Posted on 12/20/2010 12:55:51 PM PST by george76
Budget shortfalls and subsequent muni bond defaults "could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about," ...
Gov. Christie does an excellent job of framing this discussion by pointing out the huge disconnect between the benefits of public sector employees vs. their private-sector counterparts. "I think the general public thinks, 'I can't believe anybody gets a pension anymore. I've got a 401(k). It got killed in the stock market. I don't know what I'm gonna do for my retirement. I can't believe people get a pension anymore,'" ...
"There's not a doubt in my mind that you will see a spate of municipal bond defaults" in the next 12 months, noted banking analyst Meredith Whitney tells "60 Minutes." "I think next to housing this is the single most important issue in the United States, and certainly the largest threat to the U.S. economy."
(Excerpt) Read more at finance.yahoo.com ...
Now that you mentioned Muni Bonds and their collapse, one of the best Bond Fund Managers, with a great 10 year history of making money for his clients, Bill Gross, is ACCUMULATING them.
Either he knows something or he’s a fool.
See here :
http://www.reuters.com/article/idUSSGE6BD0DJ20101214
Influential bond investor Bill Gross invested $5.5 million of his own money in five municipal bond funds run by his firm, Pacific Investment Management Co, to take advantage of the falling bond prices.
Gross, who helps oversee more than $1.1 trillion in assets at Pimco and runs the $252 billion Total Return Fund (PTTRX.O), bought 560,090 shares of Pimco municipal bond funds between Dec. 9 and Dec. 14, filings with the U.S. Securities and Exchange Commission showed.
U.S. municipal bonds prices have been tumbling for more than a month as investors worried that a flood of new tax-exempt debt sales this month will swamp longer-dated debt as Build America Bonds (BABs) exit the market.
CLICK ABOVE LINK FOR THE REST...
I bought a bunch of Silver Eagles when they were $12. I wish I had bought a lot more. With the way things are going, silver may hit $40 an oz within 6 mo. If you buy and it does...WHOOPEE. If it doesn’t, they do have a nice tactile feel that you can enjoy while thinking about what you should have done with your money.
Pimco warns on US municipal sell off.
The record outflow of $3.1 billion (£2 billion) in the municipal mutual fund sector over the week beginning November 15 has been largely attributed to the effect of QE2 on US treasuries and an oversupply of bonds, according to Pimco.
The majority of this outflow has been concentrated in long duration and high yield municipal funds.
http://www.fundstrategy.co.uk/markets/bonds/pimco-warns-on-us-municipal-sell-off/1023568.article
He probably reckons that the munis will be bailed out by the state and/or federal government and made dollar-good.
Buy at a discount when distressed, then sell after the bailout...its a win.
If one does one's homework and finds the places that still manage a prudent fiscal budget, one can make a killing these days in munis. Gross does his homework (or, at least, his grunts do the homework for him).
It is time to CRIMINALIZE public employee pensions! Let them have 401K’s like the the rest of us - the pitiful masses.
Just discovered FreeRepublic (after hearing someone in the media ripping on it).
Re Gross and PIMCO.
1. Munis have gotten hit hard, so it could simply mean that he thinks they are in trouble, but underpriced.
2. He probably knows that Obama is thinking about a muni bailout, similar to the Treasury bailout of State budgets.
I will be on Fox Business Channel talking about housing this Wednesday (Connell McShane and Degan McDowell).
Do I care if Lefties ID me? Nope. I won’t say anything here that I wouldn’t say in Congress in front of the cameras.
Cool!
“I think the general public thinks, ‘I can’t believe anybody gets a pension anymore. I’ve got a 401(k). It got killed in the stock market.”
If a person is either greedy or lazy or uniformed and so keeps 100% of their 401(k) money in stocks, then they sure could get killed in the stock market.
I would urge everyone out there to look at so-called “target” funds for all their long-term investing needs. (The funds go by different names depending on the fund company.)
These funds are targeted to the year you expect to start needing the money, usually the year you retire.
So if you plan to retire in 2030, you’d buy a 2030 fund. Since 2030 is a long way off, the fund would be investing now in mostly risky - but high-reward - stocks. A market crash in 2011 is no big disaster; you’ve got 20 years to catch up.
As the years go by, the fund AUTOMATICALLY shifts money from riskier stocks to safer bonds and ultra-safe money markets funds.
So if the market crashes in, say, 2025, your losses will be small because you no longer hold many risky stocks.
Something to think about.
If anyone thought that $14 trillion in 2010 debt is bad, just wait until we hit $24.5 trillion in total US national debt in 2015.
And it gets even more surreal:
total US Unfunded Liabilities are estimated at $144 trillion, roughly $1.2 million per taxpayer...
Awesome! Happy 0th Anniversary! Welcome aboard the freedom train.
Steve Forbes was on Lou Dobbs' radio show this afternoon, and when Dobbs asked him if he thought municipal bonds were a big risk he said not necessarily -- but he recommended buying a diversified portfolio of them, and paying close attention to the financial condition of individual cities rather than just assuming they're all low-risk investments.
Ditto.
Buy a portfolio of individual municipal bonds and most will do ok.
Avoid the bond funds.
The next decade could be dicey for state and local governments and bond funds could take a beating.
If you own a specific municipal bond you will get the principal at maturity and interest prior to maturity if the issuer does not default.
“”Gross, who helps oversee more than $1.1 trillion in assets at Pimco and runs the $252 billion Total Return Fund (PTTRX.O), bought 560,090 shares of Pimco municipal bond funds between Dec. 9 and Dec. 14, filings with the U.S. Securities and Exchange Commission showed.””
____
This sure looks a lot like the Bernanke buying the bonds issued by the US Treasury.
I came this close (holding index finger next to thumb) to buying into a muni bond fund. Most holdings were good ratings, but I got nervous. Many governments, state and local, are running in a sea of red ink and I don’t want to put money into a sinking ship.
It’s a really bad time to be an investor, with the ‘rats doing everything they can to destroy the economy and free markets.
Good advice, and the reason I stopped. I was considering the tax advantage of such funds, but unless I know that they are investing in low-risk cities and states, I am not putting up my scant hard-earned cash.
When the federal money printing stops, look out.
IMHO
I am not surprised that PIMPCO would accumulate Muni bonds. PIMPCO is “too big to fail”. He knows that Munis that go tits up will be bought by Obama. PIMPCO has no risk, unlike you and me.
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