Munis still a 'danger zone,' warns Whitney

Munis still a 'danger zone,' warns Whitney
State and local governments not nearly out of the woods, analyst says
DEC 30, 2011
Meredith Whitney, the banking analyst who incorrectly predicted that “hundreds of billions of dollars” of municipal-bond defaults would occur in 2011, said the tax-exempt market is still a “danger zone” for investors. The reaction to her December 2010 forecast on CBS Corp.'s “60 Minutes” television program was “surprising,” Whitney said today on CNBC's “Squawk Box.” About $23 billion was withdrawn from tax-exempt-bond funds in the four months after her statement, according to the Investment Company Institute. “Clearly, this is something people see in their communities and can relate to and see on an anecdotal basis every day,” Whitney said. “If it was just taking my word for it, I don't think you would have seen a reaction that strong.” Defaults involving missed payments totaled $2.6 billion in 2011 out of $3.7 trillion of outstanding municipal bonds, according to Matt Fabian, a managing director at Concord, Massachusetts-based Municipal Market Advisors. State and local securities earned 14 percent through yesterday since Whitney's Dec. 20, 2010, “60 Minutes” interview, according to Bank of America Merrill Lynch indexes tracking prices and interest payments. That's more than the 9.4 percent for Treasuries, 10 percent for company bonds and 9.2 percent for the Standard & Poor's 500 stock index. RELATED ITEM Top muni bond ETFs » Whitney plans to write a book about the municipal market titled “Downgraded: Why the Next Economic Crisis Will Be Local,” according to a statement today from Portfolio, a Penguin Group imprint. It is scheduled to be published in November. The book “will reveal why America's cities and states are in deeper trouble than is commonly realized, with far-reaching and potentially disastrous consequences,” according to the statement. Whitney said today that state and local finance “shapes the future of the American economy and shapes the future of migration in this country.” --Bloomberg News--

Latest News

Stratos Wealth Holdings closes 11 acquisitions in push for advisory scale
Stratos Wealth Holdings closes 11 acquisitions in push for advisory scale

RIA aggregator adds $4.8 billion in client assets across seven states as demand grows for alternatives to traditional succession models.

Beyond wealth management: Why the future of advice is becoming more human
Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

Shareholder sues FS KKR Capital board, alleges NAV and dividend cover-up
Shareholder sues FS KKR Capital board, alleges NAV and dividend cover-up

Shareholder targets FS KKR Capital's directors over alleged portfolio valuation and dividend missteps.

UBS loses $1.2 million arbitration claim linked to variable annuities and margin
UBS loses $1.2 million arbitration claim linked to variable annuities and margin

UBS has a history of costly litigation stemming from the sale of volatile investment products.

'We are monitoring the situation,' SEC says of private funds
'We are monitoring the situation,' SEC says of private funds

New director David Woodcock puts firms on notice over fees, conflicts, and liquidity risk as private credit shows signs of stress.

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline