Choad Mangler

The Imminent Collapse of Municipal Bonds

If it is contract law you doubt, then I think your problem likely extends well beyond the confines of the municipal bond market. And not to beat a dead horse, but there was no violation of contract law in the GM bankruptcy. It was perfectly legal, if not disingenuous in the way it was implemented.

The Imminent Collapse of Municipal Bonds

Not really. But I always find it interesting when people bring up CDS spreads. You understand that a credit default swap contract involves you and a counterparty, so with that said - wouldn't you be more concerned about the counterparty's ability to satisfy his side of the swap if, for example, the State of Georgia was defaulting on its debt and triggering payment on the swap? It just makes no sense to me that you can have a referenced entity with less credit risk than the other side of your swap, such as Lehman, Bear or AIG. Maybe the move towards exchanges helps alleviate that a bit, but I still question the validity and usefulness of municipal CDS for investors - even to hedge a large book of bonds.

On Nov 05 12:07 PM Angel Martin wrote:

> I don't trust the ratings agencies, and individual opinions are a
> dime a dozen.
>
> Are CDS spreads increasing for municipals?

The Imminent Collapse of Municipal Bonds

"Perhaps, but it might be wise to recall what happened to GM's bondholders. TPTB seem to have no issue with re-writing contract law as they see fit."

I certainly don't agree with how the GM case was handled, but how does that have anything to do with municipal finance? Section 363, which dictated the sale of Old GM's assets to New GM, relates to Chapter 11 of the Bankruptcy Code. There is no such provision in Chapter 9. Besides, since the federal government was GM's largest creditor, they technically had the right to make this decision, while the 10th amendment specifically protects the rights of states to administer their municipalities as they see fit. The federal government cannot interfere, and for that matter, the role of the bankruptcy judge is actually quite limited. So I don't see how the GM comment has any relevance to this conversation.

The Imminent Collapse of Municipal Bonds

I read the Dark Vision report and it is a scare piece with little substantive information to support his theory that we are headed for some sort of collapse in municipall finance - in fact, it borders on silly. Pensions obligations can, and will be, rejected and renegotiated as needed. Municipal debt, specifically the bonds in your portfolio, are real debts under chapter 9 of the bankruptcy code and while they can be readjusted, they cannot be wiped away. Without going into too much detail, because I dont have the time today, the prerequisites for a municipal bankruptcy are extremely difficult to meet, and they is indeed a longer history of municipal bankruptcy than you might think - with recovery rates on defaulted munis very close to par on average. Look, engage in solid due diligence, build a diversified portfolio of credits, and you're going to do just fine - particularly when the new tax regime kicks into place in 2011.

Muni Bonds No Longer a Conservative Investment

I love it. Long CA bonds widen out by 60 or so basis points and munis are no longer a conservative investment. Don't pay attention to the 4% health care surcharge tax about get slapped on wealthy Americans, or the increase in marginal income tax rates that Obama has promised us in 2011. Times could not be worse for tax exempt state and local government paper.

Please sell...and let me know when your list hits the street so I can bid your bonds.

DDR to Sell Malls at 30% Discount...to 2004 Prices

Wow, and I can drown in a lake with an average depth of 3 inches. Averages can be deceiving you know. Who is to say that these were not the worst 11 properties in the original package?