The Path of Least Resistance Is Complacency

You know what is about to hit the FAN.

Municipal bonds may not be worth the paper they are written on.

Jim

Jim,

The public, when presented with options - see headlines below, tends to choose the path of least resistance. That is, the path of complacency. It is much easier assume that the world they know, understand, live, and most importantly denominates the value of their possessions is solid as rock.

Local and State governments are facing deficits so large that few people realize how long it will take balance the economic and social equations. Are municipal bonds in trouble? Don’t ask the politicians or experts. The message of the markets is the only opinion that matters.

The suggestion that the iShares Muni Bond to Gold ratio is anything but a plunger’s (short side) trend is opinion. Opinions are the kiss of death in this business.

iShares Muni Bond (ETF) to Gold Ratio:


Regards,

Eric

Headline: Ind. bill would allow cities to declare bankruptcy

INDIANAPOLIS — A plan backed by Gov. Mitch Daniels would allow local governments in Indiana to ask for a state takeover and declare bankruptcy if necessary.

Daniels says he hopes there won't be many local governments that seek bankruptcy, but says the state needs to have the law clarified and on standby in case it happens.

Headline: Despite Default Risk, Select Muni Bonds Strong Buy: Gross

Regardless of the shabby state of government finances in the US, Pimco's Bill Gross says now is the time to be buying municipal bonds.


California and New York City are among the governments Gross, speaking in a CNBC interview, says will treat investors the best.

While he suggests avoiding entities with big budget shortfalls like Illinois, there are a number of other opportunities out there for investors trying to get better yields than the still-low returns that Treasurys provide.