It’s Wednesday, midweek, so how about we head into the rest of the week with some real fear?
Massive spending cuts and tax hikes due next year will cause even worse economic damage than previously thought if Washington fails to come up with a solution, Congress’ budget referee said on Wednesday.
Perhaps the CBO wanted a wakeup call for politicians too wrapped up in ideology to get the job done, or maybe it is a real warning. I don’t know and I don’t care. Just fix it, will ya?
Have any of you been investing in the municipal bond market since a celebrated analyst predicted its demise in January 2010? If so, good job, as it has paid out nicely over the last 2.5 years. Now, will it continue to pay out well, or will it collapse?
Buffett’s Berkshire Hathaway ended a five-year-old credit default swap arrangement in which it insured $8.25 billion of municipal bonds.
The above has many wondering, why did Mr. Buffet exit? Some suggest Mr. Buffet sees problems in the market, so he exited now, while others suggest he sees it is time to move his billions elsewhere. No one really knows because The Oracle from Omaha is not talking and the results of his transactions are not public.
Investors have generally remained positive on the $3.7 trillion municipal market, pouring $964 million into municipal-bond mutual funds last week — 18 straight weeks of inflows. Investor appetite may be stronger for municipal debt than U.S. government bonds, but the tide could be changing after the Berkshire Hathaway disclosure.
It will be interesting to watch what happens now to this market, especially since no one really knows why Mr. Buffet exited. Will irrationality play out or will common sense rule? Currently, municipal bonds offer a much better return than US T-bonds, so what will all that money do?
The $3.7 trillion municipal-debt market is a critical destination for American investors. It’s also a fundamentally safe one. Regardless of scare stories in the news media, muni investors have no reason to panic. There’s good reason demand is so strong. State tax collections are rising, suggesting a return to fiscal health and an increased ability to service debt.
I agree. The US economy is still improving after a once-in-a century storm, but it is improving, as are the state economies that comprise the US economy. In fact, the future looks bright, despite the scary “news” all around us. Don’t buy into it (or do if it is muni-bonds). Stick with US consumers, as it appears they are not buying into the doom and gloom scenarios.
US home sales rise 2.3 percent in July to 4.47 million, latest sign of housing recovery.
Folks, it is easy to make a big, bad, bear case for the market, as bad stuff exists, but the fact remains that the market ultimately moves on corporate profits, which depend on the economy, which is why I always write about the economy. I rely on understanding the macro-economic picture to make money, and it works for me. The fact is the macro-economic picture is much brighter than the breathless media paints, so until we know otherwise, stick with muni-bonds, and everything else that has been working for you (pssst … no mention of Europe).
Trade in the day; Invest in your life …
