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  #41  
Old 03-18-2011, 05:33 AM
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Mary Pat Campbell
 
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....

5)
6) Profit

?
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  #42  
Old 03-18-2011, 05:36 AM
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The thing is, of course, that if the pensions were well-funded, it would be difficult for the states to blame pension costs.

I'm just going to point to Illinois, which not only has been borrowing money to make its pension contributions (and they're still way way underfunded... and they've been cashing out assets in at least one major fund, in a very bad sign of a liquidation spiral), but also is way behind on its regular operational costs.... I'd say it's pretty fair to point to pensions, amongst many other state expenditures, as being unsupportable. And will not be supported 100%.
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  #43  
Old 03-22-2011, 07:06 AM
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Meredith Whitney walking it back
http://www.usatoday.com/money/compan...th-whitney.htm

Quote:
Q: You have been the voice of concern regarding the finances of the states and municipalities. How do things stand today?
A: Every day things get better because politicians are addressing the fiscal challenges more aggressively. Since November you’ve had more governors take strong austerity measures. The reality is that states have simply been spending far more than they’ve been taking in. In many cases, states have spent over two times the tax revenue they’re taking in. Of course, that’s not sustainable because they run down their rainy day funds, which they had previously used to balance misbudgets on a year-to-year basis. They don't have any wiggle room today. But every day the situation gets more focused, and that means it’s closer to finding a fix

Q: You have said that there could be 50 to 100 sizable defaults that could amount to hundreds of billions of dollars. Could we still see defaults?
A: Yes. This will be an extended multiyear issue. You will see defaults. You have debt that’s just not backed by ample cash flows, ample revenue. You’ve got too many drains and demands on state revenue. I’ve never said that a state would default, but I think the local municipal bonds are at a significant risk of default. Ultimately, a legislator is going to have to decide between the bondholder and their constituents, i.e., paying the police force or paying the bondholder. The local governments have decided they’re going to pay their police force, their firemen, their trash collectors. Some of the project finance bonds that have gone to back entities should never have been backed by tax-exempt municipal bond paper. Hotels, sports arenas, etc., project development bonds, don't have the revenue to back up the projects.
....
: What are you telling your clients about investing in light of all of this?
A: You don’t have a lot of bad news through May and June. And then you have some real challenges coming after June as housing starts to decelerate again as foreclosures resume and inventory really comes on the market. Investors who are looking for a strong second half may be disappointed. You may see a repeat of what happened last year. And inflation is a real issue. But for the next couple of months the markets should continue to do well. The more we can do to address fiscal austerity, the better our markets will do, and there is a real political shift to doing that.
And someone who's having none of it

http://www.huffingtonpost.com/charle..._b_838612.html
Quote:
Meredith Whitney's doomsday prediction back in December that there would be 50 to 100 sizable municipal bond defaults totaling hundreds of billions of dollars over the next year sparked a panic that hurt average investors who hold munis for their retirement, and municipalities trying to raise much needed cash during a time of strained budgets.

And yet, even as it become clearer by the day that what Whitney said was both irresponsible and wrong (do the math; just $12 million of munis have defaulted since December and we're already of the way through her timetable) she continues to mesmerize certain members of the press with her nonsensical meanderings about a market she obviously knows nothing about.
....
All of which wouldn't be so bad if Bartiromo didn't serve as a conduit for Whitney's initial absurd claim. In late December, after Whitney told 60 Minutes that municipal governments in 2011 were going to be no different than the banks were in 2008, she was promptly "interviewed" by Bartiromo on CNBC without even having to produce a shred of actual research to support her claims.

With that, the market for municipal bonds imploded. Because of the panic selling, small investors (the primary holders of munis because of their tax advantages) got hit the hardest, unless of course you count the nation's taxpayers who are now forced to pay higher interest rates when the cities and states they live in need issue debt.

This all seemed to fly over the head of Bartiromo, who lets Whitney off the hook once again, namely by failing to get Whitney to admit that she was wrong, and make her concede that her prediction was devoid of any real analysis (I have seen the research and it makes no mention of all those defaults).

