Tuesday, December 14, 2010

Muni Update: If You Are Still In Them, You Can Still Get Out Alive...

(click on chart to enlarge)

We've seen this chart pattern many times over the last 9 years, starting with Enron.  The last time I posted on November 16, I thought that ultimately Congress would force an extension of the Build America Bond program into the Bill which will extend the Bush tax cuts, jobless bennies and other welfare state entitlement goodies.  For some reason Congress is drawing the line on the BAB program. 

It will start with California and Illinois and then set off a daisy-chain of muni bond defaults.  I know that Califiornia has been using the BAB tag in order to issue new bonds which refinance maturing paper.  What happens now?  I'd love to hear some opinions/solutions.  My guess is that this rout in the muni market will soon turn into a bloodbath. If you decide to ride this out, good luck!  I'd say you are flirting with missing the last transport plane out of Viet Nam...


  1. Here is a sure sign of implosion dead ahead: My Stepmother decided it would be wise to take the advice of Lincoln SageMark Financial... They put my entire trust into Muni's. It's down 18.8% in a few short months and will likely be cut in half or worse. Adios dinero, by the time the rug pull arrives, these won't be worth wallpapering a bathroom.

  2. WOW! Ben C! just wow!.

    Good luck m8ty

  3. The Fed will step in a back stop the states and cities. They will announce QE3 in 2011 and start buying up muni debt.

  4. I know the day is young, but congrats to the Metal guys for keeping PM's above the line, on days like this I suspected Gold to go down as far as $1360...nope couldn't even break the $1380 mark.

    Get some now folks the next leg up is a MOON TRIP!...you heard it here first.

  5. The FED is already back stopping everything in sight and will do so until the USD becomes worthless.

    What happens if we get a series of large west coast banks failures that causes the derivative domino meltdown? Too big to fail becomes too big to bail and down goes Frazier.

    Joe M.

  6. I think the Feds would print whatever it takes to prevent large-scale muni defaults.

    I think that even Cal only pays 7% of its revenues in interest. And the state constitution puts GO payment 2nd in priority after education. So Cal has to pay.

    FWIW I think the focus should stay on Uncle Sam/Gentle Ben.

  7. California borrows from Uncle Sam in order to brigde it's budget shortfall. In fact, it's already borrowed over $10 billion just fund unemployment insurance.

  8. California is by far the best run state in Mexico.

  9. @bill: ok, so i have to ask, what is meant more specifically by your statement that CA is the best run state in mexico?