“401(k)s and IRAs? Forget it.”
Can you say in terms of what? Will this be the ‘crisis’ that will enabe the Treasury to confiscate everyone’s retirement $$, or do you mean we can kiss 80% of the value good-bye?
Or both?
The GOOD news is that Detroit, and other entities that won't back their bonds, will NOT be able to borrow, period, even at rates that would make a loan-shark blush. Detroit will have to operate on a cash basis balanced budget, and the cuts to achieve this will be brutal.
The most immediate casualties, IMHO, will the the insurance companies that have made a fortune "insuring" municipal bonds. Those "guarantees" will prove to be worthless..many of them will fail..
It is all part of his twisted “spread the wealth around” plan.
He did the identical thing with GM. He screwed the bondholders with cents on the dollar. Many good hardworking people had their savings in GM bonds and they were screwed.
The same thing will happen here.
I would be very careful with municipal bonds right now. It could be SHTF time for these once solid investments as the liberal cities start to fall one by one.
A little rational thought will focus the discussion on reality.
The bonds can not be repaid if there is no revenue.
If there is to be a new city, all traces of the old must be eliminated. The new must be new. That which is old....cops, teachers, bureaucrats, water depertmants etc must be scrapped. A governor’s viceroy must be appointed to replace all the junk, both people and institutions.
what do I care anyway.....hubby and I have worked our whole lives to arrive at a point where retirement won't be easy, where every dollar we have is targeted by the govt, where every other penny will have to go to pay for health care....
sell the house the buy a small motor home and just travel, fish, enjoy...
If cities have a taxable base and assets it must convince a Fed judge that it absolutely cannot honor its bond obligations. It is not that easy to walk away. Bondholders and underwriters are suppose to analyze the cities accurately before they underwrite and/or buy the bonds. Meredith Whitney actually broached this subject several years back about how muni bond firms to not accurate audit and determine the ratings of cities and cities were committing fraud by budget shell games and misreporting data. Lack of monitoring and business as usual by the muni bond firms, and selling worthless high risk bonds as AAA paper game is afoot again. People who buy Detroit bonds, what are they thinking???!!!! A lot of powerful muni bond firms on Wall Street don’t want this issue expose that many of the “AAA” bonds they have been peddling have not been audited for many years and sold to investors, pensions and etc. Today there are too many broke local, county and state govs.
“A state appeals court on Tuesday (7/23/13) put on hold Judge Rosemarie Aquilina’s legal challenge to Detroit's bankruptcy, clearing the way for a federal judge to begin reviewing the city's filing.”
That sound you here are the bulkheads collapsing...she's goinjg down.
Why not have a sheriff’s sale of every city owned asset to pay off bond holders? I would start with city hall and empty it of desks, computers etc. leaving just enough stuff to maintain essential services. Let city bureaucrats use cardboard boxes for desks or sit on the floor.
It may happen faster than we think. Just the threat of possible muni haircuts may well dry up the market for munis, and then the cities have nowhere to go for the funds they need to keep up the huge pensions they owe.
I guess this means that Whitney gal wasn’t so looney after all!!
Wonder if CNBC would let her back on? Lots of folks on there made several snide remarks about her.