(click on chart to enlarge)
We've seen this chart pattern many times over the last 9 years, starting with Enron. The last time I posted on November 16, I thought that ultimately Congress would force an extension of the Build America Bond program into the Bill which will extend the Bush tax cuts, jobless bennies and other welfare state entitlement goodies. For some reason Congress is drawing the line on the BAB program.
It will start with California and Illinois and then set off a daisy-chain of muni bond defaults. I know that Califiornia has been using the BAB tag in order to issue new bonds which refinance maturing paper. What happens now? I'd love to hear some opinions/solutions. My guess is that this rout in the muni market will soon turn into a bloodbath. If you decide to ride this out, good luck! I'd say you are flirting with missing the last transport plane out of Viet Nam...
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