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| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
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S&P National Bond Index
|
3.00% |
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S&P California Bond Index
|
2.96% |
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S&P New York Bond Index
|
3.13% |
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S&P National 0-5 Year Municipal Bond Index
|
0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
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S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
|---|
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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BABs: What's Too Painful to Remember, We Simply Choose to Forget |
Minyanville - Nov. 22, 2010 - By Peter Atwater
Build America Bonds may have created municipal interconnectedness where none existed before, jeopardizing financial stability.
Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial).
This morning in his Wall Street Journal op-ed, Steven Malanga offers, "The governments that have made the most use of BABs ["Build America Bonds"] have been those with the greatest fiscal problems." Malanga then goes on to note that "when money that would otherwise go to private business flows into subsidized government activities, resources are misallocated."
While time will tell, I suspect that Malanga is likely to be proved right on both fronts. But to me, he misses my bigger concern about Build America Bonds: They may have created municipal interconnectedness where none existed before.
Over the past two years, I have filled many pages writing about Europe's financial House of Mirrors, where the crossholdings of financial and sovereign debt has created a complex web in which failure of one borrower has the potential to create a contagion of defaults elsewhere. And clearly the EU bailout of Ireland announced yesterday demonstrates the seriousness of the issue.
As Malanga notes this morning, BABs were designed "to appeal to investors such as pension funds and overseas buyers who don't buy traditional municipal bonds because they can't take advantage of their tax-free status."
My concern is that many of the "pension fund" buyers of BABs are likely to turn out to be US municipal and state pension plans, with the net result being our own House of Mirrors in which the default of, say, a Columbus, Ohio BAB impacts the financial stability of the City of Philadelphia, because the Philly municipal pension plan owns the Columbus BABs and vice versa.
How big is this problem? I honestly don't know. And unfortunately, I'm not sure that anyone knows and probably won't know until the music stops. But it appears to me that BABs may have created significant interconnectedness among our state and local governments (not to mention interconnectedness between corporate pension plans and state and local governments) where none existed before. And with state and municipal defaults appearing to be the next shoes to drop, my fear is that BABs have set up the same "Where's Waldo" contagion risk that we saw among financial institutions back in 2008.
I suppose that Bab's was right. What's too painful to remember, we really do simply choose to forget.
But how we could forget, in this case, is beyond me.
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Income Security Recommendation January 2013 Issue.
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