Startin up the Muni bond doom thread again.

A while ago I started a thread that was about the Muni Bond Doom and from what I have seen the problem has just not gone away.

Here is how I started the thread,,,,,,,,and think about this cuz I have a few updates Since Jan of 08.......


Dec. 20 (Bloomberg) -- MBIA Inc. fell the most since 1987 in New York trading after the world's biggest bond insurer disclosed that it guarantees $8.1 billion of collateralized debt obligations that investors say have a greater chance of losses.

``We are shocked management withheld this information for as long as it did,'' Ken Zerbe, an analyst with Morgan Stanley in New York, wrote in a report yesterday. ``MBIA simply did not disclose arguably the riskiest parts of its CDO portfolio to investors.''

What does this mean. In the case of Ambac Fitch, Moody's and Standard & Poor's are downgrading them and they are the main isurier of Municipl Bonds.

There is the Market's problem, Funds that must hold a percentage of AAA bonds in their profolio would be forced to sell them. YEP a dumping of bonds will start happening.


"Bob Smith, president and CIO of Sage Advisory in Austin, Texas, cautions that even general obligation bonds are not as straightforward as they used to be. Investors, he says, are overconfident in the companies that offer municipal bond guarantees. Over half of all municipal bonds are now backed by financial guarantees that confer AAA ratings, even when the cities, states or agencies that issue them are rated below AAA.

“What many people don't realize is that they are private companies, not government agencies that are mandated to work in the public interest,” Smith says.

If the guarantors become unstable, the prices of the bonds they guarantee could collapse. Such an event would catch retail investors and many brokers alike by surprise. There are four companies that dominate the financial guarantee market. They are MBIA (NYSE: MBI), Ambac Financial Group (NYSE: ABK), Finance Security Assurance (NYSE: FSA) and Financial Guaranty Insurance (a unit of GE Capital)