This link is to a very long article on muni bonds. Towards the end is a section on muni bond CEFs where the interviewee predicts muni bond CEFs may be in for a 20 to 30% drop in price. Don't know if I agree with him but its worth a read. Also says the fees charged to manage these CEFs is excessive for the amount of actual work required.
I was amused to see that even the
Swiss pigs are now lining up for
our welfare dollars, their legendary
expertise having somehow failed to
prevail under free market conditions.
The interesting Mr. Satyajit Das
has a funny piece on financial
industry expertise @ Minyanville
now, called "Help Wanted: Rogue
Sorry that it won't link to this
wretched Yahoo service.
This is part of the problem.
Do you think they would have
done a long term financing at
In any case, you can find
literate accounts of the
incident through a Google
search. Read about it last
night, myself, but didn't
bookmark the reference.
Whether it's a glitch or
something recurrent is the
real question, but the reset
cycle is very short for these
particular instruments. In
this case, it was 7 days if
Hey, if the Port Authority
wanted to sell long term paper
@ 20% per annum, the line of
buyers would stretch to Princeton.
We would certainly be in it.
Again, I'm not talking about
the cefs here but about the
normative experience on Municipal
credits--the actuarial basis of
the Berkshire offer. If the
nervous activity of a small
minority of cef shareholders
and consequent volatility is
too much, then I'd sure think
about a good closed end, like
You can check investor opinion
on the muni bonds themselves
daily by looking at the spreads
to comparable Treasuries at Yahoo
Going for the greedy Full Monty in one shot. Of course when you ask for the moon strategically you have a real bottom line that you actually wanted and hoped to get. FHA guaranteed refinancing for all sub-primers seems unlikely to be part of that final bottom line, but who knows?
Judging from the more comprehensive
articles on the subject, this is more
craziness from the banks. More
of what the perceptive Mr. Das calls
"the nuclear option" and I call
plain old "extortion." The failed
auctions I read about all took place
before Berkshire move on MBIAs
municipal underwriting, which
probably should say something to
buyers but may not.
(For those who don't know,
these auction rate securities,
like the PA of New York tranch,
are essentially callable after
7 days--so the "20%" APR amounts
to a rounding error in the context
of their financings.)
and on the home front----
go out to 2-3 yrs. for long view.
What the Fed is trying to do is reallocate money into hands that are willing to lend it via the TAF, rather than having it wind up in the hands of those currently inclined to hoard it like C and GS.
As far as trends are concerned, when auction rate securities for the Port Authority reset from 4.3% to 20% in the weekly auction, I ain't buying it. Or perhaps I am if it continues! Talk about bizarre, out of whack, whatever.
You know, whatever the Fed is
doing, it isn't "printing money."
This is plain to anyone who follows
the supply stats.
I also saw a Financial Times article,
obviously a pickup from the WSJ
piece, referenced by the Captain, that makes a "trend" out of a
literal handful of failed muni
auctions, among hundreds.
I leave it to you to decide how
much attention this material merits;
but I will point out that asset
diversification and value are
important sources of safety under
such conditions and that, if half
of what these people are saying is
true, "cash" isn't necessarily
a safe haven either.
You shouldn't construe this as
investment advice. As usual, I've
learned what I can about the situation and drawn my own
conclusions, which may or may
not be accurate.
BTW, I saw an article tonight
in which the monoline insurers
are now blaming the ratings