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The SEC commissioner issuing this dire warning for the Muni bond market if rates spike as -- go bankrupt.
-- -- CEO about a -- financial securities -- at the roundtable jury in this discussion you know I never hear anybody from the FCC say anything negative what was this about.
I'm a big fan Dan Gallagher -- and he calls it like it is -- moves off our roundtable launched on the fixed income market place and I and the panel I was on the specifically about municipal bonds.
And he raised the issue very clearly that as interest rates rise.
Municipal bonds are -- facing an Armageddon due to -- -- bond defaults so what's the big ticket with a 123.
At how it all blows up well interest rates go up so bond values go down.
And as bond values go down consumers are suffering massive losses like they suffered in stocks in 08.
Wondering what to do about this simultaneously.
State and local governments are facing higher interest rate costs and that's gonna cost them more to borrow money and they're not going to be able to pay those debts and then the pension obligations become a crisis.
And banks which have the mark to market as bond values go down and they're going to be facing stress test challenges from the Fed and and then -- -- And you're scaring the heck enemy -- let's take a look at the municipals filing for bankruptcy across the country because as you said these are the poster children.
For what could be Armageddon you look at California -- has -- in San Bernardino.
These are places where they are deciding even now that the people who are gonna get paid or not the bond holders -- who always get paid right why people invest -- gonna pay the retirement benefits of the workers.
-- is this -- this is a sea change in strategy historically state and local governments always said we will repay bondholders no matter what if we have to lay people off -- cut services raise taxes.
Will do it to preserve our triple -- credit rating.
And pay off the bondholders another -- They have -- the bond -- -- have put a AAA rating were gonna stiff the bondholders so that we can keep those little local municipal workers employed.
And as a result bondholders Muni bond -- most of whom are retired meeting and -- are gonna find themselves without any value in the.
-- -- earlier here this entire marketplace is built around people.
Who want their income coming from these investments to be -- tax free.
This is the retired market the people who have not been able to earn a penny on a CDR or -- savings account.
Who relying on these Muni bonds now -- up.
While the SEC roundtable made it clear that 70% of all the buyers Muni bonds are.
Consumers individual investors most of whom -- retired living on this investment income if that income dries up these seniors are going to be -- severe personal financial -- -- -- all kinds of problems in the bond market right now I find it fascinating story in the Wall Street Journal today though a lot of the bond funds out there not buying bonds anymore just -- hey it's kind of crazy and it's really obscene if you're investing in a bond -- because you don't want to own stocks and then to have the fund manager buying stocks without your knowledge or consent.
It's it's an obscene practice mutual fund industry why are they doing it.
Well look at the where interest rates are today look at the fabulous offering that apple just announced a couple of days ago on the question is why would you buy the apple bond when the Apple Stock has a higher Democrat.
And that's why the fund managers of these bond funds are desperately looking for higher yields in the fining them in the stock market not the bond market unbelievable do you believe that the apple bonds will be safer than treasuries.
People who say that's crazy -- crazy because but US treasury has an unlimited resource they just keep printing money.
Apple is a private company and although there are big huge star today so let's -- back so well those Kodak 1 day source pan am and eastern and brand offense Studebaker.
Veteran he told me when you sat down we were talking during the break you said Jerry I haven't had my clients investing in Muni bonds in years wives.
Because there just simply to rescue their heavily dependent on the tax break which is under threat by congress looking for revenue.
They are dealing with pension obligations that many of them can't handle their subject to interest rate risk and credit -- And the yields frankly don't justify the risks that you're taking they just don't two -- -- make any sense.
Scary stuff you -- outlook for the market.
Stocks were very excited the stock market is doing great going to continue to do greatest -- that maintain the pace of the first few months of this year so good that I.
-- like to see that just continue on or not but let's not get cocky but it's going to continue to do well if you don't investor gonna regret that you didn't.
Love it Rick settlement thanks for -- and very nice -- by -- well for you -- thank you so much -- -- -- --
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