Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page >> News >> Story  Disclaimer 
Latest Headlines

The Gold Bull Era: Key Tactics Now
By: Stewart Thomson

Types of Gold Standards
By: JP Koning

Commodities Are Flashing a Once-in-a-Generation Buy Signal
By: Frank Holmes

Fake Markets Produce A Fake Economy
By: Steven Saville

Will Kim’s Denuclearization Dethronize Gold?
By: Arkadiusz Sieron

Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves
By: GoldCore

Gold Seeker Closing Report: Gold and Silver Fall Almost 1% and 3%
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 4 23 2018
By: Ira Epstein

Frustrated by the Dormant Silver Price? Don’t Be, Says History, the Upsurge Is Coming
By: Jeff Clark

Avoiding the Obvious
By: Theodore Butler and Jim Cook


GoldSeek Web

Muni-Bond Market’s Descent into Hell

By: Rick Ackerman, Rick's Picks

-- Posted Wednesday, 22 December 2010 | Digg This ArticleDigg It! | | Source:

Rick’s Picks

Wednesday, December 22, 2010

“Phenomenally accurate forecasts”


Just when it looked like the alleged economic recovery couldn’t get any weaker without extinguishing itself entirely, the municipal bond market has gone to hell. And just like in hell, there is no exit – at least none that we can imagine. Here’s why: Municipal and state borrowers who are on the ropes must pay a premium to continue borrowing; this drives their budgets deeper into the red, causing ratings downgrades that in turn raise borrowing costs even more. A vicious cycle, for sure, and it sounds just like much of Europe’s predicament doesn’t it?  Except that, for strapped U.S. cities and states, there is no IMF to pretend to bail them out.  And while Europe’s erstwhile deadbeats, the PIIGS, get plenty of time to work on balancing their budgets through measures of “austerity”  (Merriam-Webster’s Word of the Year, by the way),  U.S. cities and states must bring their budgets into at least a fleeting semblance of rectitude before the beginning of each new fiscal year.   

We shouldn’t get our hopes too high that this recurring dog-and-pony show will work without eventually causing a taxpayer revolt. If you’ve been following the sordid bookkeeping tactics of such fiscal n’er-do-wells as California, Illinois and New Jersey, you’ll already know that austerity measures that would have been unimaginable just a few years ago have done little to eliminate structural deficits that keep returning like the slasher in a Wes Craven film. The big question is whether the lenders will continue to distinguish “good” borrowers from “bad.” At present they are doing so, charging, for one, the State of Illinois — the riskiest borrower of them all, with an A1-negative rating — 1.9 percentage points more than the broader muni market charges for 10-year bonds. For comparison, the borrowing spread for Nevada, which has been blighted by a real estate crash and severely depressed gaming revenues, is 0.80 percentage points, up from 0.50 in early November.

Although we’d like to believe that some miracle awaits to save the municipal bond market from disaster, it only gets worse. According to a report recently issued by the Congressional Budget Office, the revenue side of the equation – i.e., property taxes – is poised to decline because of downward reassessments across the length and breadth of America. Because homes are not reassessed every year, local property-tax revenues tend to lag behind falling home prices by about three years.  “Even small declines in collections could cause fiscal stress when the cost of providing public services is growing,” the report said. What this implies is more than mere belt-tightening in the years ahead. Since states and municipalities won’t be able to raise taxes much to cover the shortfall, we would predict either a hyperinflationary federal bailout with Funny Money; or, more likely, a deflationary wallow that will make the 1930s Depression look like Mardi Gras.



Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts.  Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2011, Rick Ackerman. All Rights Reserved. 

-- Posted Wednesday, 22 December 2010 | Digg This Article | Source:


Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to >> Story

E-mail Page  | Print  | Disclaimer 

© 1995 - 2017 Supports

©, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of, its affiliates or advertisers. makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of, is strictly prohibited. In no event shall or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.