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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (39848)	10/31/2010 1:42:18 AM
From: Paul Senior	Respond to of 78820

What Mr. Buffett did say about the muni bond market, I found instructive. According to him, insuring the bonds was formerly a pretty decent business. To a large extent the bonds were issued to and held by people in the community -- businessmen, the wealthy, local retirees. Therefore, it was politically unacceptable for local elected officials to declare insolvency or a moratorium on interest payments. Because it would be their neighbors, friends, and political base that would be affected. Now though according to Buffett, the bonds are widely distributed and the people insuring those bonds (like Mr. Buffett and his company) are not part of the community. So there's lots less negative repercussions to the politicians or within the community if city officials choose to default. Thus Buffett said he believed there was now much more risk to insuring municipalities than was commonly believed. Maybe that's why we aren't seeing Buffett so active in muni insurance.