. They don't double-park or go the wrong way on one-way streets. So, my point is, if these municipalities suddenly lose the $6.5 billion that they're currently receiving every year from all the bad human drivers on their roads... how will they provide services and pay their bills?
And, FINALLY, the Answer to the Original Question!
Since one of the major bills these municipalities pay is the interest they owe on the municipal bonds they've issued... isn't it possible we could experience the most devastating series of municipal bond defaults in U.S. history?
And, by the way, what would happen to all the retirees who (ignoring my advice) purchased over $3.6 trillion worth of municipal bonds... and are dependent on the income they generate?
Ladies and Gentlemen, I rest my case.