"When you stick your neck out and make prognostications about the future, sometimes you're going to be wrong. I’m certainly no exception. But when it comes to really big misses, I think Meredith Whitney’s call for a monster blow-out of the Municipal Bond market is on top of the list.
BLOOMBERG: Meredith Whitney Loses Credibility As Muni Defaults Fall 60%
Meredith is a smart lady. That being the case, it’s worth looking into why she was so wrong. A report this weekend from the Bond Buyer provides a partial answer:
THE BOND BUYER: Long-Term Muni Bond Volume Slipped 32% To $295B From $433B
A 32% ($138B) YoY decline is a very big relative change. The drop in long-term financing was not offset by increases in short-term debt; that category fell by 7.4% ($5B).
The drop in total borrowings is almost exclusively a result of the 46% ($129B) in the “New Money” category. The drop in New Money debt issuance is a consequence of hundreds of cities and states collectively saying:
Thus, all may appear well in muni land. A successful re-balancing has taken place, for the time being. If the munis can continue to push off infrastructure projects, they will not suffer the fate that Ms. Whitney feared they might.
I said that the munis had “kicked the can down the road”. In this case, it’s quite a different form of can kicking. When the Federal government raises the debt ceiling, we all say, “They kicked the can”.But the munis are doing (pretty much) the exact opposite, so Can Kicking would appear to be an improper/unfair description of what is happening with Munis. I think it's still valid, deferring infrastructure investments is another form of kicking..."
at http://www.businessinsider.com/avoiding-muni-defaults-set-the-stage-for-an-infrastructure-crisis-2012-2?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1mCRNxozv
BLOOMBERG: Meredith Whitney Loses Credibility As Muni Defaults Fall 60%
Meredith is a smart lady. That being the case, it’s worth looking into why she was so wrong. A report this weekend from the Bond Buyer provides a partial answer:
THE BOND BUYER: Long-Term Muni Bond Volume Slipped 32% To $295B From $433B
A 32% ($138B) YoY decline is a very big relative change. The drop in long-term financing was not offset by increases in short-term debt; that category fell by 7.4% ($5B).
The drop in total borrowings is almost exclusively a result of the 46% ($129B) in the “New Money” category. The drop in New Money debt issuance is a consequence of hundreds of cities and states collectively saying:
We’re in a pinch on revenues. Let’s not spend any money we don’t have to for the time being. We’re going to have put off the construction of the new (Sewer plant, overpass, water treatment facility, school, whatever). The last thing we want to do is go to the Muni market and borrow any more.
As a result of many individual decisions to defer infrastructure projects, the Munis have kicked the can down road. They have eliminated the current and future expenses related to these projects. With that, they have stabilized the trajectory of their debt growth and improved short-term cash liquidity (by having less ST debt). In the process, they have created a shortage of muni bonds (relative to expectations) in the market. Thus, all may appear well in muni land. A successful re-balancing has taken place, for the time being. If the munis can continue to push off infrastructure projects, they will not suffer the fate that Ms. Whitney feared they might.
I said that the munis had “kicked the can down the road”. In this case, it’s quite a different form of can kicking. When the Federal government raises the debt ceiling, we all say, “They kicked the can”.But the munis are doing (pretty much) the exact opposite, so Can Kicking would appear to be an improper/unfair description of what is happening with Munis. I think it's still valid, deferring infrastructure investments is another form of kicking..."
at http://www.businessinsider.com/avoiding-muni-defaults-set-the-stage-for-an-infrastructure-crisis-2012-2?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+clusterstock+%28ClusterStock%29#ixzz1mCRNxozv
