China on U.S. Debt: Need to “Seriously Assess the Risks” of its Holdings in U.S. Treasuries

July 15, 2011

As the debt ceiling debates continue, there have been several recent developments suggesting that we could enter into a default situation.  It was reported last night that President Obama “abruptly” walked out of the meeting following a heated exchange with the House Majority Leader Eric Cantor.

We also saw Moody’s and Standard & Poor’s recently threatened to downgrade the U.S. if the debt ceiling is not resolved satisfactorily.  We were all aware that this was going to happen as Moody’s made it apparent that if the U.S. did not make any steps toward shoring up the budget deficit and raise the debt ceiling.  Unfortunately, we are still wrestling with both of these tasks as we continue to move toward the deadline. Read more

Sunday Fun: Bond Bubble (Say it ain’t So…)

January 17, 2010

Bond traders are leery of a possible growing bond bubble. If the bubble bursts, people’s retirement savings may be in jeopardy, Smart Money’s Russell Pearlman Read more

Muni Money Markets at 5.25%+

October 7, 2008

Take a look at these tables ripped right from the pages of Schwab Institutional. Amazing ? Mistake ?

With “normal” taxable money markets are yielding less than 1%:

Look at the raw tax-free muni money market rates now….

New York is doomed, then it gets worse

September 28, 2008

First, watch video, then read commentary. Interesting developments….

Below is the text from a recent MSNBC article that corroborates my thesis. Note that the video is from early August, 2007. The media is way behind, as usual. Read more

The Steak is Perfect, but The Big Apple is Rotten

August 12, 2008

This is way overdue. I have been writing this over the past few weeks and have been researching New York’s financial woes. This is definitely on my watch list… But truth be told, my travel plans have prevented me from getting this posted. So, in light of the recent announcement by Mayor Bloomberg, here is the start to my lunatic fringed discussion about New York’s coming problems.

(Now, I am looking for ways to short this for profit. I am not coming up with good answers just yet..more to come)


I sit and write this in the center of the action. Sunday night in the Big Apple and the buzz at Rue 57 is high. This is one of my favorite French Bistro style restaurants on par with the likes of Balthazar, Les Halles and others that serve superb steak and  the freshest seafood – so fresh that you may need to slap it !

After mulling the great choices, I think that I will order a standard, Steak pomme frits au poivre. (Steak with a green peppercorn sauce and fries). Usually this is a New York strip but here it is a mouth pleasing sirloin. The preparation is simple, crusted with peppercorns and then served with a brown sauce finished with a dash of brandy and saturated with green peppercorns.

Somehow I have always felt this is the perfect combination as both the sauce and the meat dramatically enhance each other. To be perfectly honest, if this had to be my last meal, it would be just fine. I mean, unless something is really off, you can’t go wrong with this. So, if you have never had this dish, I highly recommend it at this particular restaurant. Just add a glass of your favorite Cabernet or Merlot and life will slow down be perfect.

While this was a wonderful memory, the fact that it appears that New York is about to have some major financial problems cannot be avoided. MSNBC is reporting:

New York Gov. David Paterson is summoning lawmakers into an emergency session in mid-August to deal with a “mammoth collapse in revenue,” including a 97 percent drop in banking taxes from a year ago. He ordered a hiring freeze and called for a $1.23 billion cut in state spending that could affect such things as colleges and hospitals. He has also proposed leasing state roads, bridges and tunnels as well as the lottery to outside companies.

The problem is much greater. Selling the Brooklyn bridge and the tunnels may sound funny, but this is done all of the time. In the world of finance don’t they do this through revenue bonds? Sure, but the problem is that New York will need to sell off a revenue producing assets and one that may be financed through Municipal revenue bonds. But this is highly improbable.

Economists are warning of further revenue losses in the months ahead that could force lawmakers in many states to reopen their budgets and make midyear cuts.

Don Boyd, a public policy researcher with the Rockefeller Institute of Government in New York, said states will face the second wave of lost revenue next year when residents and businesses file tax returns reflecting their heavy losses on the stock market.

“You should expect significant proposals from governors, certainly for spending cuts, probably for more tax increases and certainly for more gimmicks,” he said. “And I’m sure you’ll see hiring freezes and layoffs.”

With that, how best to position a portfolio for profit and/or protection with this potentiality? Certainly the use of insurance through MBIA, FGIC, or AMBAC does not necessarily mean that holders of bonds are safe. In fact, a common misnomer as the interest is protected, not the principal.

Muni ETFs

Just recently, the CEO of upscale restaurant chain Smith & Wollensky was on CNBC explaining how New York is a different place than any other part of the country. In fact, he is predicting that there are no problems as he sees it with the foot traffic and the fact that people will still pay to eat. Yet, he forgets that now is the time to become cautious as the foreign money x-factor along with the confluence of factors that will bring in a nasty slowdown for the state.

Note: No Positions as of now