Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
What does he know and when did he know it? Yeah, looks like he's running scared. The ice has been broken; a number of localities have declared, and guess what? No lightning from the skies, the gods are asleep or maybe they just don't really care all that much.
"Hey, if those guys can do it, why can't we?" "Yeah, let's get rid of all those pensions and stuff and start all over!" "Hey, my brother-in-law is out of work and he'll be happy to be a fireman with no pension!"
You think maybe you could hear this in a fair number of towns and cities?
"..it may be unwise to read too much into Buffett’s move about the state of muni bonds, pros say. His decision to stop using credit default swaps to back munis, which would require him to pay up if a bond defaulted, could have more to do with waning interest in such insurance contracts than with the credit quality of the muni bonds themselves, says Fabian. Investors like Buffett could lose money if fewer people are willing to make those kinds of wagers, whether or not bonds default, he says."
Buffet's two investing guys have sold some long time Buffett stock holdings as well. I think he is slowly transitioning portfolio management to these new guys. They increased Wells Fargo holding. Also, I suspect Buffett may also be preparing to do some big purchase and raising cash.
Buffet hasn't stopped using CDS on munis, he's cut his position in half. Per the article: "The CDS amount to insurance against municipal bond failure. The idea of reducing exposure now would be to resell the contracts later at a better price. It's a position shift, not a sea change."
I've not seen anything about his selling muni debt - only CDS on muni debt.
Reply to @johnN: Not that there aren't kernels of truth in places on the site, but you do realize, John, that anybody can write an article for Seeking Alpha? It's not all expert opinion, by any means. Not to ignore it, but it certainly goes into the "trust, but verify" category ...
Reply to @Investor: According to the article below posted by by AndyJ, Buffet also sold Intel and Direct TV, and bought Phillips in addition to Wells Fargo.
I expect more changes coming as you eluded that transition to the new hands is progressing.
Reply to @johnN: Speaking of thin ice, writer says "New Jersey, another state under pressure, just reported a 2.26% return in the recent fiscal year." - Since when did long-term investors like pension funds start worrying about one-year returns? These generally have very long-term time horizons and as a consequence can take on more risk than an individual might. Don't know who the guy is or where he's going with this, but there seems to be an all-out assault on public sector pensions these days & their opponents will say whatever serves their purpose. Sure, low interest rates, sluggish economy, the real estate bust, and other factors are making for rough sledding. But, extrapolating anything meaningful from a single year's return? Really?
From the article: " Paul Ryan is also opposing any form of state or local government bailout. [16 large cities facing bankruptcy]:
"We can't do a bailout. If we bailed out one state, then all of the debt of all of the states is not just implied, but almost explicitly put on the books of the federal government. [Some states] are already telling us [about their dire circumstance]. But should taxpayers in frugal states be bailing out taxpayers in profligate states? … Should taxpayers in Indiana, who have paid their bills on time, who have done their job fiscally, be bailing out Californians, who haven't? No, that's a moral hazard we are not interested in creating."
I recall writing a similar note more than a year ago regarding whether North Dakota would be willing to put up money to bailout NJ or some other states. I suspect North Dakota citizens and their state gov't. would wholly object.
One may point a finger to whom or whatever about the monetary conditions that exist for any state or local government; but past this, and no unlike what we all have to factor into our investment decisions, is the fact that many budgets for especially local/city governments are a serious problem area. Our U.S. states/cities/communities and their monetary problems are not unlike the similar problems with some of the EuroZone states. While the Fed/Treasury reportedly will not back bailouts of states and related, directly; the function is already in place by actions of congress and monies going to states and related for 1,000's of programs and grants. The problems do cross borders for an overall impact, regardless how weak or strong a neighbor state may be. Our states have their own rules, regs. and tax laws to attempt to satisfy what those in charge perceive as a best path to a "better way of life for the citizens of their state". Government functions, desires and abilities are night and day if one compares California to North Dakota.
All of us are impacted by any and all problems from the federal to the local levels. We here are all aware of the serious impact of the low interest rate policy upon many who are retired or near retirement and choose to remain frugal; but can not earn enough interest with a relatively safe CD to even offset inflation. Many of these people are the grandparents and parents of many here at MFO; let alone some of the participants at MFO.
To place everything into the most simple words: "The monetary turd pile, while perhaps dried and not so smelly on the top and outside layers, reveals a continued nasty smell when one turns over some of the underlayers."
I really wish that "things" were better and perhaps the monetary unwinds will be slow enough for many to not cause serious problems; but many areas that have been accepted as a normal circumstance over the past several decades will have continued re-do's for many years to come; and there will be problems in various areas of the economy, not in the least; state, city and other municipalities.
Reply to @catch22: If the unemployment jumps and economy starts going downhill again, the problems will not be bound to a particular state and cross borders. California's problem will be Indiana's problem pretty soon. The sort of messages are short sighted. Europe tried to take such high road. How did it work out. We are in this all together.
