Municipal Bond Defaults Happen More Often Than Ratings Agencies Report

“After bank analyst Meredith Whitneyprophesied a wave of defaults by U.S. citiestwo years ago, many investors mocked herwhen her prediction failed to come true.

But Whitney may have been on to something. It turns out that U.S. cities have defaulted on municipal bonds much more often than credit ratings agencies have acknowledged, according to research by the Federal Reserve Bank of New York released on Wednesday.

Economists at the New York Fed found between 35 and 50 times more municipal defaults over the past few decades than ratings agencies have reported: Cities have defaulted on municipal bonds 2,521 timesbetween 1970 and 2011, while Moody’s has listed only 71 municipal defaults during that time period. And while S&P lists only 47 municipal defaults between 1986 and 2011, the New York Fed found 2,366 municipal defaults over that time period.”

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“As West Nile Virus plagues the US in its worst outbreak since 2004, Texas has declared an emergency as it hosts 80 percent of the country’s infections.

Dallas Mayor Mike Rawlings expressed concern over his state’s unusually high infection rate. More than 200 disease infections occurred in Dallas County. In Texas, there were 381 cases and 16 deaths related to West Nile Virus – more than half of which occurred in Dallas County, ABC News reports.

The mayor on Wednesday authorized the first aerial spraying of insecticide from planes in more than 45 years, in an attempt to battle the deadly insects. The spraying will cost the government’s emergency fund $500,000.

“The number of cases, the number of deaths are remarkable, and we need to sit up and take notice,” the mayor said”

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“The suicide rate among U.S. military personnel is reaching a new high, according to official statistics.

This year to date, 116 confirmed or suspected suicides have been recorded – twenty-one more than at the same juncture last year. In July alone, thirty-eight soldiers were either confirmed or believed to have killed themselves.

The self-inflicted death rate among active duty soldiers has increased by 22 percent this year, and for the first time, there were also more suicides among soldiers ranked sergeant or higher (excluding officers ranked lieutenant and higher), a military expert told USA Today.

“Suicide is the toughest enemy I have faced in my 37 years in the Army,” Gen. Lloyd J. Austin III, vice chief of staff of the Army, said in a written statement.

“That said, I do believe suicide is preventable,” he added. “To combat it effectively will require sophisticated solutions aimed at helping individuals to build resiliency and strengthen their life coping skills” 

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“Doctors have discovered an incurable brain disease evident in a large number of soldiers returning from war, and estimate that as many as 250,000 US troops are at risk of being ravaged by the disorder next.

Chronic Traumatic Encephalopathy cannot be diagnosed or adequately treated yet, Col. Dallas Hack of the Army’s Combat Casualty Care Research Program tells the Huffington Post, and scientists say that they think brain injuries developed during battle might bring up the likelihood of CTE occurring, which is characterized by bursts of anger and depression, and is believed to be able to impact motor skills and memory. And with 2.5 million Americans being able to call themselves veterans of the United States’ wars in Afghanistan and Iraq, an increasingly large proportion of them are showing symptoms of CTE.”

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“Yahoo! Inc. (NASDAQ: YHOO) has begun the search for a chief operating officer who would be number two to new CEO Marissa Mayer. AllThingsD reports that the person would need turnaround and financial experience. Yahoo! has been turning itself around for years, so it may as well get someone who can do the job adroitly. The tech news site reports:”

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“(CBS/AP) NEW YORK – Macy’s Inc. (M) is suing rival retailer J.C. Penney Co. (JCP), claiming Penney’s bid to sell products by Martha Stewart Living is a breach of an exclusive contract held by Macy’s and could cost it potentially billions in sales.

In the complaint filed Thursday in the Supreme Court of the State of New York, Macy’s claims that J.C. Penney entered into an unlawful contract with Martha Stewart Living to sell some of its home products at its stores starting next February.”

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“(AP) CEDAR RAPIDS, Iowa – The founder an Iowa-based brokerage is expected to appear in court to face charges stemming from a suspected $200 million fraud scheme that drove his firm to bankruptcy and ripped off thousands of customers.

Peregrine Financial Group, Inc. CEO Russ Wasendorf Sr. is scheduled to be arraigned Friday in federal court in Cedar Rapids on an indictment that charges him with 31 counts of lying to regulators.”

