Fear mongering or should we go hide in bunkers? http://www.cnbc.com/id/40769692/comid/2#comments_top
I dont really expect the default number to get massively high, because I think the bailout machine will just get cranked up again. I do expect the muni market to get incredibly locked up and nasty and for it to resemble to 2008 High Yield market in a lot of ways. Good luck getting a bid on a California GO when the s— hits the fan. The worry would be that it would slap retirees once again and cause a massive wave of “risk off” behavior.
Agree with HYer in most respects. All the media coverage of this has been macro conjecture with nothing on specific issuers, something that is very relevant in an asset class of over 80k issuers. There will be some credit problems, but they will not be very widespread. Most of the yield expansion to date has been driven by supply/demand fund flow factors. Also, most of the media coverage I have seen has focused on the long end of the muni market. Bottom line, making a broad statement about the muni market doesn’t make a lot of sense. Most people would probably be better off continuing to hold their bonds.
I’d rather have bailouts that societal unrest because that could get really ugly really fast, especially in a country like ours with many people armed to the teeth and may fringe groups waiting for such an opportunity. If the (inevitable) devaluation of the dollar is the price we need to pay to maintain stability, so be it.
her dialogue kind of sounds like that Russian economist who predicted that the US will split up into 5 or 6 “distinct” countries. every area of the country has its ups and its downs. if we’re going to bail out certain industries when they’re down, why would we not bail out certain states. her comment about those from nebraskas not wanting to bail out florida is ridiculous. florida, and california, are the meccas of the western world. california will always be seen as a top destination for young westerners looking for work and florida will always be seen the most affordable and safe spot in the western world for retirement, that is of course if they are not bailed out. if florida and california initiate a sales tax, and as baby boomers begin to retire in both florida and california, i think we could expect a natural recovery in both of these states. destroying (not bailing them out and letting them become criminal wastelands) two of the most beautiful states in the western world due to short-term-ism is the stupidest thing i’ve ever heard. i predict that in 20 years or so, FLA and CA could very well be a supporter of the strong states of today. there was a time when the dust bowl was well, a dust bowl, and i assume it will once again become more of a dust bowl than it is today.
Once we start bailing out municipalities and states that is pretty much the end of democracy here in the US.
marcus phoenix Wrote: ------------------------------------------------------- > I’d rather have bailouts that societal unrest > because that could get really ugly really fast, > especially in a country like ours with many people > armed to the teeth and may fringe groups waiting > for such an opportunity. > > If the (inevitable) devaluation of the dollar is > the price we need to pay to maintain stability, so > be it. I think you overestimate this country’s ability for coordinated social unrest. Yes there are armed fringe groups, but their capability for mass disruption can’t be taken seriously. Now if we could organize like France and were armed, that would be different.
mep_cfa’10 Wrote: ------------------------------------------------------- > Once we start bailing out municipalities and > states that is pretty much the end of democracy > here in the US. How so? How would be any different from bailing out banks?
^ are you suggesting that a financial institution and a local city are the same, or even similar? How would a municipal bailout even work? Would the feds get “stock” in the town?
BValGuy Wrote: ------------------------------------------------------- > ^ are you suggesting that a financial institution > and a local city are the same, or even similar? > How would a municipal bailout even work? Would > the feds get “stock” in the town? Some cities/ counties have already been bailed out. No there is no “stock” involved. There really is no other alternative to preserve order.
Can you answer your own question about the difference btw a bank bailout and a muni bailout? In a corporate bailout, the company can cut some fat, better organize and optimize its ops, etc. What is a town to do to repay this $$? It would just result in higher prop taxes, then there is a migration out of the town and what will be left?? I don’t see it working and I certainly do see it being at all similar to the aforementioned bank bailouts.
Most states have it as a law that cities and counties cannot run a budget defecit in the general fund for a fiscal year. I think for bailed out states that should be made a federal law as well.
BValGuy Wrote: ------------------------------------------------------- > Can you answer your own question about the > difference btw a bank bailout and a muni bailout? > In a corporate bailout, the company can cut some > fat, better organize and optimize its ops, etc. > What is a town to do to repay this $$? It would > just result in higher prop taxes, then there is a > migration out of the town and what will be left?? > I don’t see it working and I certainly do see it > being at all similar to the aforementioned bank > bailouts. They will do the same, cut some fat, restructure pensions, optimize ops and when the economy turns around maybe return surpluses to the Fed?
marcus phoenix Wrote: ------------------------------------------------------- > I’d rather have bailouts that societal unrest > because that could get really ugly really fast, > especially in a country like ours with many people > armed to the teeth and may fringe groups waiting > for such an opportunity. > > If the (inevitable) devaluation of the dollar is > the price we need to pay to maintain stability, so > be it. That’s BS, most of the fringe groups you’re referring to are in rural areas (where I grew up) and those areas are not reliant on socialized programs and have only lightly indebted municipal govts. The munis in trouble are typically pro-cyclical rich areas with large social programs (illinois, cali, fl, ny, etc). People overlook that about small towns. People are self reliant, when a shock hits, the community pulls together as necessary to help one another out. I grew up in a house with A LOT of guns, many of which were covered under Clinton’s assault weapons ban, and all the beliefs about violent armed militias are crap. Those groups are primarily gun enthusiasts / outdoorsmen and very mild people.
Anyways, its fear mongering, just did a risk review of muni’s last month, situation is bad, but not meltdown bad.
Black Swan Wrote: ------------------------------------------------------- > marcus phoenix Wrote: > -------------------------------------------------- > ----- > > I’d rather have bailouts that societal unrest > > because that could get really ugly really fast, > > especially in a country like ours with many > people > > armed to the teeth and may fringe groups > waiting > > for such an opportunity. > > > > If the (inevitable) devaluation of the dollar > is > > the price we need to pay to maintain stability, > so > > be it. > > > That’s BS, most of the fringe groups you’re > referring to are in rural areas (where I grew up) > and those areas are not reliant on socialized > programs and have only lightly indebted municipal > govts. People overlook that about small towns. > People are self reliant, when a shock hits, the > community pulls together as necessary to help one > another out. I grew up in a house with A LOT of > guns, many of which were covered under Clinton’s > assault weapons ban, and all the beliefs about > violent armed militias are crap. Those groups are > primarily gun enthusiasts / outdoorsmen and very > mild people. When I mean fringe groups I meant criminal gangs, anarchist/ anti-government and other criminal elements. I wasn’t talking about responsible gun owners.
Black Swan Wrote: ------------------------------------------------------- > Anyways, its fear mongering, just did a risk > review of muni’s last month, situation is bad, but > not meltdown bad. I agree with you, its usual fear mongering by the doom and gloom Whitney. Probably trying to scare some investors into selling their bonds for cheap to Newport Beach.
what has the historical default rate been in municipals??? under 3%
marcus phoenix Wrote: ------------------------------------------------------- > BValGuy Wrote: > -------------------------------------------------- > ----- > > Can you answer your own question about the > > difference btw a bank bailout and a muni > bailout? > > In a corporate bailout, the company can cut > some > > fat, better organize and optimize its ops, etc. > > > What is a town to do to repay this $$? It > would > > just result in higher prop taxes, then there is > a > > migration out of the town and what will be > left?? > > I don’t see it working and I certainly do see > it > > being at all similar to the aforementioned bank > > bailouts. > > > They will do the same, cut some fat, restructure > pensions, optimize ops and when the economy turns > around maybe return surpluses to the Fed? So residents are going to put up with theorectically higher prop taxes while the city has a surplus? Not likely.
How is this back office?