Last Wednesday I posted BS... Defined: Bernanke Seeks (BS) to Divorce QE Tapering From Interest Rates - OR - Economic Prestidigitation! wherein I ridiculed the notion of being able to withdraw economic financial aid while expecting rates not to spike. The fact of the matter is we are the at the end of a 33 year old bull market in credit. Or, to put it more accurately, we are at the end of a 5 year synthetic extension of a 28 year old credit market bull run....
I urge readers to keep in mind what I expoused in Apple Bonds Proven To Have A Nasty Taste wherein Apple bonds lose 9% in six weeks:
We Clearly & Obviously Ending A 3 Decade Bull Market, Likely At The Tail End Of The Largest Global ZIRP Experiment Ever!
And this final aspect is the kicker. We are likely culminating the end of a three decade secular bull market in bonds. Why in the world would anyone want to buy debt now, in a good, bad or mediocore company? Reference a chart of ten year rates over time, and you will see that once you get this close to zero (and the applied end to excessive ZIRP), there's no way to go but up. As excerpted from theMarket Realist site:
Yes, this goes for muni investors as well! Municipalities have a dual edged sword up the ass. Not only are higher funding rates to be expected from a shifting market, but the actual fundamentals of municipalities are in the crapper as well, putting an even larger premium on what is already a steep increase in funding costs. What do you think happens next?
- Detroit Slides From Industrial Might to Bankruptcy Bloomberg
- Judge seeks to halt Detroit bankruptcy filing CNBC
- Detroit bankruptcy fight could be long CNBC
- SEC charges city of Miami with fraud CNBC
It's not as if we couldn't see this coming a mile away - or at least 2 to 5 years ago...
Wednesday, 14 May 2008 The Municipal bond market and the securitization crisis
ARS market – composition as on 31 December 2007
Student loans? Ruh Oh!
How To Profit From The Impending Bursting Of The Student Loan Bubble, Pt 1
- How To Profit From The Impending Bursting Of The Student Loan Bubble, Pt 2
- How To Profit From The Impending Bursting Of The Student Loan Bubble, Pt 3
- Calculate The Value & ROI Of Your College Education Now With BoomBustBlog
Saturday, 24 May 2008 The Municipal Bond Market and the Asset Securitization Crisis, pt 2
Thursday, 20 January 2011 Here Come Those Municipal Defaults That Everyone Said Couldn't Happen
In the multifamily housing segment, default rates increased significantly and were extremely high for the period 1987-90, i.e. at the time of the S&L crisis when real estate lending was reckless due to declining lending standards by banks and other financial institutions. The default rate peaked in 1988 in the eleven year period reviewed to 4.31%, followed by 3.41% in 1989.
Don't let me say I told you so. Will those monolines start feeling part 2 of credit crunch?