The Golden Truth: If Your Advisor/Broker Calls To Sell You Muni Bonds

Tuesday, November 10, 2009

If Your Advisor/Broker Calls To Sell You Muni Bonds

Hang up the phone immediately and move your account. We have found brokers/advisors from Raymond James, Wells Fargo/Wachovia, Bank of America/Merrill and RBS to be particularly pernicious. As per the report linked from Barry Ritholtz's The Big Picture:

"For the year ending in June 2009, the period corresponding to most states’ fiscal years, total state tax collections declined by $63 billion or 8.2% from the previous year. That loss is also a record, and is roughly twice the amount states gained during the year in fiscal relief from the federal stimulus package."

Please read this article and study the charts, which show the plunging source of revenue used to repay muni debt: LINK

To be sure, it is likely that the Fed/Treasury will ultimately be forced to print even more money in order to bail out our municipalities. But in between, I guarantee you that your broker/advisor will be calling you often, as muni prices tank, to sell you more "great value" paper. And at the end of the day, even with a bailout, you'll be left with nothing but paper that has even less value than it does now.

2 comments:

MysteryTuesday, 10 November, 2009
Have you seen this?

http://www.economicpolicyjournal.com/2009/11/whats-fed-hiding.html
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Dave in DenverTuesday, 10 November, 2009
I had not seen that. But the guy does not have the mechanics of leasing laid out very well. There are lot of reasons the Fed does not want an independent audit and of course one of them could be the gold issue.

But the way it works is that the Fed would lease out its gold to JPM and GS, who then turn around and dump the gold into the market and invest the proceeds in Treasuries or other securities that yield a lot more than the cost of the gold lease (usually in the area 1/2% or less. www.kitco.com tracks lease rates.

I've seen some alternative theories on why India bought the IMF gold, but none of them come even remotely close to what economicpolicyjournal guys is throwing out there. His theory doesn't make any sense. India bought the IMF gold because it allowed the country to buy a nice chunk of gold at the market price and unload U.S dollars.

Back to the leasing thing. It is likely that most of the U.S. Govt's gold is leased out in a massively long term gold price suppression scheme. However, it is the bullion banks (GS, JPM, etc) who would be on the hook for retrieving leased out gold. Unless this the citizens of this country take over and threaten to burn down GS and JPM, my best guess is that those lease obligations will ultimately be settled in worthless FRNs.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.