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  #51  
Old 05-04-2011, 11:30 PM
Trimalchio Trimalchio is offline
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Quote:
Originally Posted by limabeanactuary View Post
What will that "face value" really be worth, though? i'm hard pressed to see how he's not a sucker.
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  #52  
Old 05-05-2011, 05:19 AM
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Now now.

Not all bonds will default.

And some are expecting the taxpayers to get screwed before the bondholders do.

We'll see who wins!
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  #53  
Old 05-10-2011, 10:33 PM
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Let's pretend the postal system is a municipality:
http://www.msnbc.msn.com/id/42982117

Quote:
The Postal Service is continuing to hemorrhage money, reporting a loss Tuesday of more than $2 billion over the first three months of the year and warning it could be forced to default on federal payments.

Such a default would not interrupt mail service to millions of Americans, but it could further hobble an agency struggling with a sharp decline in mail because of the Internet and a tough economy.

The agency says the $2.2 billion loss covers Jan. 1 to March 31, 2011 — sharply higher than the net loss of $1.6 billion for the same period last year. The post office also said it will have reached its borrowing limit, set by Congress, of $15 billion by the end of the fiscal year.

Unless Congress intervenes, the Postal Service said, the agency won't have the cash for certain payment to the government, such as billions for a trust fund to provide health care benefits for future retirees.

"The Postal Service continues to seek changes in the law to enable a more flexible and sustainable business model," said Postmaster General and CEO Patrick R. Donahoe. "The Postal Service may return to financial stability only through significant changes to the laws that limit flexibility and impose undue financial burdens."

Total mail volume, about 41 billion pieces, was down 3.1 percent for the January to March period, compared to the same time a year earlier, the Postal Service said. A modest increase in revenue from standard mail wasn't enough to offset the revenue loss from fewer pieces of first-class mail.

In the last three years, the agency has cut over 130,000 jobs. And it's making more cuts, with the elimination of about 7,500 administrative jobs in regional offices.

The Postal Service does not receive tax money for its operations.
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Last edited by Klaymen; 05-11-2011 at 08:51 AM..
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  #54  
Old 05-11-2011, 06:42 AM
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Could you give us a link on that one? (and I have been putting USPS stuff in here, too....just because)
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  #55  
Old 05-21-2011, 06:48 AM
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Whitney puts out something again in WSJ:
http://online.wsj.com/article/SB1000...261805612.html

Quote:
Next month will be pivotal for most states, as it marks the fiscal year end and is when balanced budgets are due. The states have racked up over $1.8 trillion in taxpayer-supported obligations in large part by underfunding their pension and other post-employment benefits. Yet over the past three years, there still has been a cumulative excess of $400 billion in state budget shortfalls. States have already been forced to raise taxes and cut programs to bridge those gaps.

Next month will also mark the end of the American Recovery and Reinvestment Act's $480 billion in federal stimulus, which has subsidized states through the economic downturn. States have grown more dependent on federal subsidies, relying on them for almost 30% of their budgets.
....
Since January, some of my colleagues focused exclusively on finding the most up-to-date information on ballooning tax-supported state obligations. This meant going to each state and local government's website for current data, which we found was truly opaque and without uniform standards.

What concerned us the most was the fact that fixed debt-service costs are increasingly crowding out state monies for essential services. For example, New Jersey's ratio of total tax-supported state obligations to gross state product is over 30%, and the fixed costs to service those obligations eat up 16% of the total budget. Even these numbers are skewed, because they represent only the bare minimum paid into funding pension and retirement plans. We calculate that if New Jersey were to pay the actuarially recommended contribution, fixed costs would absorb 37% of the budget. New Jersey is not alone.
....
Fortunately, many governors are addressing their state's structural deficits head on. Unfortunately, there is a lack of collective appreciation for how painful this process will be. Defaults in a variety of forms by states and municipalities are already happening and more are inevitable. Taxpayers have borne the initial brunt of these defaults by paying higher taxes in exchange for lower social services. And state and local government employees are having to renegotiate labor contracts that they once believed were sacrosanct.