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A fear driven rally may be underway….

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“This week’s rail traffic data continued to show signs of positive growth though the trend has weakened in recent weeks.  Intermodal traffic was up 3.2% year over year bringing the 10 week moving average down marginally to 5%.   AAR offers some more details on this week’s data:”

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An interesting poll result indeud….

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Thank you for allowing us to export our inflation to you….

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“The White House is “dusting off old plans” for a potential release of oil reserves to dampen rising gasoline prices and prevent high energy costs from undermining the success of Iran sanctions, a source with knowledge of the situation said on Thursday.”

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CERN, FCEL, KKD, GTAT, GRPN, MRVL, MCK, MDT, MCP, PSX, TSO, VIA, WLP,

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Gapping up 

OPLK +5.2%, NOK +4.5%, BRCD +3.9%, TEF +3.3%, IDIX +7.9% , GTAT +1%,

AAPL +0.3%, FINL +2% , AFCE +0.7, CHC +34.7% , ANN +11.2%, FL +5.6%,

OPLK +5.2%, GPS +1.5%, SAN +1.9%, DB +1.8%, CS +1.6%, BCS +1.5%, UBS +1.1%, ING +0.7%,

Gapping down

MRVL -8.5%, ARO -7.8%, COSI -7%, LPHI -6.7%, PMT -4.1%, MCP -4.1%, DRYS -2.2%, AVGO -1.9%,

GRPN -1.6%, VVUS -6.4%, ARCC -3.6% , MCP -7.7%,  GGP -2%,  GSK -0.9%, NVS -0.8%,  IO -22.1%,

GOLD -4.1%, HMY -3.3%, RIO -1.8%, AU -1.6%, BBL -1.5%, SCSC -4.7%, HIBB -3.9%,

In Play ,

On the Wires 

“Goldman Sachs investment strategist Abby Joseph Cohen is out with a massive presentation on the state of the world economy and investment environment.

Cohen’s presentation looks at the state of several key economic and financial market metrics in key countries around the world and discusses her outlook for the rest 2012 and beyond.

• Cohen says investors should “expect quarterly volatility linked to weather, inventories, energy prices and global factors including European activity.”
• However, she also says she “does not expect additional deceleration” in U.S. economic data.
• The presentation concludes with an interesting discussion about the rise of environmental risk in financial markets.”

See presentation here

Source

“MADRID (AP) — The Bank of Spain says the country’s bad loan rate shot up to a record of 9.42 percent in June, with more than €164 billion ($201.38 billion) in loans to households and businesses at least three months behind in their payments.

Spain announced in June that its banking sector, hit hard by a collapsed real estate bubble, needed a bailout. Up to €100 billion in money has been made available by the other members of the 17-country group that uses the euro, but has yet to be disbursed.

The increase from May was more than €8 billion, the second biggest monthly increase on record.

Spain is in its second recession in three years and the jobless rate is almost 25 percent. Many think it will end up requesting a full-blown sovereign bailout because of the government’s soaring borrowing costs.”

“The U.S. Treasury Department today announced plans to accelerate its winddown of its backing of Fannie Mae and Freddie Mac.

Treasury amended its terms as conservator of the government-sponsored-enterprises. Treasury said the plan also includes a “full income sweep” for Fannie and Freddie.

The GSEs have been under conservatorship since 2008. Both Fannie Mae and Freddie Mac reported second quarter profits earlier this month.

Republicans in Congress have called for an end to the two taxpayer-owned companies, which now own or guarantee about 60 percent of U.S. home loans. Treasury Secretary Timothy F. Geithner has said he will propose a plan to overhaul housing finance that could include dismantling or altering Fannie Mae and McLean, Virginia-based Freddie Mac.”

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“International Business Machines Corp. (IBM), following a deal to buy Texas Memory Systems Inc., vowed to continue its five-year shopping spree by acquiring more companies in the storage industry.

IBM announced the purchase yesterday of closely held Texas Memory, a designer of flash memory, without disclosing terms. The goal is to provide a more complete storage system than competitors by assembling the components through purchases of smaller companies, said Bob Cancilla, vice president for storage systems at Armonk, New York-based IBM.”

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