at the mo the only awesome truth is the debt and how wastrelism speeds along, in ever expanding awesomeness.
as the false valuation compresses, the social tension borne of an once-in-three-hundred-years experiment rises tracking natural trajectory, and at the natural conclusion, will doubtlessly be awesome as well. to be convinced otherwise is (i) not trusting human nature, and (ii) especially in view of pervasive character of general alpha vs sheeple electorates, unnatural.
ussr and germany and ... heck, even china was awesome once until awesome no more. it is rarely the case that we need to concern ourselves with the final chapter of a script, for there are only too ways events work out at the tragic or happy end.
the matter to pay attention to, always, and invariably, is the trajectory, and to decide on, whether the trajectory will lead to natural end or some twist and turn will rescue revelation day.
the final chapter on gold at the end of this (always) interim script is that it be priced at a level unthinkably high now. the details in the lead up to that fine beautiful day can kill us.
generally it is not a terribly good idea to bankrupt an entire and in the main majority social class at an hour where their needs are trending to highest in their life time, and that is what be happening as we listen to pretty speeches and get sold on change, i reckon.
in the mean time, just in in-tray,
Interesting post by Accrued Interest
accruedint.blogspot.com
Municipals and Chrysler: What happens to one will affect the other
I sent this article to xxxx xxxxx who used to be a bond fund manager. Below is his reply.
that's one reason why Michigan and Detroit bonds are selling at much higher rates than Texas and Connecticut bonds. Bond insurance has been great for many reasons. First of all, there are fewer defaults in the muni area than in the corporate area. MUCH fewer.
en.wikipedia.org
There are more defaults during recessions and many more during depressions, but, still, a very small amount among investment grade and high grade issues. When you buy junk munis, the rate goes up, but there are not many of those around. Just look at the junk muni mutual funds and closed end funds. They usually average BBB or A ratings because there simply isn't enough diversified junk munis out there with which to build a portfolio.
The muni insurers, especially MBIA, have been absolutely vicious about seeking recovery during a default. In most muni defaults, there are costs that can be cut and assets that can be sold, but elected or appointed govt. officials don't want to make those types of decisions. The muni insurers have no problem about walking in and selling a school building to a warehouse club. So, insured bonds, even if the insurer is close to insolvency, are better than uninsured. I can't hire lawyers and CPAs to fight the big water works, but AMBAC can. Remember, even with the famous Orange County default, bondholders eventually got principal and interest, though it took longer than they'd hoped.
The problem comes with the huge issuers. The idea that any insurer can cover the State of California or the City of New York is ridiculous. Individual issues, yes, but the entire state, no way. The answer is that the bonds have to trade down in price, up in yield, until speculators say, "hey, that's worth it." The idea of a possible federal bailout makes that yield lower than it would be otherwise.
In general, muni owners have to be paid or the issuer has no future, even after reorganization. And most muni issuers need constant cash inflows from bond sales. A corporation has different economics. You can wipe out Chrysler's bond debt and then make a clean equity IPO. That options is not avaialble for munis.
So, the writer is really talking apples and oranges.
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