David Kotok, Bond Girl on Michael Lewis' latest Vanity Fair ARTICLE -- a Meredith Whitney critique

rcwhalen's picture

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 10/10/2011 - 17:04 | 1759073 Quinvarius
Quinvarius's picture

The Whitney haters declare victory after a few short months.  Which means the muni implosion, which is  a mathematical certainty without an intervention, is just around the corner.

Mon, 10/10/2011 - 14:50 | 1758468 ??
??'s picture

Meredith Whitney should buy David Kotok lunch and spend some time listening IMHO.  -- Chris

Chris did you ever read the transcript or see the interview with Whitney?   instead of  offering up the musings of  a blowhard who is  in the order of Biggs and Birinyi  and who has an agenda - why not post the transcript of Whitney's interview and actually take the time and put in some  effort to respond to it yourself.



Mon, 10/10/2011 - 14:33 | 1758398 Eally Ucked
Eally Ucked's picture

What kind of shit is this? Debt is debt and everybody knows that starting from Federal level to every single citizen (sorry 1% or maybe 10% of them excluded) are in debt to the hilt.
Nobody cares if it’s “conduit debt for healthcare and housing”, “Florida dirt bonds” (?) and also they don’t care that “all but one of these defaults have been on revenue bonds”. “General obligation debt of a municipality” is ok? Will see how long they will be in that state when they drive residents out with increases of taxes and disappearing jobs.
“The municipal bond market is a complicated market. Many investors I have spoken with fail to appreciate the differences between claims, that there are different sectors in the market, the difference between conduit and government bonds, etc” who cares, you’ll risk your money because there is some obscure difference between sectors, especially if you don't understand them?
“There are hundreds of municipal bond market professionals that understand these matters on a granular level” I’m happy to hear that we have them still around! Hope they will disappear fast with their granularity or whatever it is.

Mon, 10/10/2011 - 14:31 | 1758387 masterinchancery
masterinchancery's picture

In general, this article is utter crap with respect to most of the large, generally liberal States.  They got a temporary reprieve from the "stimulus" handouts, but they are far under water and driving business away steadily with their tax increases.  ANd as MW speculated, the more prudent states are not going to want a bailout of their big spending neighbors.

By the way, Illinois defaulted on its obligations twice in the nineteenth century, so statements about how States never default are simply wrong.

Mon, 10/10/2011 - 14:33 | 1758382 ??
??'s picture

Whitney’s call for “50 to 100 sizeable defaults” totaling “hundreds of billions of dollars” has not even come close to materializing.


when pray tell did she provide a timetable?


from a month ago (which begs the question why regurgitate his crap here?

KOTOK: Stocks Are Cheap, Economy Will Recover, Bernanke Did Right Thing


Mon, 10/10/2011 - 14:34 | 1758401 falak pema
falak pema's picture

ever heard of debt monetization? Print, print, print n kick the can. A world wide depression in 2012 will accelerate the MW scenario...the printing will feed the hyperinflation cycle.

Mon, 10/10/2011 - 14:21 | 1758349 PulauHantu29
PulauHantu29's picture

States are on borrowed time just like most banks from what I can see based on facts...not the VooDoo BS flowing out of MSM and DC.

In fact, they keep spending & digging deeper into deficits expecting the Feds will Bail them out.


Mon, 10/10/2011 - 14:08 | 1758300 oldman
oldman's picture

'Money good' munis are having their problems, but how else will the most important essential services for places where people WANT to live be financed? And if a new way of doing business does come along---the outstanding debt will have to be retired.

Oh yeah, we could see the end of civilization and lose our money, but it will still be there after we have lost many other more important things. State banks are a good idea when there is integrity and honor----maybe these standards will return, but that also means paying the old debt that was voted upon and viewed as essential for life in a given community.

Munis are probably the last place where common-sense prevails and fundamentals are critical----

I have always been comfortable with munis----the right bonds, the right indenture, and the right community still have meaning.



Mon, 10/10/2011 - 13:46 | 1758178 I am a Man I am...
I am a Man I am Forty's picture

Michael Lewis is my favorite author, but his article in VF was garbage.  His rant on MW was not thoughtful and made little sense.  It is the only thing that ML has written that I did not finish.

As I have stated on this blog numerous times, Meredith Whitney does not know what the fuck she is talking about when it comes to municipal bonds.  Period, the fucking end.

BTW, I own a ton of municipal bonds (none in CA, NJ, or IL) that were purchased mostly prior to 2007 and absolutely hate it when one matures.  I do not buy municipal bonds now because they don't pay shit.


Mon, 10/10/2011 - 14:24 | 1758359 masterinchancery
masterinchancery's picture

So apparently you do accept her analysis in part, since you won't buy the most bankrupt states.  As a long time resident, bond holder, and analyst of Illinois finances, it is beyond obvious that, without a vast infusion of federal money, or maybe money from the Andromeda galaxy, Illinois will eventually default on both bonds and pensions; the math is inexorable.  Did you read the part about San Jose being eaten alive by municipal pensions?   Same thing in Illinois, although Obama slowed the process slightly by handing billions to Illinois pols and unions from the "stimulus".     So please tell us, what is the Truth about munis--what force will save  California, Illinois, NY, NJ, etc?

