KeNo's Housing and Economic Portal: Sunday November 21 Housing and Economic stories

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TOP STORIES:

Municipal Bond Market Shudders - (www.nytimes.com) Has the reckoning arrived for municipal bonds? That is the question investors are asking after munis — those old faithfuls of investing — took their biggest hit since the financial collapse of 2008. Concern over the increasingly strained finances of states and cities and a growing backlog of new bonds for sale overwhelmed the market last week. After performing so well for so long, munis and funds that invest in them fell hard. One big muni fund, the Pimco Municipal Income Fund II, for instance, lost 7.5 percent. The fund is still up 6.75 percent so far this year. While the declines were relatively small given the remarkable gains in these bonds over the last two years, the slump was swift enough to leave investors wondering if this was a brief setback or the start of something worse. For months, some on Wall Street have warned that indebted states and cities might face a crisis akin to the one that brought Greece to its knees. “I think it’s too early to say that it’s more than a correction,” said Richard A. Ciccarone, the chief research officer of McDonnell Investment Management. “The facts just don’t support a serious conclusion that the whole market’s going downhill,” he said. “They could. We’ve got some serious liabilities out there.”

California's a fiscal mess, but debt isn't the problem - (www.latimes.com) Despite its dysfunctional financial image, the state still has room to borrow. It will ask investors for $14 billion over the next two weeks. California took a record 100 days into the new fiscal year to nail down a budget, and that plan already is sporting a gaping hole. Now, the state will go to investors to borrow $14 billion in the next two weeks. If you don't read much beyond those headlines, it's easy to send the outrage meter spinning well into the red zone. How can California, with such horrendous financial problems, dare to dig itself into a deeper debt chasm? And why would investors be willing to fork over their money to a state that looks more fiscally dysfunctional than ever? Yet the dots don't quite connect the way the outrage-prone might prefer. The borrowing spree that Treasurer Bill Lockyer is about to launch isn't about trying to paper over short-term budget troubles with long-term debt.

Financial crisis fears grow in Ireland, Portugal - (www.washingtonpost.com) European officials on Friday scrambled to ease a brewing market panic over financial troubles in Ireland, Portugal and Spain, as speculation mounted that one or more of those nations may be forced to follow in the footsteps of nearly bankrupt Greece and ask for an international bailout. The bonds of hard-hit Ireland in particular have taken a severe beating in recent days on the back of fears that its financial woes are reaching critical levels. But investors have especially moved to dump bonds on the heels of a German-backed plan that might see bond-holders take a loss if Ireland, or any other troubled nation in the European Union, is forced to ask for aid as Greece did last spring. The idea, German officials argue, is that investors should share the burden if countries that have over-borrowed and overspent now need financial rescues from their bigger, wealthier neighbors.

Fed official sounds buyout bubble alarm - (www.reuters.com) The new round of cash the Federal Reserve is pumping into the U.S. economy to spur job growth could create bubbles that do the very opposite, some Fed officials are warning. Dallas Fed President Richard Fisher suggested this week that a bubble is already forming in private equity, with cheap debt fueling high-priced deals in an echo of the torrid days of leveraged buyouts before the subprime credit crisis cut off financing in 2007. Fisher, who argued against the U.S. central bank's decision earlier this month to buy $600 billion in Treasuries to boost the recovery, told a San Antonio audience on Monday he is concerned about signs of "speculative activity" in buyouts, along with stocks, bonds and commodities. He singled out private equity giant Carlyle Group's (CYL.UL) recent agreement to buy telecoms firm Syniverse Technologies (SVR.N), saying the price paid rivaled the lofty price tags common in the "pre-crash craze."

U.S. Gets Rebuffed at Divided Summit - (online.wsj.com) The Group of 20 nations, hailed less than two years ago by economists and policy makers as a new model of global economic cooperation, concluded its latest meeting here with only a narrow procedural accord, as the U.S. was unable to persuade other countries to take measures it believes are necessary to end currency wars and promote sustainable growth. With the world confronting hefty economic imbalances and rising tensions over currencies, monetary policy and trade, the leaders of the world's 20 most powerful economies concluded the summit with almost as many disagreements as when they started—undermining the idea of the fledgling G-20 as a forum for hashing out global policy. China and Germany rejected U.S. calls to rein in their trade surpluses and bashed Federal Reserve policies that they said undermined the dollar. Though the tone of the meeting was more civil than the heated exchanges leading to it, on key issues members rejected comity in favor of national interests. The gathering's only real agreement on the controversial issues of foreign-exchange and monetary policy amounted to a punt: a commitment to study international currency policies.