New York Lieutenant Governor Richard Ravitch made a statement last week that should have gotten headlines, but didn’t.
â??I believe that the states across the United States will face deficits a year after stimulus ends of $300 billion to $500 billion a year,â?? Ravitch told about 200 people gathered at New York Universityâ??s Robert F. Wagner Graduate School of Public Service. â??Youâ??re going to begin to see cracks in the municipal bond market well before then, because thatâ??s an inexorable casualty of unfundable state deficits.â??
To put this into perspective, the total state budgets for 2010 was about $1.4 Trillion. If his predictions are anywhere close to being true then the budget problems of the states are essentially unfixable.
“The condition of state and local budgets are in their worst shape since the Great Depression, and if the economy doesn’t turn around quicker than the mainstream believes, we are going to see defaults that will shake the economy to its foundation.”
Muni bonds have been a bad investment for the longest time, though. Only people who haven’t realized that low yields are shitty invest in municipal bonds. I don’t think this is a cause for panic, save your panic until the US indicators (S&P, dow jones) go down while the Asian markets go up indefinitely.
[quote]archiewhittaker wrote:
Muni bonds have been a bad investment for the longest time, though. Only people who haven’t realized that low yields are shitty invest in municipal bonds. [/quote]
Nonsense, tax free muni’s have been a great place to park some serious cash, until now perhaps.
[quote]ZEB wrote:
archiewhittaker wrote:
Muni bonds have been a bad investment for the longest time, though. Only people who haven’t realized that low yields are shitty invest in municipal bonds.
Nonsense, tax free muni’s have been a great place to park some serious cash, until now perhaps.
[/quote]
Easy to trade, no real price fluctuations and better than storing it under the mattress?
[quote]ZEB wrote:
archiewhittaker wrote:
Muni bonds have been a bad investment for the longest time, though. Only people who haven’t realized that low yields are shitty invest in municipal bonds.
Nonsense, tax free muni’s have been a great place to park some serious cash, until now perhaps.
[quote]archiewhittaker wrote:
Muni bonds have been a bad investment for the longest time, though. Only people who haven’t realized that low yields are shitty invest in municipal bonds. I don’t think this is a cause for panic, save your panic until the US indicators (S&P, dow jones) go down while the Asian markets go up indefinitely.
The Asian markets aren’t going up indefinitely. The need us buying their crap. We’re not buying anything and our dollar is only getting weaker. Japan’s index has flatlined for at least 10 years.
The trend right now is muni bonds. My broker called me up with some PIMCO bond fund he wanted me to get into. We see PIMCO guys in the news a lot now. That means muni bonds are a bad investment.
Cities know how to raise taxes and grow their budgets. They don’t know how to cut their budgets when tax revenues start plummeting, which is what we’re seeing now.
[quote]archiewhittaker wrote:
ZEB wrote:
archiewhittaker wrote:
Muni bonds have been a bad investment for the longest time, though. Only people who haven’t realized that low yields are shitty invest in municipal bonds.
Nonsense, tax free muni’s have been a great place to park some serious cash, until now perhaps.
Are you speaking from experience?
[/quote]
Sure. You mention the rates are low. Do you know how to factor an after tax equivalent rate at your income level?
Muni’s are a place were high income people park their money safely and in turn it allow the municipality to borrow money for its citizens at great rates. The muni rates will track closely to other highly rated corporate debt once you factor the after tax rate at the top income bracket.
Also, since you are on the topic. The only way a municipality gets the AAA credit rating to issue the debt is through credit insurance. Track the performance of top muni credit companies and you will get a better idea of the safety of your money.
If you want to really go in deep, then look into the muni issue you own and get the company that has the bonds insured against default. Watch this company more than the municipality b/c they are your safety net.
The big issue is if too many municipalities go under then the credit company can no longer survive and your bonds are junk. The US government will back this market if this ever happens and it is no where near happening. Uncle Sam needs municiple gov’t to have the access to money and independent operations.
[quote]RJK wrote:
Also, since you are on the topic. The only way a municipality gets the AAA credit rating to issue the debt is through credit insurance. Track the performance of top muni credit companies and you will get a better idea of the safety of your money.
If you want to really go in deep, then look into the muni issue you own and get the company that has the bonds insured against default. Watch this company more than the municipality b/c they are your safety net.
The big issue is if too many municipalities go under then the credit company can no longer survive and your bonds are junk. The US government will back this market if this ever happens and it is no where near happening. Uncle Sam needs municiple gov’t to have the access to money and independent operations.[/quote]
Very insightful response. I hope some of the panic stricken read this.