United STRAITS of America: The Muni Bond Crisis Is Here
This November, the whole world tuned in as the greater part of the U.S.A.’s 50 states turned red — and no, I don’t mean the political shift to a republican majority during the November 2 mid-term elections. I mean “in the red” — as in, financially fercockt, overdrawn, up to their eyeballs in debt.
Here are the latest stats: California, Florida, Illinois, and New Jersey now suffer “Greek-like deficits,” alongside draconian budget cuts, job furloughs, suspensions of city services, and the growing “rent-a-cop” trend of firing city workers and then hiring outside contractors to fill those positions.
Next is the fact that the municipal bond market has been melting like a snow cone in the Sahara desert. According to recent data, 35 muni bond issues totaling $1.5 billion have defaulted since January 2010, three times the average annualized rate going back to 1983. Also, in the week ending November 19, investors withdrew a record $3.1 billion from mutual and exchange-traded funds specializing in municipal debt, triggering the largest one-day rise in yields since the panic of ’08. Continue reading
The Next Major Disaster Developing for Bond Holders
Elliott wave analysis can warn you of trend changes when the rest of the investment public least expects a market reversal. With that in mind, we have created a new report for our free Club EWI members: “The Next Major Disaster Developing for Bond Holders.”
In this free report, you get some of the latest commentary on fixed-income markets adapted from various Elliott Wave International’s publications, including 2010 issues of Robert Prechter’s monthly Elliott Wave Theorist and its sister publication, The Elliott Wave Financial Forecast.
Enjoy this excerpt — and for details on how to read this important Club EWI report free, today, look below. Continue reading
Moving into Bonds: From Frying Pan to Fire
By David Galland and Kevin Brekke, Casey Research
The other day, I came across an article that said, while individuals may be moving their money out of equities, they have been moving into bond funds – and in a big way.
It’s called jumping from the frying fan into the fire.
Based on my experience as a co-founder of a mutual fund group, I can tell you that if there is one sure thing in this world, it’s that when investors rush en masse into an investment category, it is invariably at almost exactly the wrong time to do so. Is that the case with today’s rush into bonds?
To shed some light on that point, Casey Research Switzerland-based editor Kevin Brekke volunteered to look into the correlation between bond flows and performance. Here’s his report…
Thinking About Bonds
By Kevin Brekke
With the great bond stampede that began in 2009 continuing, giving rise to the very real possibility of a bond bubble, we decided to check the relationship between bond returns and bond fund inflows to see if there might be a correlation. Take a look at this chart:
Video: Bond Issuers Aiming Toward Debt Man’s Curve
By Jason Lureman
Thu, 09 Sep 2010
They say a picture is worth a thousand words, so a chart as startlingly clear as our Debt Man’s Curve must be worth 10,000 words. EWI analyst Jason Farkas first created and wrote about this parabola that displays different risk levels of bonds in late July 2010. Specifically, the chart plots sovereign, municipal and corporate issuers on the same spectrum. The resulting sharp curve up makes it easier to see why we think that bond issuers are flirting with a bad crash the same way the driver does in Jan and Dean’s hit song from the 1960s, “Dead Man’s Curve.”
More recently, Jason recorded this 10-minute video to take his Currency and Interest Rate Specialty Service subscribers through the perilous Debt Man’s Curve. Now you can view it too, and learn more about which bond issuers are hovering in and around the “Trouble Zone.” Create your free Club EWI profile now to watch the Debt Man’s Curve video.