Municipal bond holders will experience their own form of contract renegotiation in the form of debt restructurings at the local level. These are just the facts. The sooner we accept them, the sooner we can get state finances back on track, and a real U.S. economic recovery underway.
Someone reminds Whitney of her prior predictions:
http://www.bloomberg.com/apps/news?p...d=a1d88gL7k_bQ
Quote:
It’s no wonder Meredith Whitney wants to distance herself from her prediction of the municipal market’s meltdown.

“I never said that there would be hundreds of billions of defaults. It was never a precise estimate over a specific period of time.” So said Whitney on Bloomberg Radio on Wednesday morning.

This is what she said on an episode of CBS’s “60 Minutes” that aired on Dec. 19, 2010:

“You could see 50 sizeable defaults. Fifty to 100 sizeable defaults. More. This will amount to hundreds of billions of dollars’ worth of defaults.”

As for timing, “It’ll be something to worry about within the next 12 months.”

What this sounds like is Meredith Whitney saying there will be hundreds of billions of dollars’ worth of municipal bond defaults within the next 12 months. That sounds like a precise estimate over a specific period of time. And that’s how it has been reported and dissected in the press since then, with not a word of protest from Whitney.

Until this week. Whitney told Bloomberg Radio host Tom Keene that she thought “60 Minutes” did a “really good job” on the story. “But the risk is that they take bits and pieces of an hour-and-a-half interview and certain portions are more magnified than others.”

Whitney also later told Keene: “In the cycle of this municipal downturn, I stand by it. But we never had a specific estimate for that. That’s not the nature of our research.”
....
And yet, as arguments go, Whitneyism is an unsupported assertion. In the modern era, there is little to suggest that serious public officials will shirk their duty to bondholders. The results would be catastrophic, far worse than any temporary boon to taxpayers. Past performance is no guarantee of future behavior, but there has been nothing to signal that mass repudiation will become fashionable at any time, let alone within the next eight months.

Ha ha ha. Serious public officials, huh? What are those guys over in Europe, huh? Not serious, I suppose.
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  #56  
Old 05-21-2011, 08:28 AM
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unsaid is the current population of said "serious public officials". and even among the serious, they also have an obligation to the public they serve. is it possible that in the short term they default? (well, I am not saying it is, but someoen might run through it and say "that is what we need to do." and still be serious.)
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  #57  
Old 05-21-2011, 08:34 AM
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The default that is being planned in Europe, for example, is a "structural default" (for now), which is "Sure, we'll be paying back the principal and the coupons.... but we're changing the deal" - i.e., the term and the coupons (perhaps).
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  #58  
Old 05-21-2011, 10:59 AM
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We need some historical perspectives on Muni defaults... what are the default rates, average haircut taken by the bond holder, max/min haircut, time to recovery (if any), work-out deals, tax changes, etc?

I'll pull some stuff...
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  #59  
Old 05-21-2011, 01:16 PM
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You might also want to check out the size of the liabilities the municipal bodies took on, as well as their demographic patterns.

Kind of hard to tax your way to solvency when the taxpayers aren't even extant (cf Detroit)
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  #60  
Old 06-02-2011, 05:21 PM
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http://www.projo.com/business/conten...3.31f6508.html

Quote:
Moody’s downgrades outlook on R.I. bonds

Moody’s Investors Service has downgraded the outlook on Rhode Island bonds to negative from stable because of “the potential impact of rapidly escalating pension costs on the state’s ability to increase its liquidity margins, diminish its reliance on one-time measures to balance its budget and reduce its debt burden.”

Moody’s added, “The state’s pension costs are set to double in two years by an amount that roughly offsets its budget reserve account, raising the likelihood that it will continue to face significant budgetary pressures …”

Rhode Island currently has an unfunded liability of $9.4 billion. That includes 155 plans run by state and municipal agencies.

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