Muni-Bond Defaults Are Headed Our Way

Vous savez que nos voisins américains sont dans le pétrin.

Un cauchemar n’entend pas l’autre, depuis près de 4 ans leurs marchés immobiliers s’effondrent, malheureusement, la plupart des villes reçoivent principalement leurs financements par la taxe foncière.

Ils ont un sérieux problème, leurs recettes foncières se sont réduites de 20% à 50 % depuis la crise immobilière, et ils ont de plus en plus de la difficulté à se faire refinancer par l’entremise des bonds municipaux.

Les gens ont trop peur d’acheter de tels bonds, car ils ne savent pas si les villes ne feront pas faillite entre temps.

Situation sérieusement angoissante pour les maires des villes.

Muni-Bond default

Extrait de: Deadbeat States: Make No Mistake… Muni-Bond Defaults Are Headed Our Way, Money Morning, February 11, 2011

[Editor's Note: If you're a regular Money Morning reader, you know that Shah Gilani was way ahead of the crowd with his warnings about the banking meltdown, the subsequent credit crisis and even the “flash crash.” Given that, you're really going to want to hear his take on the current muni-bond-default controversy. In fact, take some time and check out this video of his recent CNBC interview, when he went head-to-head with a noted Wall Street insider over this very topic.]

By Shah Gilani, Contributing Editor, Money Morning

Let's make one thing perfectly clear: Wall Street analyst Meredith Whitney is not crying wolf. Whitney – who gained fame for correctly predicting the U.S. banking implosion that presaged a global credit crisis – is now warning us about defaults in the $2.9 trillion municipal bond market.

Whitney is being savaged for this latest prognostication, mostly by institutional money managers who resent the way that she's roiled the traditionally sleepy "muni" market.

That's as unfair as it is ugly . It's unfair, because she's correct: muni-bond defaults are headed our way. And it's ugly because the naysayers – vested Wall Street interests that are only trying to protect their playground – are obscuring the truth.

And with this dissembling, the Whitney-bashers are keeping disadvantaged individual investors from understanding the disaster at hand, and are likely dissuading these bondholders from avoiding the locomotive that's steaming head-on at their portfolios.

Make no mistake: The so-called "deadbeat states" problem is real, and muni-bond defaults are almost certainly unavoidable