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Municipal Bond Defaults Trending Down

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  • Description

    FBN’s Charlie Gasparino on the state of municipal bonds across the country.

  • Duration 5:41
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So -- we talk about 25 years ago how about two years ago spent two years since analyst Meredith Whitney's Muni bond doomsday prediction.

Was out and guess what she's still wrong -- more -- than ever.

As Charlie Gasparino assets and you were.

From the start saying this was questionable call right immediately loses logically he was illogical and basin which Hussein if you know anything about Muni bonds.

Even when you face fiscal distress which is what she was a base -- her whole prediction on the fiscal distress coming out of the Great Recession the financial crisis.

And that tax revenues would be going down where -- found just a full but all the bond seems.

Even if that type of fiscal distress would we -- -- where they would have to do that.

You know Muni bonds have -- -- covenants -- they have these sort of pools of money on the side that you don't go into default that quickly as if you default.

Bankruptcies that we've seen so far show you.

It's -- -- -- default the next day so -- -- the -- -- on that basis if it makes sense also that makes sense from a from a lot of reasons.

You know states would decrease -- to due to file for bankruptcy so would many large cities -- she was told about.

Big big entities in municipal bond market and when you look at the numbers she's really been wrong I mean Muni bond defaults just so you know sit there have been down for three -- now.

She she doubt that -- -- the trend is down because there was a lot of news about one.

A one community -- that they -- what an Alabama behavior there are sort of -- a lot but a lot of those are specific to those areas like the one Alabama.

They were involved in some crazy derivatives it wasn't just that could be the economy turned sour.

We -- -- point out that there are zero point 1%.

Of the three point seven trillion Holler -- me fiscal bond market.

Should also point out that the average default is approximately thirty million dollars.

Not massive not being dissolved by mark -- courage of these numbers -- time.

Muni defaults year to date in 2012.

-- one point eight billion compared to six point four billion.

To -- last year.

-- going down.

Ford expects all three defaults now.

What it will mean savings numbers here but with throwing those sort of private label bonds oil would.

You know they often for private industry that qualify for taxes and status will be we consider the Muni bonds they do.

Social good so he can get -- taxes and status and there issued by private companies a lot of these are now housing.

You expect housing to take a big -- which it did in the past.

It was sixteen housing related defaults in Florida.

Not last year I -- you -- this year three.

So sixteen to -- about a miniatures of the housing markets have been a Florida but she have addressed.

Decision as she goes on other that we will not go with me because I'll ask the questions I mean -- -- -- be nasty with her but -- -- -- one thing that I did that others didn't do I was the first actually get her.

The report that she based this prediction that she came out on sixty minutes which sent the Muni market imploding.

I got to report pretty lame O report didn't talk about a lot of stuff was invariably -- to get that stuff anywhere she.

If she's a great marketer I mean I -- I thought she was good to banks you know which one it very.

I would say very addiction I can't even agree with -- -- yeah why don't say they're very because I think she was extraordinarily which hot point which one she -- Lehman.

Not at all -- helping so that was David Einhorn Meredith Whitney's big barrel was one now was one.

Citigroup.

She predicted.

Fiscal continues fiscal stress after they bring in Vikram Pandit who we thought they got their act together to discuss when she talks as she sounds -- she predicted everything but she but what it would be the -- Citigroup call was I think gutsy because you know Citigroup what I used to do right stuff about on the didn't like.

-- that they were in fiscal -- these to collect ahead of NBC.

But it really nasty and I'm sure she worked -- -- -- an average time it seemed it was still big firm wasn't the basket case it is now we're would have became after her prediction.

They they put the screws or guaranteed that she stopped -- -- -- -- it was a good gutsy call.

This is a real pickle about -- is bad not that she's wrong.

Small investors lost a lot of money when she said that they sold more than Muni bond holdings -- -- the market rallied then as its continued to rally.

And they when they got that in the got -- and a higher at low yields -- higher prices I had a bite into a rising market.

And that's the problem that she has.

That will she ever be right.

Maybe.

Look a pretty good -- -- right -- -- right it's like saying the market's gonna go down some day I mean maybe we'll get some big defaults.

But I'm just saying that it don't look like -- we maybe if we get the fiscal cliff.

But -- predicted fiscal -- two years ago that was that -- You know that was in the you know in -- -- -- well we talk about this because a lot of view the investors are invested in Muni bonds and they had to retail why if you get good quality want now.

-- here here's what helps the performance of Muni bonds if this this so would support Meredith Whitney's prediction did pretty prediction just -- you know what helps the supply is the is that they're.

The states are raising taxes a lot of -- -- New York California.

These are triple tactic tax rate right so when they raise taxes you go by an investment that you could to get a tax break it's it's it's it's the one of the big loopholes that average people can benefit from.

So she would say -- the reason why the prices are going up is because you know you get taxes are going -- because the pay for the budget deficits -- I predicted.

Is some truth to that the other but her entire investment thesis was based on army getting fifty to a hundred.

Billions of dollars.

It did happen hasn't happened yet.

-- -- may not happen next year Charlie Gasparino and I would have never thought to -- that time with that your so that no looks good you know I was.

The -- hospital -- -- right behind you I was I think you know I was hung -- and I thought that I was like at that one bachelor.

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