Tuesday, November 3, 2009

The Problem with Muni Bonds

The $3 trillion muni bond market.. where state, city and county governments borrow money.. looks to be in some trouble, though probably not too serious yet. Here's a summary of the problem:

http://www.ritholtz.com/blog/2009/11/state-local-taxes-plummet/

* Many states and cities have had their tax base crushed in the last year; New York and California saw revenues drop 20-25%, with lesser drops nearly everywhere in between. Some cities got it even worse.. imagine being the financial chief for the city of Detroit these days. On the county level (in most cases) a significant part of the tax revenue comes from property taxes.. and in most cases, this is falling as property value plummets and foreclosures bring fewer and fewer property tax payers. Whoops.

* As part of the economic stimulus of 2009, local governments got about $50 billion in aid from Uncle Sam. This won't happen again next year.

* As the economy got worse, the demand for social services (food stamps, medical assistance, welfare etc) grew expotentially.

* Many of these governments had invested in the stock market as a way to earn money and pay bills and/or retirees (CalPers). This year isn't too bad with the stock market rally; last year was brutal.

* Many of these governments were running deficits during the good years of the 1990s and 2000s, thinking that the good times would never really end and/or that if debt became a problem, it was a problem for the dude elected after I left.

Under these circumstances, the fear that a city or county will simply say "sorry dude.. not this year" and default is higher than ever.. and muni bond markets are pricing this risk accordingly, cruelly making the problem even worse as they charge higher rates. So far not too much higher, but the rates are creeping up, especially for those municipalities who are deeply in debt or who have been hit hardest by the downturn.

Recently the city of Vallejo, CA filed bankruptcy.. this will be a test case. During the Depression, municipalities initially were not allowed to file banko.. with the results being property tax hikes to unimaginable levels.. West Palm Beach had property taxes at 42.5% of assessed value. It was insanity, and eventually they were allowed to file bankruptcy, allowing a mad rush to the bankruptcy courthouses.

Today its a little more complex.. for example, who has the highest claim to what is left of Vallejo CA.. retirees or bondholders ?? Remember that when GM and Chrysler went under, the Obama Administration rose up for their union buddies and gave the bondholders (who had legal claim to first rights on whats left of the company) the shaft. Should this be how it shakes down in Vallejo, look for muni bond rates, especially for those deemed in trouble, to spike up nicely; some cities might not even be able to get anyone to buy them.

Remember that it's a $3 trillion dollar market.. the Vallejo case is important for those reasons. If Vallejo goes under without any real consequences, what would prevent a hundred other cities from doing the same ??

Here's a good article on this mess:

http://blogs.law.harvard.edu/philg/2009/11/03/the-coming-collapse-of-the-municipal-bond-market/

Here's the latest from Vallejo:

http://www.vallejobankruptcyupdate.com/

My impression overall here is that this mess is completely unnoticed.. everyone is concerned with the stock market, unemployment, housing, the USD, gold.. and if my hunch of deflation is correct, municipalities will have a very hard time finding buyers for their bonds at decent rates. The Vallejo case is important to watch. This is a HUGE market folks..

87 comments:

  1. Just found your blog. nice work. keep it up. i share your philosophies in that things will digress to the worse for the world and the US, but not the way people generally and the MSM thinks.

    ReplyDelete
  2. Very good insight, nice job. Just found your blog, and will be checking you out again in the future.

    ReplyDelete
  3. Oh my goodness! Impressive article dude! Thank you, However I
    am having issues with your RSS. I don't know the reason why I am unable to join it. Is there anybody else having the same RSS issues? Anybody who knows the answer will you kindly respond? Thanks!!
    Also visit my blog - pkv krankenkasse

    ReplyDelete
  4. I always spent my half an hour to read this web site's posts everyday along with a cup of coffee.

    Also visit my webpage; unterschied private und gesetzliche krankenversicherung
    Here is my blog

    ReplyDelete
  5. It's going to be ending of mine day, however before ending I am reading this impressive piece of writing to increase my knowledge.
    Feel free to visit my weblog :: Designer outlet shop Online

    ReplyDelete
  6. Howdy! Quick question that's totally off topic. Do you know how to make your site mobile friendly? My web site looks weird when viewing from my iphone4. I'm
    trying to find a template or plugin that might be
    able to fix this issue. If you have any suggestions,
    please share. Thank you!

