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FBN's Liz MacDonald on Berskhire Hathaway's move in the muni bond market and how it has investors concerned.
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More doubts about the safety of municipal bonds well may big -- Buffett's Berkshire Hathaway made a big move.
Out of the sector Liz -- thank bowl lord is here to explain it it.
Bottom line hi I'm curious because it's about -- they -- insurance.
Yeah that's right -- Muni bonds sold by a number of states including reportedly Illinois Florida California and Texas so what happened here is.
He cut basically and dumped half his holdings -- the coverage for these Muni bonds reportedly sold to these states.
Meaning that he still has half of them so the question is did -- take a hit is this a warning sign that we we're gonna see more defaults because it got.
Fights in Stockton California for example were bond holders may take a hit on the principle dig -- not to -- interest and our and the yield on that.
What they have to basically -- but the principle that was far so that's a big deal and it's a good rock and a little bit and scaring PP gonna see here the timeline of events Bob what happened.
Because ordinarily treaties traders can carry the paper losses on their balance sheet the fact that it cut half of it.
Means that the second half of the trade that the other 50% still on.
Berkshire Hathaway books could take a hit because traders -- -- back in some of these bonds are out there -- till 2054.
So that's the issue is he going to take a loss on the digging you rightly pointed out to break.
The Muni bond market though has been improving we can't say either way.
-- the Berkshire Hathaway -- loss on this trade but whether it's a red flag signal event that more defaults are coming in the market.
That's -- way could be understood -- and.
-- list thank you so -- sure that complicated I'm glad you're here to explain it all those McDonald's all over.
