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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

GLD 366.51

+1.2%

Nov 5 4:00 PM EST

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To: Jacob Snyder who wrote (71742)	3/9/2011 8:33:18 AM
From: KyrosL	Read Replies (2) of 217546

I am an agnostic on the muni bond market. The article you quoted claims there will be a collapse followed by a rebound, because defaulted muni bonds have very high recoveries. That doesn't sound very bearish. Don't all the smart hedge funds allegedly shorting munis know this? It also claims that the big problem is future pension obligations. But that can can be kicked down the road for a decade or more. That doesn't sound very bearish either, at least in the short to intermediate term. At the same time, the article points out rampant cutting of local government expenses while revenues are slowly recovering with the economy. The fly in this ointment is that the stimulus money will be ending this year. This is bad, but not disastrous. Finally, here is an interesting article about muni bond issuance. In the last couple of months it hit decade lows. California doesn't intend to issue any muni bonds until September, for the first time in its history. online.wsj.com "A Deep Freeze Hits Muni-Bond Market By KELLY NOLAN Municipal-bond issuance is on pace for its lowest quarter in at least 11 years following a rush of borrowing late last year and as government borrowers struggle to get their budgets in order. Through March 4, issuers have sold about $31.5 billion in debt, according to Thomson Reuters. The last time so little in bonds was sold by this point in the calendar was 11 years ago..." Be careful about shorting MUB. You might end up paying its dividend for a number of months before it starts falling, if ever. Of course, all bets are off if the Fed lets (or is forced to let) Treasuries collapse. I think in this scenario shorting Treasuries is a better play.

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