Muni Bonds Have Been Taking a Beating

A recent “60 minutes” show this weekend highlighted a problem with states being unable to close budget gaps and pay for expensive pension and medical liabilities. States and local municipalities are in debt by nearly $500 billion according to “60 Minutes.” Furthermore they face over $1 trillion in unfunded liabilities.

What’s been the reaction to investors in municipal bonds? You can see for yourself. This problem is something we warned about previously and will rpobably become a severe national issue in 2011. No jobs and a depressed economy means no tax revenues and budget deficits. Government works will no doubt see entitlement cuts in pensions and health care programs in 2011. Sometimes our CA CD rates seem a better deal than chasing these other yields.