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The huge three point seven trillion dollar Muni bond market has been shaken a bit by events in Detroit.
And looming crises and bigger cities like Chicago and New York so should you get out of communities while you have the chance or work.
-- there being a buying opportunity in the midst of some panic selling let's ask.
Matthew event outside he is co-founder of -- and capital and he joins us now Matt good to see you thanks for a -- -- -- -- -- so -- -- have -- and end with an overall market of close to four trillion dollars chances are somewhere in my portfolio I do should -- be thinking of how to get out of them based on what's happening in Detroit.
Well a little bit of history here this is the first time the GO which is general obligations and any municipality.
Seems to be at risk from let's just be specific about what general obligate GO boxes are called.
Are they our bonds that are supposed to be guaranteed that is in order to pay off interest on these -- This cities -- the municipalities is is selling them say we will raise taxes in order to meet our obligations but if you have -- Everybody -- got to Detroit there's nobody to raise taxes that's exactly the point Detroit's been shrinking as a city for decades.
And it also -- of leadership crisis you have a mayor and City Council that's not serious campaigns that not serious about getting its house in order.
When you come to a crisis like this it's really tough for everyone involved so even though these GO Bonser called secure bonds.
Already 530 million dollars of these so called secure bonds have been labeled.
-- Well that's what -- filing for bankruptcy does -- and allows the creditors to.
-- restructured based on the federal court priority now based on that I would think of moving out candidates in my wrong.
Well Munis as an entire asset classes relatively safe if you look historically that's very rare there's a default and this time.
And it really comes down picking the right time and municipalities where you you want to look for good leadership.
We're good and fiscal balance -- -- -- of think of some of the other big cities like Chicago for example or New York.
New York okay Detroit to put it in context -- five point seven billion in retiree health care New York -- 88 billion that's a lot more so.
Couldn't New York -- in trouble too -- New York is a much bigger much.
More diversified its -- city it's -- all sorts of industries and support from entertainment's finance obviously and growing text.
Industry and it has had a stability and its mayor and and a very strong City Council little.
About to have and we may have Mayer Wiener coming next that's not going to be very secure and stable -- it well all bets are off of mister Carlos danger -- -- -- say the point is the point is people look at municipalities all over and -- this is something that doesn't just affect new York public pensions nationwide.
Were underfunded by.
One point four trillion dollars so won't this eventually spill into the -- market.
Well in theory it could.
But let's -- this that you have a lead time for this and you can raise taxes and get ahead of it growing cities are strong cities are going to be fine there and Hillary restructured there.
Debt or we've negotiated -- pension question.
This how to find the strong and growing city in -- because what's growing now may not be growing tomorrow.
Detroit by the way as the highest taxes and all of Michigan and yet it has the worst schools.
The worst roads the dirty streets so very often raising taxes doesn't necessarily mean it more revenue in a better better city service.
-- comes back responsibility if Detroit had a disproportionate amount of their funds going to -- their labor.
If you actually had redirected those funds to more appropriate areas that would have been an easier.
And then bankruptcies Mets fan all Stein co-founder of Cody and capital Matt good to see it -- you very much for lists already.
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