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Monday, May 3, 2010

Another bubble waiting to pop

Municipal bonds. And you can bet that Portland will be right in the middle of it.

Comments (6)

Unfortunately, I think the bailouts set a bad precedent. Apparently, the executive and legislative branches are under the impression we can just keep issuing debt (T-bills) and give out money. I mean Sam has no problem flying over to see Earl for more streetcar money, so I don't think borrowing to for something else is an issue. They will NEVER EVER cut any spending on anything - Not in their vocabulary.

Since the current interest-rate environment is pretty gentle, I guess they can get away with it. Heck, banks pay you 0.25% and then buy T-bills for 2%+ and call it good. So it eats up debt and they are in no rush to lend money.

My guess is this will happen at the state/city level. Cali will be the test case.

Remember, pols only have 3 levers:
- Passing a law
- Raising taxes
- Spending money (whether they have it or not)

The latter is easily the most benign route.

And then Goldman Sachs ( and others) can make up CDO's and other non existent what-nots to sell back to the sucker pension funds and other so called 'safe investments'.
Is there a pattern here?

As an investor I am seriously considering a hedge bet against both Oregon and City of Portland Bonds.
In case you are not aware of it already, many traditional muni bond investors like bond funds and insurance companies are avoiding muni bonds like the proverbial plague. And interest rates are deffinately going up on them as well.

Still just waiting for Adams & Co. to issue bonds for the hanging gardens on the green roofs....

Goodbye Babylon - The Black Keys

Yonder Come Day - Bessie Jones & The Georgia Sea Island Singers

Does anyone know how one could see who is taking short bets on Portland debt?

Perhaps Mr Obama will chat about muni's this evening with best bankster bud Jamie Dimon, among others:

But the public will not be privy to those desperate discussions.

Mojo, thanks for the most unexpected Bessie Jones link.

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