Muni sweeps: “People learn deterrence”

May 12, 2011

Professor John Coffee of Columbia Law School, who is considered one of the foremost legal scholars in the securities area, discusses the effect of the conviction of Galleon Group co-founder Raj Rajaratnam on insider trading:

“People learn deterrence from actual vivid examples of people going to prison.  And that is what it takes in every generation to overcome the tremendous temptation to make tens of millions of dollars.”

What about the municipal market? Are there instances where dealers are receiving inside information and trading on it ahead of others?

Raj Raj is a warning to all market participants.

Crushing pension costs

We keep hearing how it’s teachers that are raking in the big pensions.  But Bloomberg reports on a stunning example of politicians lavishing pension benefits on firefighters in California, and now to afford these pension payments they have to lay off workers:

A 2007 arbitration ruling letting San Jose, California, firefighters retire as early as age 48 with 90 percent of their pay may result in the firing of 370 municipal workers as the 10th-largest U.S. city tries to close a budget deficit fueled by higher pension costs.

Firefighters’ pensions were sweetened for the third time since 1996 after San Jose came under pressure from unions to keep up with what other municipalities were offering, according to Alex Gurza, the city’s chief negotiator.

Second muni trade group steps up on pension disclosure

The muniland pension shortfall is estimated at approximately $1.2 trillion. So a proposal from muni analysts on standards for reporting these shortfalls would be really great. This follows a proposal from bond lawyers on the issue earlier this month.

The Bond Buyer reports:

The National Federation of Municipal Analysts is considering developing a pension-disclosure white paper that could be completed by early 2012.

NFMA chairman Greg Clark said in a recent interview that based on feedback from members at the group’s annual conference in Charleston last week, analysts need a cohesive analytical framework for assessing public-sector pensions.

“We’ve had it in mind for a while,” said Clark, who made his comments in his capacity as chairman. “What’s the framework by which analysts should be assessing this information?”

An NFMA project would follow public sector pension-disclosure guidance released earlier this month by the National Association of Bond Lawyers.

Muni technicals go positive


…[H]ere’s the boring technical analysis kicker: A key muni bond ETF made a very bullish move for the first time since last November, the folks at Bespoke Investment Group report.

“Over the last six months, the dire predictions that were common place in the muni bond market last fall have so far failed to materialize, and munis have been showing steady and under-the-radar improvement. MUB, which is a popular ETF used as a proxy for the muni bond market, is today on track to close above its 200-DMA [daily moving average] for the first time since November 9″.

Mini Sweeps

The Broader Market: While mom and pop retail investors are fleeing

Bond Buyer: Market Close: Muni Rally Extends as Market Easily Absorbs New Deals

Corporate Legal Times: Plaintiffs Lawyers in Muni Bond Derivative MDL Object to UBS Bid-Rigging Settlement

New York Times: Squeezed Cities Ask Nonprofits for More Money Oregon, Washington among national leaders in efficient transportation spending

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