    Here is my homepage ... adsense account
    Feel free to surf my web blog ;

    ReplyDelete
  7. Undeniably consider that which you said. Your favourite reason appeared
    to be on the internet the simplest thing to understand of.

    I say to you, I certainly get irked whilst folks think about concerns that they
    plainly do not recognise about. You managed to hit the nail upon the
    top and also outlined out the whole thing with no need side-effects , other folks could take a signal.
    Will probably be back to get more. Thank you

    Here is my web-site; krankenkassen Leistungsvergleich
    Feel free to visit my web-site ;

    ReplyDelete
  8. Thanks for finally talking about > "The Problem with Muni Bonds" < Loved it!

    My blog:
    Also see my page:

    ReplyDelete
  9. Amazing! Its really amazing paragraph, I have got much clear idea concerning from this post.
    Have a look at my blog post free affiliate programs

    ReplyDelete
  10. Thanks , I have recently been searching for info about this subject for a
    long time and yours is the greatest I have came upon so far.
    But, what in regards to the bottom line? Are you certain concerning the supply?
    my webpage :: affiliate Site

    ReplyDelete
  11. Hey this is kind of of off topic but I was wanting to know if blogs use WYSIWYG editors or if you have to manually
    code with HTML. I'm starting a blog soon but have no coding know-how so I wanted to get advice from someone with experience. Any help would be enormously appreciated!
    Also visit my blog :: how to repair bad credit

    ReplyDelete
  12. I think this is among the most significant information for me.
    And i'm glad reading your article. But wanna remark on few general things, The site style is perfect, the articles is really great : D. Good job, cheers
    Here is my homepage ... search engine optimization consulting

    ReplyDelete
  13. If some one desires expert view regarding blogging after
    that i suggest him/her to pay a visit this weblog, Keep up the good work.
    My blog post ... alternative student loan consolidation

    ReplyDelete
  14. Nice post. I used to be checking continuously this blog and I
    am inspired! Extremely helpful information specifically the remaining section :
    ) I care for such info a lot. I used to be seeking this particular
    info for a long time. Thanks and best of luck.
    Look into my site ; beitragsvergleich pkv

    ReplyDelete
  15. For most up-to-date news you have to pay a visit web and on web I found this site as a finest web site for most recent
    updates.

    my homepage: seo services experts

    ReplyDelete
  16. It's actually a great and useful piece of information. I am happy that you simply shared this useful info with us. Please keep us informed like this. Thank you for sharing.

    Stop by my blog krankenkassen gesetzlich

    ReplyDelete
  17. I like the helpful info you provide in your articles.
    I'll bookmark your blog and check again here frequently. I am quite certain I'll
    learn many new stuff right here! Good luck for the next!


    Review my blog: Private Pflegeversicherung Kosten

    ReplyDelete
  18. I was curious if you ever thought of changing the structure of your site?
    Its very well written; I love what youve got to say. But maybe you
    could a little more in the way of content so people could
    connect with it better. Youve got an awful lot of text for only having one or two images.
    Maybe you could space it out better?

    My webpage :: krankenkassenvergleich auszubildende
    Also see my webpage: private krankenkasse online vergleich

    ReplyDelete
  19. Wow, wonderful blog layout! How long have you been blogging for?
    you made blogging look easy. The overall look of your web site is fantastic, let alone the content!


    Here is my blog post: business idea s

    ReplyDelete
  20. Hey! This is my first visit to your blog! We are a group
    of volunteers and starting a new initiative in a community in the same niche.
    Your blog provided us valuable information to work on.
    You have done a wonderful job!

    Also visit my website ... vergleich private und gesetzliche krankenversicherung

    ReplyDelete
  21. My spouse and I stumbled over here different web address and thought I may as well check things out.
    I like what I see so now i am following you. Look forward to exploring your web page again.


    my homepage ... best reseller web hosting
    my web page > Web hosting in uk

    ReplyDelete
  22. Hi I am so grateful I found your website, I really found you by accident, while I
    was researching on Aol for something else, Regardless I am here
    now and would just like to say cheers for a incredible post and a all round interesting blog (I also love the
    theme/design), I don't have time to read it all at the minute but I have bookmarked it and also added in your RSS feeds, so when I have time I will be back to read a great deal more, Please do keep up the great job.

