The big states, New York, California, Florida, Illinois, are in deep doo-doo. No, states cannot file for bankruptcy, but most other municipal entities can, and they make up most of the debt in the muni bond market.
I can't give specific advice in this forum (actually, that is about to change. I have withdrawn my membership in FINRA in order to concentrate on my proprietary investments - soon I will have A LOT to specifically say). I can say that, in general, Treasuries are safer than Muni's at this time.
I am in the camp that a currency crisis will happen some time in the next year or two - but it won't be the US$. My bet is that now is the time to hold US$, and that the currency crisis (Greece, Ukraine, United Kingdom, Venezuela... are all very good candidates, much better than the US$ at the moment). I have no idea of WHEN, exactly. You will know it when you see it. In that scenario, the US$ will be the beneficiary of a flight to safety - and everything else will get hurt in US$ terms, with the exception of the U.S. Treasury market.
I reserve the right to change my mind on a dime if the data comes in differently, but I can say with great confidence that the Muni market is very, very challenged at the moment.
Libertariananimal (at) gmail (d0t) com
9 comments:
Isn't it a big question of long term vs. short term? In the short term (0-3 years), the U.S. $ will gain in value as it is the only real place to flee to for quality investments in a world going nuts printing currency. Long term, however, the benefits promised to the U.S. voters (who will never allow them to be cut) can't help but sink the U.S. $ in he next 5-20 years. It is all short vs. long, no? A person has to put his "the sky is falling right now" tendency to work this concept correctly.
i've read the next round of 'stimulus spending' is to prop up the worse problem states.
that should buy a couple more years of 'stability' and 'security' for the financial chicanery and flim flam that's still going on and on and on....
there well may be a rush to us treasuries when greece and spain default on their government bonds. probably not this year nor next year, but soon enough.
when the UK defaults, and it's more of when than if, and that could take everybody by surprise by being the first, and the first of the G8 to go under. in that case, the effect on the US financials would be catastrophic.
i don't see any safe bets, and i don't think paper pushers and lazy folk that are too good to use a shovel (much less know which end to use) are going to like the future.
Don’t forget Japan. They are leading the charge down the fiscally irresponsible path, and demography they are totally #%^&#$.
I agree in the short term. But by the time the UK hits the Bond buffers, the real interest rates will be up from 4% to 5% or 6%, so even if the dollar holds up for a while, it'll get crucified by interest charges.
The US will hit the buffers too, at best it'll just take a few years until; an alternative currency, oil in euros, China investing elsewhere, Japan in more trouble, .... Add your own alternatives, there are plenty of triggers.
I can't even time my toaster oven, let alone the markets. Yes a currency blowup should help the US$, but that means nothing to the cash flow of the municipal issuers.
Time to check on my mother-in-law. She has liked the munis. I warned her a couple years ago....
It wouldn't be a bad idea for everyone here with octogenarian relatives to review their investments. Help them out if they'll let you. They are much less tuned into the changes in the economic climate, and much more likely to do what was safe 15 years ago.
Regards,
Coal Guy
Coal Guy:
You bet. Everybody fights the last War.
To those who celebrate it,
Happy Hanukkah!
Regards,
Coal Guy
Have you seen this video "The Dollar Bubble"?
http://www.youtube.com/watch?gl=US&feature=player_embedded&v=eZA0qNsf4m0
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