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Meredith Whitney well known for predicting hundreds of billions of dollars in defaults in the municipal bond market last year.
And then -- -- dead -- wrong about.
The sky that did not fall and now Whitney is penning a book about their municipal -- markets will our predictions.
Ever come true what is the new year like.
Vice president cities.
And company wrong she created a fantastic buying opportunity for -- Oh yes and NNM my company miss is that -- yields a low is getting harder and harder to find -- select clients but yes they did give us an.
So let's stay on that before we start getting into what defaults look like this year because we have looking it just all of Europe Muni bond.
-- find categories every single one but short Munis has a double digit return on in the last year due.
Don't do these categories -- does the whole market look a little bit ahead of itself.
No I don't think so I think right now I think the the international crisis is probably -- and Munis they're looking for safe havens in Munis have always traditionally been a safe area.
There's also a big supply demand imbalance right now there's not a lot of supply for some reason state local governments probably because they're trying to save money haven't been selling debt.
But there's a lot of pent up demand -- so yields are record low the yields are lower than I've seen in 37 that.
Today's -- they are you get into territory where the sponsor expensive where that you might be taken on a little bit too much.
At some point I think at some point yields do have to start coming up and you'll see prices go down on bonds I don't know that's gonna happen anytime soon because the Fed is still keeping interest rates down.
The people are still looking for safe havens -- -- traditionally have been one.
Right there's the interest rate risk in the in the default risk relative to -- look like in the coming years -- -- said that the falls won't be any greater than twenty billion dollars in 2012.
I said the same thing last year in the came in about 6000000020.
In any of the year with somebody else talking twenty billion would probably be big news of course that would be a record amount of default.
But even if they had twenty billion default which is Mike -- who wears number it's still less than 1% about 5% three and a half trillion dollar market and it won't be in the area where we're ms.
Whitney is saying it's going to happen it's not going to be in the area.
Cities and states that -- pays -- taxes to pay that debt it's going to be in the traditional high yield areas.
There's about 70% in the market that traditionally has higher default rates.
Gives you higher yields a higher income.
But 85% of the default my estimate would come in that area what type of bonds -- we talk about.
The biggest the most risky areas what we -- development bonds these B bonds that could be issued by corporations it may be a General Motors bond but it's got tax exemption meaty issue -- some authority in Michigan.
But it's still corporate debt -- corporations default at a much higher rates.
The second largest there will be another kind of development bonds what we call community development districts where they sell bonds to put in the infrastructure of the -- -- the electric.
And then they build homes if the homes coming in the months pay problem is people are build a home so a lot of these -- default and the other two -- -- housing and healthcare.
Okay it was great to talk to -- get please come back.
Let's talk about this more we -- didn't -- absolutely fine and if anybody wants to report -- on HD Sims dot com they can read the report I think is very helpful it certainly is to clarkin thank you so much -- --
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