    Feel free to surf to my weblog :: clickbank forum

    ReplyDelete
  23. It is not my first time to pay a quick visit this
    web page, i am browsing this site dailly and get fastidious facts
    from here daily.

    Take a look at my website; organic seo services

    ReplyDelete
  24. It is not my first time to pay a quick visit
    this web page, i am browsing this site dailly and get fastidious facts from here daily.


    my page - organic seo services
    My website :: cheap seo packages

    ReplyDelete
  25. Hi, yeah this post is actually nice and I have learned lot of things from
    it concerning blogging. thanks.

    Here is my site :: Www.dharmanet.org/moodle/user/view.php

    ReplyDelete
  26. An impressive share! I've just forwarded this onto a co-worker who had been doing a little homework on this. And he in fact ordered me lunch simply because I stumbled upon it for him... lol. So allow me to reword this.... Thank YOU for the meal!! But yeah, thanx for spending time to discuss this topic here on your website.

    Also visit my site best reseller hosting plans

    ReplyDelete
  27. hello there and thank you for your info – I've definitely picked up anything new from right here. I did however expertise some technical issues using this site, since I experienced to reload the site a lot of times previous to I could get it to load properly. I had been wondering if your web host is OK? Not that I am complaining, but sluggish loading instances times will often affect your placement in google and can damage your high quality score if advertising and marketing with Adwords. Anyway I'm adding this RSS
    to my e-mail and can look out for much more of your respective exciting content.

    Make sure you update this again soon.

    my web-site ... business ideas with low investment

    ReplyDelete
  28. I loved as much as you will receive carried out
    right here. The sketch is attractive, your authored material stylish.
    nonetheless, you command get got an impatience over that
    you wish be delivering the following. unwell unquestionably come
    more formerly again since exactly the same
    nearly very often inside case you shield this increase.

    Also visit my homepage: please click the next internet page

    ReplyDelete
  29. At this time it seems like Wordpress is the best blogging platform out there right now.
    (from what I've read) Is that what you're using on your blog?


    Look into my homepage ... dirndl outlet online

    ReplyDelete
  30. At this time it seems like Wordpress is the best
    blogging platform out there right now. (from what I've read) Is that what you're using on your blog?


    Review my blog dirndl outlet online
    My web site :: mode onlineshop

    ReplyDelete
  31. If you want to get a good deal from this article then you have to apply such methods to your won web site.



    My site - how to file for bankruptcy in florida

    ReplyDelete
  32. This is my first time pay a quick visit at here and i am
    truly pleassant to read everthing at alone place.


    my site; How To Find A Work At Home Job

    ReplyDelete
  33. Thanks , I have recently been looking for information about this topic for ages
    and yours is the greatest I've found out till now. However, what about the bottom line? Are you sure about the source?

    Also visit my weblog private krankenversicherung im vergleich

    ReplyDelete
  34. Hi there just wanted to give you a brief heads up and let you know a few of the images aren't loading correctly. I'm not sure why
    but I think its a linking issue. I've tried it in two different internet browsers and both show the same results.

    Also visit my website :: Leistungen Der Gesetzlichen Krankenversicherung

    ReplyDelete
  35. Hi this is kinda of off topic but I was wondering if blogs use
    WYSIWYG editors or if you have to manually code with HTML.
    I'm starting a blog soon but have no coding experience so I wanted to get advice from someone with experience. Any help would be enormously appreciated!

    Check out my web-site :: http://v-strommers.it/wiki/index.php?title=Utente:SBUJill

    ReplyDelete
  36. Hi my friend! I want to say that this post is amazing, nice written and
    come with almost all vital infos. I'd like to look extra posts like this .

    Have a look at my page - com.ar

    ReplyDelete
  37. Quality posts is the main to invite the people to go to see the website, that's what this web page is providing.

    My blog post - best Tropical vacation spots

    ReplyDelete
  38. Wow, fantastic weblog structure! How long have you ever been blogging for?

    you make blogging look easy. The total glance of your web site is excellent, as
    smartly as the content material!