Mon, 10/10/2011 - 15:26 | 1758690 jm
jm's picture

I don't think anybody dissagrees about these issues.  But these issues were well known before Meredith Whitney even started talking about munis.

Mon, 10/10/2011 - 13:40 | 1758145 apberusdisvet
apberusdisvet's picture

so what happens when property owners say no to the latest tax increase to support unsustainable public sector pensions?  Either they lose their property (homes) or there is blood in the streets.  Whitney was just a few years too soon in her analysis.

The next local budget hearings should be interesting; the sheeple are fed up.

Mon, 10/10/2011 - 13:37 | 1758143 ZackAttack
ZackAttack's picture

I'm still sorta lost on how the sub-sovereigns (the states) can have an equal or higher credit rating than the sovereign (the US after the downgrade).

Mon, 10/10/2011 - 13:04 | 1758011 SwingForce
SwingForce's picture

I have a Dream, that someday ALL Florida Condo Associations will have a website with the transparancy that the State of California provides. Ah, until that day, however, these FL "Non-Profit" entities have the unbridled power to assess their captive citizens and spend on themselves. It all starts here folks, and works its way straight up to Washington DC. There are $Billions wasted each year on property managers and accountants, lawyers too. Somebody should write a book... awe, who cares.

Mon, 10/10/2011 - 12:58 | 1757986 goodrich4bk
goodrich4bk's picture

Did Mr. Kotok or anybody at Cumberland Advisors forsee the fall of Bear, Lehman or AIG?  Did they anticipate the historic collapse of bond yields in the past couple of years?  Did they get any of their clients into gold when it was less than $300 an ounce --- or even when it was less than $1,000 an ounce? 

As for Bond Girl, I'd love to judge her past investment advice but she has chosen to remain anonymous.  At least Whitney has the courage of her convictions.


Mon, 10/10/2011 - 18:44 | 1758164 Don Birnam
Mon, 10/10/2011 - 12:56 | 1757978 Deadpool
Deadpool's picture

Lewis does what he always does here: interview interesting people on the scene and insert their witty comments into a narrative that is way bigger than he can possibly understand from the "man on the street" like the lady car driver or hot dog stand vendor he quotes in his other pieces on Greece, Iceland, etc. Infotainment.

Mon, 10/10/2011 - 12:54 | 1757967 JOYFUL
JOYFUL's picture

nice slam on Meredith.

you are unlikely to read about them in Vanity Fair or see them interviewed on 60 Minutes offering a counterpoint to Whitney. Why is that?

Probably cause she has made some major correct calls, that just like the one under discussion here, went pretty unheeded until they turned out to be just that...sadly, both Kotok and his shadowly army of "municipal bond market professionals that understand these matters on a granular level" don't appear to have been able to duplicate let allow best that performance, and therefore have not received the desired calls from major media producers....or receive subscriptions from major money players who prefer not to be left out in the cold second time around.

Florida and NJ huh? I assume the Jersey location is for the purpose of accessing the vineyards needed for all the sour grapes you stomp...

Mon, 10/10/2011 - 12:53 | 1757965 no2foreclosures
no2foreclosures's picture

"There are hundreds of municipal bond market professionals that understand these matters on a granular level . . ."

Mr. Kotok and Ms. Bondgirl better take their heads out of theirs asses and look at the macro level.  These munibonds will collapse as soon as the US "treasuries" go the way of the dodo birds, sooner when the housing market collapses another 20-40%.

Mon, 10/10/2011 - 12:53 | 1757963 Panafrican Funk...
Panafrican Funktron Robot's picture

I actually don't see defaults happening either (at least in the "maturity less than 10 years" class), even in the likely suspects.  There's too many biddable public assets.  The Dem profligates generally sell off those assets, whereas the Repub profligates simply take the hammer to public spending, typically in regulatory or "soft" (non-police/basic infrastructure) spending.  

Mon, 10/10/2011 - 12:46 | 1757927 Lazane
Lazane's picture

I am familiar with a city of 10,000 in middle america who over the course of the past decade saddled itself with 62 million in long term debt that today risks the potential of a municipal bond default more so now than at anytime in its history. the potential cascading effect of reduced taxreceipt cash flows federal state and local have never been more apparent and likely to continue since the 1930's. all it will take is one hiccup in the cash flow gravy grain and the cars jump the tracks, oh!  the misery that could come from it all. 

Mon, 10/10/2011 - 12:32 | 1757867 hannah
hannah's picture

the muni market will collapse when washington dc stops pushing bailouts to it......the idiots that wrote this article act like the states didnt recieve any bailout money? whtney was correct...the muni's did 'collapse' but the fed gov came in and backstopped them so they didnt collapse....oh and the feds did it with QE money....and that can continue how long.....?

Mon, 10/10/2011 - 15:03 | 1758555 MrPalladium
MrPalladium's picture

"whtney was correct...the muni's did 'collapse' but the fed gov came in and backstopped them so they didnt collapse"


Do NOT follow this link or you will be banned from the site!