Rocky

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    • Fri Apr 4th 15:44 PM | Rating: 0 0
      Commented on:
      RedEnvelope Getting Pink Slip?
      Whatever happened to the low tech solution to giving a gift by putting money in an envelope, with an appropriate card or note? I am surprised that a company like this lasted so long. I thought flaky companies like this collapsed in the dot.com bust of 2000.
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    • Sun Mar 2nd 22:46 PM | Rating: 0 0
      Commented on:
      Municipal Default Alert: Vallejo, California
      A website put up by Vallejo residents before the last mayoral election in November 2007 had a list of firefighter salaries/overtime for 2006. All were over $100,000. The highest was about $379,000. #1 retired in 2007 and probably qualified for the maximum payout (3% credit for each year of service x 30 years of service = 90% of final year's compensation), or over $300,000 pension per year for life. That is surely the way to municipal bankruptcy. Many cities and counties in California and the State itself offer such a plan to public safety employees. Watch for library closings coming to a town near you. California's public employee pension law needs to be changed but I guess it will take a full blown financial crisis before the Democrats (who control both the Assembly and the Senate) have the guts to take on the public employee unions.
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    • Sat Mar 1st 18:49 PM | Rating: 0 0
      Commented on:
      Muni Bond Troubles Worsen
      The results for Feb. 29 were much worse according to articles in the Weekend WSJ and the latest Barron's. However, these "yield rallies" did not appear to be fully reflected in Friday's closing mutual fund prices. The Vanguard LT California Tax Free Bond Fund was off by only 0.73%. Will Friday's muni bond prices turn out to be a one day wonder, or are long term muni mutual funds being grossly misspriced? We'll find out in the coming week.
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    • Tue Jan 29th 18:15 PM | Rating: 0 0
      Commented on:
      My 2008 Predictions for Financial Catastrophe
      I will vote for an as yet unnamed Libertarian or independent candidate before I vote for Hilary. The writer is correct, she has very high negatives. I hope Michael Bloomberg runs and spends some of his millions trying to educate the public about the financial problems facing the US government and state/local governments as well.
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    • Mon Jan 28th 15:08 PM | Rating: 0 0
      Commented on:
      I'm Out of Closed-End Muni Funds - For Now
      Many municipalities are going to have major problems honoring all their commitments to their public employee pension funds in a few years (including post retirement medical benefits). Don't be surprised if some issuers have to file for bankruptcy protection. Orange County, CA has retained law firms to see if it has grounds to invalidate its pension commitments, especially to recent public safety retirees. In Orange County, a sheriff's deputy with a lot of overtime in his final year of service can retire at age 50 and 30 years service with a pension of 90% of final year compensation. So if a deputy racks up $100,000 in overtime pay in his final year, he could easily qualify for a pension of $150,000 for life plus medical benefits. Even in Disneyland, that's a lot of money.
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    • Sun Jan 20th 22:59 PM | Rating: 0 0
      Commented on:
      Muni Bond Holders: Don't Lose Sleep Over Insurance Guarantee Failure
      If your bonds are backed by property taxes or an essential revenue stream such as water charges, I wouldn't worry about the bonds. They probably didn't need the insurance to begin with, but a lot of buyers were willing to pay higher prices (accept lower interest rates) for insured bonds so the bonds were insured. On the other hand, if your bonds are backed only by lease payments to be made by a financially weak city that you would not want to live in, you have more to worry about. If the retirement system for public employees is not fixed in California in a few years, I could easily see some California issuers defaulting on their lease bonds (certificates of participation) down the road.
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    • Wed Jan 16th 10:16 AM | Rating: 0 0
      Commented on:
      Fixed Income Pair Trade: Long MLN, Short TLT
      AAA insured munis are backed by the same bond insurance companies that are paying 14% to borrow money in the capital markets. I am specifically referring to MBIA. The AAA would appear to be overstated. If MBIA is paying junk bond rates to borrow on a subordinated basis, maybe its claims paying rating should only be A or BBB. The US government has one big advantage over municipal issuers: it can print money. Even the State of California does not have that power.
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    • Wed Jan 2nd 17:06 PM | Rating: 0 0
      Commented on:
      An In-Depth Look at Municipal Bond Insurance
      As I recall from my days on a bond trading desk, the major bond insurance companies have risk to capital ratios of close to 150:1. Even when unearned premiums and other reserves are taken into account, it doesn't take many defaults for an insurance company to go bust. In the good old days, the majors stuck to insuring mostly investment grade bonds that were not in much risk of defaulting. FGIC reportedly had the highest standards. Not any more. Too bad the companies ventured into exotic mortgage instruments and who knows what else. While a 150:1 risk to capital ratio was adequate for insuring investment grade munis, the standard did not change as the risks increased. Too bad for investors relying on muni bod insurance to sleep nights.
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    • Tue Jan 1st 13:50 PM | Rating: 0 0
      Commented on:
      TOBs, and Why Munis Are a Must for Long-Term Holders
      The long term muni:Treasury ratio may look cheap, but the credit outlook for many munis especially in California is not very good. The State lurches from credit crisis to credit crisis every few years. The unfunded pension liability issue has not been dealt with and was made much worse by changes in state law in 1999. It is now possible for a public safety employee to retire at age 50 (with 30 years of service) and collect 90% of his final year compensation (including overtime pay) as an annual pension. Then there is the cost of post-retirement health benefits. The California of 2008 is not the California of 1958. Even if your bonds are insured, the bond insurers that survive the sub prime mess will be in a weakened state, while their risk to capital ratio will remain high (close to 150:1 as I recall).

      Then you want to ask yourself, are long term taxable yields high enough to compensate for inflation risk? Not in the US, not now.
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    • Mon Dec 24th 14:24 PM | Rating: 0 0
      Commented on:
      Fisking Ben Stein on Goldman's 'Wrongdoing'
      Ben Stein should worry more about his own ethical conflicts of interest and less about what Goldman Sachs did or didn't do for its customers. Most of Mr. Stein's articles in the NY Times and on yahoo Finance seem to slip in recommendations for variable annuities (although the current one does not), without Mr. Stein ever disclosing his financial ties to the life insurance industry. Variable annuities tend to come with very high fees that are not in the interest of the average Mom and Pop investor. Goldman does not go after the Mom and Pop investor. Its customers are mostly institutions, along with some wealthy individuals, who are presumed to be financially knowledgeable. If a county pension fund does not understand the mortgage backed securities it is buying, whose fault is that? The broker's or the management of the pension fund?
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