More Whitney rebuttals

September 29, 2011

The media is full of municipal bond market participants rehashing Meredith Whitney’s prediction of muni collapse which began last September. From Bloomberg:

[Meredith] Whitney, the banking analyst who predicted Citigroup Inc.’s 2008 dividend cut, said on “60 Minutes” on Dec. 19, 2010 that there would be “hundreds of billions of dollars” of municipal defaults within 12 months.

Data from [John Hallacy, Bank of America Merrill Lynch’s head of municipal research in New York], Standard & Poor’s and Municipal Market Advisors show the opposite.

Debt-service payment defaults this year are the equivalent of 0.64 percent of municipal-bond sales, compared with 0.99 percent for 2010, Hallacy wrote in a report last week. About 99 percent of the defaults have been revenue bonds. Health-care accounted for the biggest chunk, at 39 percent. Hallacy included monetary defaults or missed payments to investors in his tally.

The largest default for 2011 is the Clare at Water Tower, a 53-story apartment building for retirees in Chicago with about $229 million of long-term debt, according to Richard Lehmann, publisher of the Distressed Debt Securities Newsletter in Miami Lakes, Florida.

Where federal cuts to state aid will likely come from

State officials have banded together to try and influence federal budget cuts that affect states. From Reuters:

State officials appear most unified on an alternative cost-cutting strategy, which they say could save more than $100 billion by changing the healthcare delivery system for the poorest, sickest and most costly patients. Known as “dual-eligibles,” they qualify for both Medicaid and Medicare, the government-run program for the elderly.

There are about 9 million dual-eligibles and state officials see billions of dollars in savings from shifting them into managed care plans better able to eliminate unnecessary doctor’s visits, tests and hospital admissions.

“Support for that proposition is very broad,” Maryland Governor Martin O’Malley, who chairs the Democratic Governors Association, told Reuters.

States also hope the super committee will adopt proposals to control Medicaid prescription drug costs, combat waste and fraud, and relax federal restrictions on benefits and eligibility, lobbyists said.

@Twitter Talk

Jon Prior @JonAPrior Jon Prior  OCC: Seriously delinquent mortgages up for first time since ’09. More than 5.5m in 30 day delin. or foreclosure.

Barrett and Greene @GreeneBarrett Barrett and Greene  Census breakdown of voting & registration for all states for Nov. 2010. Fascinating differences.

IpreoMuni @IpreoMuni IpreoMuni   MuniIC – Sept Issue:  J. Fichera kicks off a new series focusing on ways to revitalize the muni market #muniland #munis

Alex Paz @Pazzler Alex Paz  Shot in the dark here, but does anyone know anything about Indiana educational funding? Namely the IN Bond Bank? #muniland

Paul Greaves @greavespg Paul Greaves   So the Harrisburg City Council has enough chutzpah and money to hire an attorney to fight a state takeover

+ Good links +

Bloomberg:  Amazon Workers Rediscover the Grapes of Wrath: Ezra Klein

Reuters: Strapped states crave bigger online tax bite

Business Journalism: Look into risky conduit bonds using EMMA, the EDGAR of munis

Bond Buyer: As Election Season Heats Up, MSRB Offers G-37 Reminder

Morally Bankrupt: Muni Madness

One comment

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Ha ha, more like ‘Meredith re-bashing’ as she has certainly been proven to be around some kind of bend.

Keep in mind Chou Enlai was asked what he thought about the French Revolution; “Too soon to tell …”

Meanwhile, the munis default but by firing staff, which shifts the liability from issuers directly toward countercyclicals: unemployment insurance, SS and pensions … from the muni sector to the Federal sector.

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