Just about a year ago this week, rumors started to circulate in the sometimes sleepy and boring world of municipal finance. The crisis talk went into overdrive, of course, when Ms. Whitney appeared on 60 Minutes andwarned that the $3 trillion municipal bond market faced the immediate threat of hundreds of billions of dollars in defaults.
President Obama’s new American Job Act proposes changes to the tax-exempt status of the income from municipal bonds, which is “something we haven’t seen really in memory,” said Ben Thompson, a portfolio manager who oversees $7 billion in tax-exempt bonds for Samson Capital.
As the U.S. inches closer to a possible default, the already struggling municipal markets are feeling the pain, Bernard Beal, CEO of M.R. Beal & Company, told CNBC Tuesday.
The major issue facing states and municipalities is the unsustainability of their defined benefit public pension plans. States and local governments made promises to public employees that upon retirement they would receive defined payments for the rest of their lives.
New Jersey's move to take out a short-term $2.25 billion loan to pay its bill is symbolic of how difficult state and municipal financing will be in the year ahead, analyst Meredith Whitney said.
Meredith Whitney, once a media darling , finds herself pilloried in the news media and by colleagues these days for predicting a calamity in municipal bonds. Critics say the call is overstated, but it has alarmed investors in that usually sleepy market. The New York Times reports.
Financial analyst Meredith Whitney is sticking by her call that the nation's municipalities face a wave of defaults, despite a wave of criticism over her prediction that hundreds of local governments would not meet their obligations.
People need to think about junk bonds in relation to comparing them to municipal bonds, Jeffrey Gundlach, CEO of the fixed income investment management firm DoubleLine Capital and former CIO of TCW Group, told CNBC on Wednesday.
America is now officially worried about a municipal bond meltdown. In a piece called ‘Day of Reckoning,’ CBS 60 Minutes showcased financial analyst Meredith Whitney’s bold prediction that we will see “50 to 100 sizable [muni] defaults...more. This will amount to hundreds of billions of dollars of defaults.” It’s a frightening forecast.
Notable analyst Meredith Whitney created a lot of buzz defending her prediction that the $3 trillion municipal bond market faces the immediate threat of hundreds of billions of dollars in default. "The hundreds of billions of dollars is really the issue," Ben Thompson told CNBC on Wednesday.
To be clear, I'm not saying the muni market today offers the same opportunity as it did in 2008, during the heart of the credit crisis. But it now presents a fantastic opportunity for those looking to generate tax-free income, and here's why.
In an interview broadcast on “60 Minutes” Sunday night, Whitney, who runs the Meredith Whitney Advisory Group, argued that the $3 trillion municipal bond market faces the immediate threat of hundreds of billions of dollars in defaults. That notion has put the investment community on the defensive Monday, as bankers and analysts scramble to reassure investors and clients that the market isn’t about to fall to pieces.
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers, the New York Times reports.
Although current law does not allow states to go bankrupt, some experts believe it should be permitted so the federal government can avoid bailing out states faced with massive budget shortfalls and the end of stimulus funds in 2011.
Bankruptcy is not an option for US states, Gov. Jack Markell of Delaware told CNBC. "Rather than bankruptcy, I think what states really need is electred officials who are willing to make tough decision," he said.
Discussing whether Meredith Whitney's predictions on the muni bond market are overblown, with Thomas Doe, Municipal Market Advisors CEO, and Doug Dachille, First Principles Capital Mgmt. CEO.
Why more voices say trouble is brewing in the muni bond market, with Richard Ciccarone, McDonnell Investments, and Peter Kaufman, Gordian Group.
Discussing whether it's a good time to get into muni bonds, John Miller, Nuveen CIO & muni bond portfolio manager, and Michael Darda, MKM Partners chief economist.
Bill Gross, co-CIO of PIMCO, tells CNBC why he thinks muni bond yield returns are attractive.