odin

The Next Shoe to Drop: Muni Bonds

Will continue to be painful as the yield curve flattens out and people withdraw from reaching out for risk (which has been such a great trade for the past couple of months).

Banks are sitting on record amounts of cash (people are starting to save!) and even if foreign central banks dont (and dont need to as trade surplus' go down due to trade collapsing), they will be buying treasuries.

As for munis, selection will be key but they have the potential to be quite profitable as top marginal tax rates (federal, state and local levels) take sharp turns up.


On May 29 02:54 PM tunaman4u2 wrote:

> TBT... good call, painful today though

The Next Shoe to Drop: Muni Bonds

Do you mean only the revenue backed munis are cracking or all of them cracking?

And given the treasury moves in the insurance space (and the willingness of Buffet et al to take the share if AIG, MBIA falter), are we still worried about the strength of the insurers? (i.e. Is the federal govt able to back away from these obligations in case these insurers are unable to fulfil them?)

And most importantly: what have recovery been rates like on similar bonds in the past?

There's gold and crappiness in any asset class but overall, given the trajectory of taxation and the yield on some of these issues (esp. when you compare it against govt backed taxable agencies), dont you think there's a floor under the munis?