Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
California Munis Closed End Funds tanked today, why?
Old 01-18-2008, 08:32 PM   #1
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 428
California Munis Closed End Funds tanked today, why?

Anybody know why Ca Munis CEF tanked today (BCK, EVM, PCK) ?

Thanks,
mP
__________________

__________________
Disappointed is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-18-2008, 08:53 PM   #2
Thinks s/he gets paid by the post
twaddle's Avatar
 
Join Date: Jun 2006
Posts: 1,378
The Associated Press: Ambac Downgraded, Cities Seen at Risk
__________________

__________________
twaddle is offline   Reply With Quote
Old 01-18-2008, 10:17 PM   #3
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 428
Thanks, that what I thought but was not sure. This could be an opportunity as munis are usually pretty safe.

mP
__________________
Disappointed is online now   Reply With Quote
Old 01-19-2008, 12:27 AM   #4
Full time employment: Posting here.
 
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 831
Just read somewhere about Cal's $14 BILLION budget deficit. Maybe things are hitting the fan in relation to state government fiscal conditions there. R's don't want to raise taxes and D's don't want to cut spending. In between sits the $14 bil deficit.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
RetireeRobert is offline   Reply With Quote
Old 01-19-2008, 02:05 AM   #5
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
Quote:
Originally Posted by Disappointed View Post
Thanks, that what I thought but was not sure. This could be an opportunity as munis are usually pretty safe.

mP
Just my 2 cents... I'd be a bit careful with munis especially in places like California right now. Yes historically, they have been safer than say corporate bonds, but with declining home values in CA (which will probably translate into lower property tax revenues down the road), plus the fact that CA seem to already be squarely in a recession (which translates into lower income, sales, etc. tax revenues), some cities could find themselves in a bit of a financial pickle. It become especially delicate for investors if the company insuring their municipal bonds goes out of business or becomes insolvent. Now there is an argument out there that yields on munis are currently very attractive (especially compared to taxable treasury bonds) and that's where everyone should put their cash (as heard on CNBC). It is based on the assumption that munis are safe investments (almost as safe as treasuries). But there must be a reason why those yields are so much higher right now than the yields on treasuries (Is it perhaps because they have become much riskier?). So choose your munis very carefully...
__________________
FIREd is offline   Reply With Quote
Old 01-19-2008, 02:27 AM   #6
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Location: Los Angeles area
Posts: 1,432
My last 2 CA muni's (bought in 1984) come due in 2 years. CA state GO muni's
are second in line after education for the state's $$. I am not too worried.
__________________
learn, work, save, invest, fire
CyclingInvestor is offline   Reply With Quote
Old 01-19-2008, 09:46 AM   #7
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
The rating agencies have all be criticized for not raising the alarm on the CDOs and SIVs they rated as AAA. Now they won't ever let any of the bond insurers have enough capital to keep their AAA rating. The bond insurers had been forced to dilute equity once already and the rating agencies are trying to force a second round except the insurers have decided enough is enough. That triggered MBIC to basically give the "finger" to the rating downgrade threat. When that happens, all of the "insured" municipals will drop to whatever level the rating agencies happen to rate the highest -- the municipality or the bond insurer. I think the agencies are over reacting to avoid further finger pointing at them.

One thing worth noting is that so far, to the best of my knowledge, none of the insured CDOs or SIVs have missed an interest or principal payment. That is not the case with the uninsured obligations. The insurance companies are obligated to maintain the principal and interest payments on the products they insure. They are not obligated to maintain a AAA rating on themselves. Not having a AAA rating will greatly impact their ability to get new business. They are still well capitalized and should remain in business for several more years even with a rating drop. That should give them more time to work through the credit issues.

My BIL/SIL live in California. Listening to them makes me think the state is in a full blown depression. They are semi-frantic about the economy. DW and I are stuck in Houston where housing is going up 5 to 10% a year and any unemployment is voluntary.

In many ways, I think the federal govt would spend $150 billion more wisely by shoring up the bond insurers instead of sending out $800 checks.

I would personally not buy any of the bond insurer stocks based on my feable analysis.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 01-19-2008, 10:01 AM   #8
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,543
Quote:
Originally Posted by Disappointed View Post
Thanks, that what I thought but was not sure. This could be an opportunity as munis are usually pretty safe.

mP

i suggest you find a good news database and look up what happened in the early 1990's when some counties especially in california either went bankrupt or were very very close to it
__________________
al_bundy is offline   Reply With Quote
Old 01-20-2008, 10:41 AM   #9
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 428
Quote:
Originally Posted by 2B View Post
The rating agencies have all be criticized for not raising the alarm on the CDOs and SIVs they rated as AAA. Now they won't ever let any of the bond insurers have enough capital to keep their AAA rating. The bond insurers had been forced to dilute equity once already and the rating agencies are trying to force a second round except the insurers have decided enough is enough. That triggered MBIC to basically give the "finger" to the rating downgrade threat. When that happens, all of the "insured" municipals will drop to whatever level the rating agencies happen to rate the highest -- the municipality or the bond insurer. I think the agencies are over reacting to avoid further finger pointing at them.

One thing worth noting is that so far, to the best of my knowledge, none of the insured CDOs or SIVs have missed an interest or principal payment. That is not the case with the uninsured obligations. The insurance companies are obligated to maintain the principal and interest payments on the products they insure. They are not obligated to maintain a AAA rating on themselves. Not having a AAA rating will greatly impact their ability to get new business. They are still well capitalized and should remain in business for several more years even with a rating drop. That should give them more time to work through the credit issues.

My BIL/SIL live in California. Listening to them makes me think the state is in a full blown depression. They are semi-frantic about the economy. DW and I are stuck in Houston where housing is going up 5 to 10% a year and any unemployment is voluntary.

In many ways, I think the federal govt would spend $150 billion more wisely by shoring up the bond insurers instead of sending out $800 checks.

I would personally not buy any of the bond insurer stocks based on my feable analysis.
Interesting article re MBIA in Barron's
MBIA: Priced for Catastrophe - Barron's Online

mP
__________________
Disappointed is online now   Reply With Quote
Old 01-20-2008, 10:43 AM   #10
Recycles dryer sheets
 
Join Date: Sep 2007
Posts: 428
Quote:
Originally Posted by al_bundy View Post
i suggest you find a good news database and look up what happened in the early 1990's when some counties especially in california either went bankrupt or were very very close to it
Thanks, I believe that was Orange County and MER. All bond holders got paid. Now it looks like the entire state may be in financial trouble.

mP
__________________
Disappointed is online now   Reply With Quote
Old 01-20-2008, 07:15 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 1,543
and the issue back then was derivatives as well

this time there are a lot more retirees for the local governments to take care of
__________________

__________________
al_bundy is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Do you guys use Closed End Funds? Olav23 FIRE and Money 8 10-13-2009 12:22 PM
Closed End Funds - Advice? grumpy FIRE and Money 22 10-25-2008 08:51 AM
Closed-end Funds wildcat Stock Picking and Market Strategy 3 09-25-2007 01:05 PM
why not closed end funds? katfish FIRE and Money 4 04-08-2006 12:36 PM
Arbitrage closed-end funds and ETFs? Olav23 FIRE and Money 3 07-06-2005 09:37 PM

 

 
All times are GMT -6. The time now is 08:15 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.