Tue
Aug 21 2012
01:04 pm
Municipal bond worries
By: R. Neal

WSJ reports that Warren Buffett has reduced Berkshire Hathaway's exposure to municipal bonds, suggesting concerns about the solvency of state and local governments.

In October of last year, Tennessee received the top Aaa rating from Moody’s Investor Service and Fitch Inc. and an AA+ rating from Standard & Poor’s.

The City of Knoxville in April reported a Fitch bond rating of AAA, an Aa1 rating from Moody's, and an S&P rating of AA+, all excellent ratings. S&P also rated Knox Co. credit as AA+ in February.

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gonzone's picture

All the tax cuts in state and

Submitted by gonzone on Tue, 2012/08/21 - 1:58pm.

All the tax cuts in state and local government due to the Tea Party nuts first reduced the number of employees but will eventually impact other bottom line issues.

It's "starve the beast" at the state and local level and the end result is not enough taxes to pay the bills.

Rooster2's picture

I disagree. Buffett went

Submitted by Rooster2 (not verified) on Tue, 2012/08/21 - 7:37pm.

I disagree. Buffett went negative on these bonds some time ago.

You can tax and spend and borrow and spend all you want, until you wind up like our friends stuck in the mess known as the Eurozone.

Bad economies worldwide, somebody has to be doing something to pay those taxes. And right now no one really is.

We should be hoping the EU cuts Greece out before it pulls down everyone. Greece doesn't want its labor market to be competitive, its addicted to the dole.

Average Guy's picture

BEWARE;

Submitted by Average Guy on Tue, 2012/08/21 - 3:50pm.

the issuers, advisors, brokers or whatever they call themselves to fit the pitch.

Many municipalities took some bad deals, but they're not the villain in this equation. Unless they maintain, or worse, try to hide the deals.

R. Neal's picture

Wonder what role the LIBOR

Submitted by R. Neal on Tue, 2012/08/21 - 7:11pm.

Wonder what role the LIBOR rate rigging played?

Average Guy's picture

Heh

Submitted by Average Guy on Tue, 2012/08/21 - 8:08pm.

Same as S&P and Moody's green lighting all Wall Street's BS.

Only instead of hands manipulating ratings of the banks, LIBOR is the bank's hand. That and a few more hundred trillion.

If Buffett is right; Knox, Sevier, Blount and their respective cities are in for a shock if any agency with authority tries to right the ship. The variable debt muncipalities have engaged in is built on the same type variable debt that sent an $800 mortgage to a $1,600 mortgage in a flash. Hopefully heads will be on pikes before all our tax bills double, but I'll not hold my breath.

Or maybe we'll just refinance...

Up Goose Creek's picture

Tennessee

Submitted by Up Goose Creek on Tue, 2012/08/21 - 7:57pm.

I suspect TN is doing well because we have the Hall tax on interest and dividends. As the rich get richer 6% trickles down into the state coffers.

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