06/24/10 Baltimore, Maryland – US households are piling into municipal bonds. The household sector accounts for 80% of all flows into munis over the last three quarters, according to the Federal Reserve’s flow of funds report.
Of the $2.8 trillion in municipal debt currently outstanding, households hold $1 trillion. And that doesn’t count what they hold indirectly through banks, insurance companies, mutual funds and so on.
We can just imagine what the average broker is telling his clients right now: “If you think stocks are too risky right now, munis are the perfect way to earn a respectable return. And munis are always a place to turn at a time like this when income tax rates are likely to rise.”
Yikes. As we point out in the current issue of Apogee Advisory, municipal debt holds the same laundry list of risks that subprime mortgages did in 2006.
Dave Gonigam
for The Daily Reckoning
Dave Gonigam
Treading a fine line between contrarian thinking and conspiracy theory, Dave Gonigam explores the nexus of finance, politics, and the media for Agora Financial's 5 Minute Forecast. He joined kindred spirits at Agora Financial in 2007 after a 20-year career as an Emmy award-winning writer, producer, and manager in local TV newsrooms nationwide.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
I do not think it is households buying the muni debt, where are households getting the money from? They are broke! I suspect it is more stealth monitization by the fed.