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

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...

10 comments:

Ben_CarlosWednesday, 15 December, 2010
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.
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BillWednesday, 15 December, 2010
WOW! Ben C! just wow!.

Good luck m8ty
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Return to ResistanceWednesday, 15 December, 2010
The Fed will step in a back stop the states and cities. They will announce QE3 in 2011 and start buying up muni debt.
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BillWednesday, 15 December, 2010
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.
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JoeWednesday, 15 December, 2010
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.
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Dave in DenverWednesday, 15 December, 2010
"DOWN GOES FRAZIER" I love it LOL
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"DoctoRx"Wednesday, 15 December, 2010
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.
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Dave in DenverWednesday, 15 December, 2010
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.
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BillWednesday, 15 December, 2010
California is by far the best run state in Mexico.
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AnonymousThursday, 16 December, 2010
@bill: ok, so i have to ask, what is meant more specifically by your statement that CA is the best run state in mexico?
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Add comment

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.