    Feel free to visit my webpage bad credit home loan people

    ReplyDelete
  39. Great goods from you, man. I have understand your stuff previous to
    and you're just too excellent. I actually like what you have acquired here, really like what you're saying and the way in which you say it.
    You make it entertaining and you still care for to keep it sensible.
    I can not wait to read much more from you. This is really a terrific site.


    Here is my weblog; priv krankenversicherung

    ReplyDelete
  40. This design is wicked! You definitely know how to keep a reader amused.
    Between your wit and your videos, I was almost
    moved to start my own blog (well, almost..
    .HaHa!) Great job. I really enjoyed what you had to say,
    and more than that, how you presented it. Too cool!

    Stop by my webpage: Read Significantly More

    ReplyDelete
  41. It's remarkable to visit this web site and reading the views of all mates on the topic of this article, while I am also eager of getting know-how.

    Here is my site: outlet online kaufen

    ReplyDelete
  42. I used to be suggested this website by means of my
    cousin. I am now not sure whether this submit is written through
    him as nobody else know such targeted approximately my problem.

    You are incredible! Thanks!

    Also visit my homepage - http://www.helpyourselfcommunity.org/node/18787/

    ReplyDelete
  43. Hey there! Would you mind if I share your blog with my facebook group?
    There's a lot of folks that I think would really appreciate your content. Please let me know. Many thanks

    My site - private krankenversicherung familientarif

    ReplyDelete
  44. Nice blog right here! Additionally your web site so much up very fast!
    What host are you the usage of? Can I am getting your associate link in your host?
    I want my site loaded up as quickly as yours lol

    Feel free to visit my webpage privat krankenversicherungen vergleiche

    ReplyDelete
  45. Whoa! This blog looks exactly like my old one! It's on a completely different topic but it has pretty much the same layout and design. Outstanding choice of colors!

    Check out my weblog; http://www.xfire.com/blog/lorrigrey/4587639

    ReplyDelete
  46. Its like you read my mind! You appear to know so much about this,
    like you wrote the book in it or something. I think that you could do with a few pics to drive the message
    home a bit, but instead of that, this is excellent blog.
    An excellent read. I will definitely be back.

    Feel free to surf to my blog post - private krankenkasse vergleichen

    ReplyDelete
  47. Thanks for sharing such a nice thinking, post is fastidious, thats why i
    have read it fully

    Have a look at my page :: source for this article

    ReplyDelete
  48. Hi! I know this is kinda off topic however , I'd figured I'd ask.

    Would you be interested in exchanging links or maybe guest
    authoring a blog article or vice-versa? My site goes over a lot of the same topics as
    yours and I feel we could greatly benefit from each other.
    If you're interested feel free to send me an e-mail. I look forward to hearing from you! Awesome blog by the way!

    Check out my site - relevant Site

    ReplyDelete
  49. Pretty! This was a really wonderful post. Thanks for supplying this information.


    Check out my homepage - www.virtualpre-k.org

    ReplyDelete
  50. I got this site from my pal who informed me concerning this website and now this time I am visiting
    this web page and reading very informative articles or reviews at this time.


    Feel free to visit my website; Running Your On The Net Organization: What You Must Know | Shift Into Sports

    ReplyDelete
  51. Everyone loves what you guys are up too. This sort of clever work and reporting!

    Keep up the great works guys I've included you guys to blogroll.

    Look at my web-site ... Just click the up coming page

    ReplyDelete
  52. I always emailed this web site post page to all my associates, for
    the reason that if like to read it afterward my friends will too.


    Also visit my webpage :: Read Full Article

    ReplyDelete
  53. Howdy, I think your blog could possibly
    be having browser compatibility problems. Whenever I take a look at your
    web site in Safari, it looks fine but when opening in I.
    E., it has some overlapping issues. I merely wanted to
    give you a quick heads up! Other than that, excellent
    blog!

    Feel free to surf to my webpage :: please click the next website

    ReplyDelete
  54. І cаme aсroѕs thiѕ post thrοugh http://themeanοldinvеstor.
    blοgspot.cοm/ and if ӏ coulԁ I'd like to point out to you some worthwhile things or ideas. Perhaps you can write your next articles pointing to these ideas. I want to read more details related to what you'гe talkіng abоut.


