With 1M+ foreclosures projected for this year and next and the economy potentially headed for a nasty recession AND potentially the cost of money for the municipalities rising drastically long term and not just short term (the big unknown right now) 20% might be cheap. Until the credit markets start to work again it is hard to knowhow much money is going to cost for municipalities and this is a big factor in their solvency. If they have to roll large amounts of debt at 20% or more if there are no takers for it for longer than just a few months that certainly significantly rasies the risk of default and that is why I say it might be cheap or might not, too early to tell. If Buffet and Spitzer come through then some people will have made out very well, but if it doesn't pan out a lot of people can get burnt even at 20%.
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Port Authority pays 20%
- Thread starter dozu888
- Start date
With 1M+ foreclosures projected for this year and next and the economy potentially headed for a nasty recession AND potentially the cost of money for the municipalities rising drastically long term and not just short term (the big unknown right now) 20% might be cheap. Until the credit markets start to work again it is hard to knowhow much money is going to cost for municipalities and this is a big factor in their solvency. If they have to roll large amounts of debt at 20% or more if there are no takers for it for longer than just a few months that certainly significantly rasies the risk of default and that is why I say it might be cheap or might not, too early to tell. If Buffet and Spitzer come through then some people will have made out very well, but if it doesn't pan out a lot of people can get burnt even at 20%.
For those looking for free money take a loot at NIO. its a municipal fund trading at 9% discount, looks like its putting some kind of bottom and I loaded up. the NAV might decline(and decrease the discount a bit) but it will be a BS decline since it will have nothing todo with the credit quality but just forced selling and panic. if the municipal market blows up and huge selling occurs then I dont think my brokerage account returns will matter because we will be back at the stone age. I dont think this will happen, I expect dinallo and co to even break contracts and ignore private property if necessary to prevent forced selling
Quote from moo:
What the hell is going on??? Isn't this stuff supposed to be super-safe?
Yes, but banks and other financials are broke and are not putting money into the system, they are busy trying to save their asses, not profit. Basically, the Port Authority is paying a high rate because the market has effectively disapeared at this time.
People have been talking for some time about the credit crisis, but I don't think thats what we have at all, what we actually have is a solvency crisis.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2ksXTL4zoAc&refer=home
Thats where I got it but its all on Bloomberg.
Thats where I got it but its all on Bloomberg.