Reply to @catch22: lol talking about "bailouts" and "not creating moral hazard" after the last few years loaded with bailouts and creating moral hazard in the financial system. Hilarious. We're a little far down the path of trying to bail everything out, sorry Ryomney (yeah, that's the combination name I came up with.) You have a financial system that is largely concerned with nothing beyond whether or not another round of QE is coming.
Anyone who thinks that Romney and Ryan will not continue to do the same bailouts and easy monetary policy tactics if faced with the decision ... at least is going to totally expect it when they do, versus being totally disappointed by someone they'd hoped would actually have done any of the things they said they would, like, you know, make some difficult decisions how to fix structural economic issues. Stuff like that. Additionally, while Romney has been negative on Bernanke, his economic advisor hinted the other day that maybe keeping Bernanke around might not be such a bad idea.
As for munis, people seem to reallly want to like them and seem awfully defensive whenever someone talks the slightest bit negatively about them....
Comments
"Hey, if those guys can do it, why can't we?"
"Yeah, let's get rid of all those pensions and stuff and start all over!"
"Hey, my brother-in-law is out of work and he'll be happy to be a fireman with no pension!"
You think maybe you could hear this in a fair number of towns and cities?
http://blogs.smartmoney.com/advice/2012/08/21/should-muni-investors-follow-buffett-to-the-exits/
"..it may be unwise to read too much into Buffett’s move about the state of muni bonds, pros say. His decision to stop using credit default swaps to back munis, which would require him to pay up if a bond defaulted, could have more to do with waning interest in such insurance contracts than with the credit quality of the muni bonds themselves, says Fabian. Investors like Buffett could lose money if fewer people are willing to make those kinds of wagers, whether or not bonds default, he says."
http://finance.yahoo.com/blogs/breakout/warren-buffett-investor-trader-115118306.html ---
Buffet hasn't stopped using CDS on munis, he's cut his position in half. Per the article: "The CDS amount to insurance against municipal bond failure. The idea of reducing exposure now would be to resell the contracts later at a better price. It's a position shift, not a sea change."
I've not seen anything about his selling muni debt - only CDS on muni debt.
I think we are treading in thin ice.
be very careful my friend, the ice can melt any time now
I have not sell any munis yet but 90% are BBB+ or higher
I expect more changes coming as you eluded that transition to the new hands is progressing.
From the article: " Paul Ryan is also opposing any form of state or local government bailout. [16 large cities facing bankruptcy]:
"We can't do a bailout. If we bailed out one state, then all of the debt of all of the states is not just implied, but almost explicitly put on the books of the federal government. [Some states] are already telling us [about their dire circumstance]. But should taxpayers in frugal states be bailing out taxpayers in profligate states? … Should taxpayers in Indiana, who have paid their bills on time, who have done their job fiscally, be bailing out Californians, who haven't? No, that's a moral hazard we are not interested in creating."
I recall writing a similar note more than a year ago regarding whether North Dakota would be willing to put up money to bailout NJ or some other states. I suspect North Dakota citizens and their state gov't. would wholly object.
One may point a finger to whom or whatever about the monetary conditions that exist for any state or local government; but past this, and no unlike what we all have to factor into our investment decisions, is the fact that many budgets for especially local/city governments are a serious problem area. Our U.S. states/cities/communities and their monetary problems are not unlike the similar problems with some of the EuroZone states. While the Fed/Treasury reportedly will not back bailouts of states and related, directly; the function is already in place by actions of congress and monies going to states and related for 1,000's of programs and grants. The problems do cross borders for an overall impact, regardless how weak or strong a neighbor state may be. Our states have their own rules, regs. and tax laws to attempt to satisfy what those in charge perceive as a best path to a "better way of life for the citizens of their state".
Government functions, desires and abilities are night and day if one compares California to North Dakota.
All of us are impacted by any and all problems from the federal to the local levels. We here are all aware of the serious impact of the low interest rate policy upon many who are retired or near retirement and choose to remain frugal; but can not earn enough interest with a relatively safe CD to even offset inflation. Many of these people are the grandparents and parents of many here at MFO; let alone some of the participants at MFO.
To place everything into the most simple words: "The monetary turd pile, while perhaps dried and not so smelly on the top and outside layers, reveals a continued nasty smell when one turns over some of the underlayers."
I really wish that "things" were better and perhaps the monetary unwinds will be slow enough for many to not cause serious problems; but many areas that have been accepted as a normal circumstance over the past several decades will have continued re-do's for many years to come; and there will be problems in various areas of the economy, not in the least; state, city and other municipalities.
My inflation adjusted 2 cents worth.
Regards,
Catch
Anyone who thinks that Romney and Ryan will not continue to do the same bailouts and easy monetary policy tactics if faced with the decision ... at least is going to totally expect it when they do, versus being totally disappointed by someone they'd hoped would actually have done any of the things they said they would, like, you know, make some difficult decisions how to fix structural economic issues. Stuff like that. Additionally, while Romney has been negative on Bernanke, his economic advisor hinted the other day that maybe keeping Bernanke around might not be such a bad idea.
As for munis, people seem to reallly want to like them and seem awfully defensive whenever someone talks the slightest bit negatively about them....