Saturday, January 15, 2011

Munis are a-crashing

Having a large allocation of income investment vehicles, usually a form of taking caution, is the riskiest option around these days. Today it's the munis, another it's the financial's debt and another is the treasuries. However, one must remember there could be a domino's effect again. One side of the economy can topple the other. Given that possibility, a regular Joe might ask - well where should we put our hard earned savings.

Munis Crashing For Third Straight Day, And This Is The Worst Yet
It's hard to look at this chart, and not have your heart skip a bit of a beat.

For three days now, munis have tanked, and this is the worst one yet.

My thought: Falling muni-bonds means that state and local authorities are at the end of their rope and will find it much harder to fund their activities via further debt. A logarithmic sudden decline might force some into bankruptcy - as is the case with any indebted entity looking to refinance right when it's credit rating is crumbling.


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