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mobyss

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  • What Are the Chances of a Muni Doomsday? [View article]
    It seems that holding any "asset" that is based on the promise of some future entity to pay is becoming less and less wise.

    The general sentiment in the comments above is that due to local voter and union issues, municipal bond holders WILL be the ones told to "pound sand", making Whitney's predictions sound about right. After the first small town says "We can only pay 30 cents on the dollar of bond payments due this month", the whole muni market begins unraveling.

    In terms of the courts and the "law", look at what happened with GM and Chrysler bondholders - they were told by a Unitary Executive to pound sand, and they did. Decades of normal bankruptcy law turned on its head, because a politician happened to have high approval ratings at the time (look at those ratings now - do you think some of the GM bondholders now wished they had stood their ground?).

    Local voters will absolutely NOT tolerate higher taxes to pay either "fat-cat" bondholders or bloated public employee pensions. Unemployment is 10%, houses are worth less than they were 10 years ago, and being told that sales or property taxes are going up 4% will be essentially a call to torches and pitchforks.

    Bonds and promissory notes are only as good as the entity issuing them. Nobody is going to cut their own throats to pay these obligations. Who do you really trust anymore?
    Dec 23 12:46 PM | 9 Likes Like |Link to Comment
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