Municipal Debt: A Win-Win Situation For
Everyone Present Generations
Despite how badly the United States could use an infrastructure upgrade (e.g. “Globally, the U.S. ranks 19th — behind Spain, Portugal and Oman — in the quality of its infrastructure), state and local governments are holding back, thanks to 1) heavy debt hangovers from the financial crisis, and 2) projects in limbo as the federal government’s Highway Trust Fund runs out of money. “To finance big infrastructure projects, state and local governments usually go to the municipal bond market, but in the last few years, they’ve issued few bonds for new capital projects despite historically low interest rates.” Meanwhile, “issuers from California to New York have scheduled $11.7 billion of long-term sales in the next 30 days, the busiest calendar in three months.” So supply is going up, but what about demand? “Municipal investors receiving $104 billion of principal and interest payments in the next three months” could help extend the muni rally even further in 2014. Meanwhile, Moody’s would like you to know that Illinois politicians are running this thing into the ground.
Hog Farmers Concerned About Growing Hogs, Potential For Slaughter
“The Fed’s growing worry (alt) — which could influence future interest rate decisions — is that if investors start taking undue risk it could lead to economic turbulence down the road.” How’s that for irony? Reuters says Fed officials “are right to worry, but in casting blame, policymakers need to look in the mirror.” Meanwhile, “the business of bundling junk-rated corporate loans into top-rated securities is booming like never before after the implementation of regulation aimed at making the financial system safer.“ Also, “lenders such as Ireland’s Allied Irish, Spain’s Bankia and Portugal’s Millennium BCP were once regarded as having little chance of long-term survival. But today international investors are prepared not just to lend them billions of euros — they are doing so without collateral. One reason such crisis-hit banks have returned to favour (alt) is that investment funds have taken on more risk in the hunt for better yielding assets…’Right now everyone is a yield hog.’”
Alibaba’s Money Market Fund Is Now 4th Largest In The World
“The explosive rise of Yu’e Bao (Alibaba’s online money market fund) surprised everyone, including Alibaba, which is proving to be a potential disintermediator for the entire financial industry…High yield with perfect liquidity has made Yu’e Bao an unbeatable product, draining 400 billion yuan from banks in a click.” Meanwhile, Chinese state media is printing things like this (alt): “foreign technology services providers such as Google and Apple can become cybersecurity threats to Chinese users…To resist the naked hegemony, we will draw up international regulations, and strengthen technology safeguards, but we will also severely punish the pawns of the villain.” I guess that’s a no-go for Facebook Autofill and Google Wallet in China?
HBR argues that the debate over a U.S. manufacturing renaissance “is less black and white than either the cheerleaders or the naysayers would suggest.” The results of an L.E.K. Consulting survey indicate “modest improvement in U.S. manufacturing but not a wave of reshoring. More companies are investing in the U.S. or considering it as a location for new manufacturing facilities. But this is essentially a rebalancing after many years in which manufacturing shifted overwhelmingly to lower-cost nations such as China.”
“Interest rate changes generally have small effects on bank profits, but changes in economic conditions do matter relatively much more.”
Also, even Warren Buffett doesn’t practice what he preaches.