    Here іs my web-sіte ... elagat.com

    ReplyDelete
  55. Hey, incredibly Good diary!

    my web page mouse click the following post

    ReplyDelete
  56. Howdy! I just would like to give a huge thumbs up for the good data
    you’ve got right here on this post. I might be coming again
    to your weblog for extra soon.

    My weblog - SEO收費

    ReplyDelete
  57. Good day! I simply want to give a huge thumbs up for the good info you
    might have here on this post. I shall be coming again
    to your weblog for more soon.

    my page ... cosmetic surgery insurance plans insurance company

    ReplyDelete
  58. Whats up! I just would like to give an enormous thumbs up for the nice info you could have here
    on this post. I will probably be coming back to your weblog for
    more soon.

    my page; korean woman plastic surgery addiction

    ReplyDelete
  59. Hi there! I simply wish to give an enormous thumbs up for the nice info you may have here on this
    post. I will be coming again to your blog for more soon.


    Feel free to visit my blog - taeyeon snsd before plastic surgery

    ReplyDelete
  60. Hello! I simply would like to give an enormous thumbs up for the nice info you have right here
    on this post. I might be coming again to your blog for
    extra soon.

    Here is my homepage ... super junior feat snsd seoul song lyrics

    ReplyDelete
  61. Hiya! I simply want to give a huge thumbs up for the good information you
    might have right here on this post. I will be coming back to
    your blog for more soon.

    Also visit my web blog :: how to get a free itunes gift card code

    ReplyDelete
  62. Hi there! I simply wish to give a huge thumbs up for the nice data you have right here on this post.
    I can be coming again to your weblog for more soon.


    Stop by my site - kay jewelers diamond return policy

    ReplyDelete
  63. Hiya! I just wish to give an enormous thumbs up for the nice info you’ve here on this post.
    I might be coming again to your blog for extra soon.

    Visit my webpage: man releases text before crash

    ReplyDelete
  64. Howdy! I simply would like to give an enormous thumbs up for the great info
    you have got here on this post. I will be coming again to your weblog for extra soon.


    Feel free to visit my site ... nutritional value of vinegar

    ReplyDelete
  65. Hey! I just wish to give an enormous thumbs up for the
    nice info you’ve right here on this post. I will be coming again to
    your blog for more soon.

    Feel free to visit my homepage ... SEO公司

    ReplyDelete
  66. Hey! I simply would like to give a huge thumbs up for the good data you might have here on
    this post. I might be coming back to your blog for more soon.



    my blog post :: semicolon journal

    ReplyDelete
  67. Good day! I simply wish to give a huge thumbs up for the great
    information you have got here on this post. I will likely be coming
    back to your blog for more soon.

    My blog post: manic panic semi-permanent hair color cream purple haze

    ReplyDelete
  68. Hiya! I simply wish to give an enormous thumbs up for the great information you have here on this post.
    I shall be coming back to your weblog for more soon.


    Also visit my web blog; semicolon quiz multiple choice

    ReplyDelete
  69. Hiya! I simply want to give an enormous thumbs up for the great data you will have right here on this post.

    I will be coming back to your weblog for extra soon.


    Also visit my web blog free seo services google

    ReplyDelete
  70. Whats up! I just would like to give an enormous thumbs up
    for the nice info you have got right here on this post.
    I shall be coming back to your blog for extra soon.


    Feel free to visit my web page: free travel agency website design

    ReplyDelete
  71. Hey! I just want to give a huge thumbs up for the good information you
    might have here on this post. I shall be coming back to
    your blog for extra soon.

    Look at my blog; country music awards nashville nov 2012

    ReplyDelete
  72. Hiya! I simply wish to give a huge thumbs up for the good data you’ve got
    here on this post. I shall be coming back to your weblog for more soon.


    Have a look at my web page: SEO

    ReplyDelete
  73. Hello! I simply wish to give a huge thumbs up for the good info you’ve got right here on this post.

    I might be coming back to your weblog for extra soon.


    Feel free to visit my web site ... queen seon deok summary 14

    ReplyDelete
  74. I am regular visitor, how are you everybody?
    This piece of writing posted at this web page is actually nice.



    My web site - übersetzung deutsch italienisch *homemathpractice.com*

    ReplyDelete
  75. As a beginner, generally consider the on-line articles which will aid me.
    Thank you

    Also visit my web-site - private krankenversicherung für studenten

    ReplyDelete