Posted on 01/18/2011 6:01:41 AM PST by george76
Recent headlines trumpeting staggering budget deficits in states and cities throughout the nation have stricken fear into the hearts of municipal bond investors. California's deficit has grown to an astounding $25 billion, while Illinois is grappling with a projected deficit that could swell to $15 billion. In September 2010, Pennsylvania's capital, Harrisburg, announced its intention to default on $3.3 million in bond obligations, before their bond insurer stepped in to bail them out.
Crunch the numbers and it's not hard to see why investors are feeling nervous about how municipal bond issuers are going to make good on their obligations in the face of seemingly insurmountable financial challenges.
"People are surprised because [they] get into munis expecting safety," says James Early...banking analyst Meredith Whitney, who has predicted a staggering 50 to 100 "sizable" muni bond defaults in 2011 amounting to "hundreds of billions" of dollars. Whitney says the spate of defaults will touch off a municipal bond sell-off in the coming months, stifling the economic recovery and sparking unrest as local governments are forced to cut back on services and lay off public employees.
Several critics have publicly dismissed Whitney's predictions as overblown
(Excerpt) Read more at finance.yahoo.com ...
Definitely trouble brewing if we can’t pass a law that forbids the collection of taxes by the federal government to pay for another states debts, that is a never ending spending loop that will kill our country for sure as the federal government robs everyone to pay for their wasteful and disfunctional programs and social families..
Just wait till IL, CA, and NY go bankrupt
There is BIG TIME trouble brewing with muni’s...if you’re in, and you can get out, you’d better get going.
At the best of times, you're invested in immorality and crime.
At the worst of times, the mob has run all the victims out of town, and you're holding the empty bag, sucker.
Serves you right.
Muni bonds are the investment of choice for trust fund libs, who donate to Obama and Co., and may get a bailout for the states to save their investment. It’s not like Obama is immune to bailing out special interest groups for money.
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