Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Dow Stocks Bear Market Underway - 6th July 15
Marc Faber Warns of Greece Crisis Contagion Very High Risk - 6th July 15
Greece to Print Counterfeit Euros or IOUs, Hyper-Inflation Beckons - 6th July 15
Stock Market, Investing Big Picture - 6th July 15
“Oxi!” - Greeks Defy EU As Varoufakis Resigns To Ease Tensions With “Partners” - 6th July 15
Stock Market Rally in a Downtrend? - 6th July 15
Silver Price Consolidating Ahead of Another Sharp Drop - 6th July 15
Gold Price Gravitating Lower Towards $1000 - 6th July 15
Syriza Convinces Greece to Commit Suicide, GrExit Beckons, Market Reaction - 6th July 15
Financial and Commodity Markets Become Scary: Crash Point Or Turning Point - 5th July 15
A Revolutionary Pope Calls for Rethinking the Outdated Criteria That Rule the World - 5th July 15
Forget 'Haircut', Instead Syriza Plans Beheading of Greek Bank Depositors, Theft of Deposits - 5th July 15
The Pentagon’s 2015 Strategy For Ruling the World Through Endless War - 5th July 15
United States Celebrates the Disastrous Secession From Great Britain - 5th July 15
Greece Referendum Vote Result Forecast Yes Win, But Depression Will Continue - 5th July 15
The Great Greek Economic Depression - 4th July 15
Happy 4th of July Stock Market Analysis - 4th July 15
The Most Pressing Reason Yet You Want to Avoid Investing in Retail Stocks - 4th July 15
Fed’s Full Normalization and the Stock Market - 3rd July 15
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

Muni Bonds: Matt Taibbi's Antidote to Meredith Whitney

Interest-Rates / US Bonds Feb 09, 2011 - 02:48 AM GMT

By: Janet_Tavakoli

Interest-Rates

The credit-worthiness of specific muni bonds, particularly non-general obligation project bonds, has become a hot topic since "AAA" bond insurers imploded, partly due to mispriced risk premiums on protection they wrote on value-destroying CDOs for Wall Street banks.


Meredith Whitney provided no research to back up her call on a recent 60 Minutes segment of coming defaults by large municipalities amounting to $50-$100 billion. Bloomberg News revealed that her muni report was on the state level and didn't cover large municipalities. That's a problem, since muni credit issues are granular and the severity of the problem -- or non-problem -- depends on the specific situation. Her unsupported claim gives muni-problem-deniers ammunition to claim there is no substance to the argument that there are serious problems with certain muni bonds.

The Columbia Journalism Review made a valid point when it called out 60 Minutes for not making sure Whitney could back up her claims. Max Abelson and Michael McDonald of Bloomberg News debunked her "untarnished" track record and Spaceballs-worthy jabberwocky:

Bloomberg News reported in October that about two-thirds of her stock picks since starting her company in 2009 had fared worse than market indexes. A 2008 Fortune cover story ranked Whitney 1,205th out of 1,919 equity analysts the previous year, based on stock picking.

"A lot of this is, you know it, but can you prove it? There are fifth-derivative dimensions that I don't think I need to spell out to my clients," [Whitney] said.

"Whitney Municipal-Bond Apocalypse Short on Specifics," Bloomberg News, Feb 1, 2011 (excerpted and condensed).

In contrast, Matt Taibbi's Rolling Stone expose of Jefferson County, Alabama's sewer project is a hair-raising account of financial corruption, bribes, cost padding, pay-to-go-away agreements between investment banks, and fee slamming that wildly inflated the cost of a sewer project from $250 million to $3 billion. It saddled Jefferson County's taxpayers with a too-onerous debt burden and broke the financial back of the county. JP Morgan agreed to pay a $25 million fine to the SEC and $50 million to aid Jerrson County's displaced workers for its role in the devastation (updated):

The county, it turned out, was more than $5 billion in debt -- meaning that courthouses, jails and sheriff's precincts had to be closed so that Wall Street banks could be paid...Homes stood empty, businesses were boarded up, and parts of already-blighted Birmingham began to take on the feel of a ghost town.

"Looting Main Street," by Matt Taibbi, Rolling Stone, March 21, 2010

Whitney might back up her claim by walking the media through at least one analysis -- if she has one -- of the specific problems of a large municipal bond issue, since it is beginning to look as if Whitney's claims are a series of PR stunts.

Whitney's claim-to-fame, a bearish bank call on Citi, was over-hyped. Her Citi call was late. Jim Rogers, a world famous investor with a provable track record, appeared with her in early 2007 on Cavuto on Business and explained why he was short (bearish on) Citi. Whitney refuted him and continued to rate Citi sector perform, yet Citi underperformed the sector during this time period. It wasn't until October 31, 2007, that she took Rogers' hint. Likewise her Bear Stearns call was late, and her Lehman call was tardy. I mentioned this in a commentary after either she or her PR people seemed to take credit for an apparently nonexistent early call on AIG. (See: "Reporting v. PR: Meredith Whitney and AIG," TSF, March 23, 2009 .)

Meredith Whitney's PR has more issues than Rolling Stone, but Matt Taibbi provided evidence that he researched the substance of the problems behind a muni bond issue.

By Janet Tavakoli

web site: www.tavakolistructuredfinance.com

Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct associate professor of derivatives at the University of Chicago's Graduate School of Business. Author of: Credit Derivatives & Synthetic Structures (1998, 2001), Collateralized Debt Obligations & Structured Finance (2003), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, September 2008). Tavakoli’s book on the causes of the global financial meltdown and how to fix it is: Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street (Wiley, 2009).

© 2011 Copyright Janet Tavakoli- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History