Disappointed
Recycles dryer sheets
- Joined
- Sep 16, 2007
- Messages
- 464
Anybody know why Ca Munis CEF tanked today (BCK, EVM, PCK) ?
Thanks,
mP
Thanks,
mP
Thanks, that what I thought but was not sure. This could be an opportunity as munis are usually pretty safe.
mP
Thanks, that what I thought but was not sure. This could be an opportunity as munis are usually pretty safe.
mP
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.
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