And make no mistake about it, what Whitney predicted is wrong; so wrong that now she's even admitting to it, though her mea culpa once again seemed to go over the author's head. In the interview, Whitney now says her 50 to 100 sizable defaults prediction isn't going to occur over the next year. Rather, it's "an extended, multi-year issue." It would have been nice to know this three months ago.
Tell us how you really feel, Charles.
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  #44  
Old 03-22-2011, 07:46 AM
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Rick Sanchez is blogging for HuffPo now? I guess HuffPo is where you toil for free to try to regain relevance.

Usually like Chuck, but boo-hoo, someone actually said something negative about bonds. The horror. Fox Business is so corporatist its scary.
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  #45  
Old 03-23-2011, 09:57 AM
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I've been following the whole M.W. prediction and fallout. One item of note is that the Build America Bond federal stimulus program ended on 12/31/10. States rushed to the market with offerings before the federal stimulus dollars ended. So the muni bond market has seen very light supply in the first quarter of 2011 because of all the offerings at the end to 2010. So the real test of the muni market comes this summer? when supply increases to normal levels again.
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  #46  
Old 04-24-2011, 04:38 PM
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Considering making muni bonds taxable - as Girard Miller of Governing Magazine notes, this proposal is DOA, but Miller tells the munis to consider this...because they're going to need all the financing options they can get.


Fed claims muni bond defaults unlikely. I don't exactly disagree, but I think that the munis are going to find a tough time of it in rolling over their bonds or issuing new ones. The power to tax isn't infinite, especially when one's population keeps moving away (ask Detroit about that). Here's the Chicago Fed letter on this.
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  #47  
Old 04-28-2011, 03:47 PM
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NJ downgraded

http://www.newjerseynewsroom.com/eco...%204%2F28%2F11

Quote:
The bond rating for New Jersey’s state government has been downgraded one step to Aa3, the fourth-highest level, by Moody’s Investors Service, which cited a “weakened financial position” and an economic recovery lagging behind the nation.

Only Illinois and California have lower ratings from Moody’s, according to data compiled by Bloomberg News Service. Moody’s cited New Jersey “rapidly rising fixed costs, relatively slow economic recovery, and a lack of specified plans to rebuild fund balances.” Rising health-care and pension costs were also cited as a concern.

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  #48  
Old 04-28-2011, 04:41 PM
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From Mary Pat's article about NJ:
Quote:
Vallejo has paid $5 million in bankruptcy-related legal costs.
Aahhhhhhhhhhhhhhhhhhh it's part 9 again! Stulz & Risk Management Can Reduce Bankruptcy Costs. Aaaaaaaaaahhhhhhhhhhhhhhhhhhh!

7 days until the exam.
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  #49  
Old 04-28-2011, 04:56 PM
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Well, at least somebody is getting rich out of the bankruptcy.... and I think that somebody is lawyers.
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  #50  
Old 05-04-2011, 02:49 PM
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http://www.bloomberg.com/apps/news?p...d=aJrDba9MScY8

Quote:
John Hirsch, 57, has been buying municipal bonds during the past four months, taking advantage of falling prices as muni mutual funds are forced to sell them to cover withdrawals.

“I have no interest in trading bonds,” said Hirsch, a consultant to the medical industry in Clermont, Florida. “I’m going to hold until maturity, and at maturity I’ll get the face value back.”

Investors have withdrawn about $47 billion from U.S. municipal-bond mutual funds since Nov. 10, pulling money for 24 weeks straight, according to Lipper US Fund Flows, a Denver- based research company. Retail investors purchased about $3 billion more in individual municipal bonds in the first quarter this year than in the same period last year, according to data on trades of $100,000 or less from the Municipal Securities Rulemaking Board, which regulates muni dealers.

Surging investor withdrawals force mutual-fund managers to sell in a falling market. Investment-grade muni bond prices have dropped 4.6 percent in the six months through April, as measured by the Bank of America Merrill Lynch Municipal Master Index.

“The people who are redeeming are the dumb money, because they’re redeeming into a market where prices are down,” said Alexandra Lebenthal , chief executive officer of New York-based Lebenthal & Co. , which manages about $170 million in municipal- bond separately managed accounts. Her firm has received about $30 million in new money since December.

Lots more at the link.
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