As investments, municipal bonds have been traditionally seen as safe, stodgy and boring. None of those terms describe Jim Lebenthal, one of "munis" biggest fans. At 81, Lebenthal is a larger-than-life character, a raconteur who can sell ice cubes to Eskimos without breaking a sweat. Munis are in his blood. "Has there ever been such an enthusiastic booster of the municipal bond market?" asked Bloomberg News columnist Joe Mysak a few years ago. Probably not.Lebenthal's parents Louis and Sayra founded Lebenthal & Co. in 1925, four years before the crash of the stock market. In an interview with DailyFinance, Lebenthal says he remembered seeing men in fedoras selling apples near his parents' office at 120 Broadway, near Wall Street.
A Princeton Grad
"I was born at a time when munis did their stuff," he says, referring to the many municipal improvements funded during President Roosevelt's administration. His family business displayed the eagle sticker supporting Roosevelt's National Relief Agency, which was later ruled unconstitutional by the Supreme Court. Municipal bonds are used by government entities ranging from school districts to state governments to fund expenditures such as school and road construction.
He attended Princeton University with former Federal Reserve Chairman Paul Volcker, though he did not get to know him well until decades later when they both served on the board of MBIA (MBI) and as a "class agent" for Princeton, who asked fellow alums to donate to the university. He remains a fan of Volcker, who wrote the forward to one of his books, but is not sure if he has the stamina to serve another term as Fed chairman, as some have suggested.
"I do think he would be marvelous as her majesty's loyal opposition," Lebenthal says, adding that he particularly admires how Volcker sticks to his guns, even if his position may be unpopular. "I wish he were our Fed chairman."
Worked As A Hollywood Correspondent
Lebenthal fled the family business when he was younger, winding up at the advertising firm Ogilvey & Mather and as a correspondent for Life magazine in Hollywood, where he says he helped make Kim Novack a star. By the early 1960s, Lebenthal was getting restless.
After the tedium of writing photo captions about buffaloes for Life proved too much, Lebenthal realized he wanted back in the family business. Lebenthal phoned his mother who was glad to hear from him. He rejoined the company and, despite resigning once as he struggled to adjust to life away from Hollywood, has been in the muni-bond business ever since then.
Louis Lebenthal, who was an orphan, died in 1951. Sayra Lebenthal remained active in the company until her 90s and occupied the office next to her son. The New York Times noted in 1989 that she had the final say in corporate matters since she was the majority stockholder. She died in 1994.
Starred In Commercials
Lebenthal starred in a series of commercials in the New York area extolling the virtues of -- what else? -- munis. In 2001, the Lebenthals sold their family business to Advest Group, a regional broker that was acquired four years later by Axa Financial who subsequently sold it to Merrill Lynch. The now-defunct brokerage retired the Lebenthal name.
Lebenthal came out of retirement in 2005 to form a new firm called Lebenthal & Co. Company President Alexandra Lebenthal is his daughter who is, at least theoretically, his boss.
"He definitely has mellowed with age," says Alexandra Lebenthal. Jim Lebenthal respectfully disagrees.
That may sound hard to believe from someone who has to remember the advice of his cardiologist about not running to catch a bus, but Alexandra Lebenthal insists that it is so. His exudes enthusiasm for munis, with little prompting and has even written two books on the subject. His latest, Lebenthal on Munis, delves into the why's and why-not's of muni investing. Most investment advisers say government bonds should be in most portfolios if for no other reason than their tax advantages.
Stresses Need For Diversification
Like stocks, muni bond investors need to be diversified. They should stagger their holdings by maturity based on when they expect to need their money, he says. Lebenthal has no problem with municipal debt, but remains adamantly opposed to deficit financing, likening it to giving a thirsty man a glass of salt water. Investors do not do the same level of research with muni bonds as they do with stocks -- and they should, he says.
Lebenthal is not oblivious to the market's challenges. Last year, Moody's Investor Service slashed ratings on 279 government bonds, up from 81 the previous year as tax collections were strained by the recession. California's budget was such a disaster that it asked for a federal bailout. The request was declined. New York's fiscal house is a mess as well as are many other states.
"Numbers if only by direction tell you something," Lebenthal says. "The budget cuts that took effect in 2009 are only the beginning. We have not even felt the full impact of what's coming down the pike."
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