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The deep dish on why Meredith Whitney was dead wrong on municipal bonds

There are trouble spots but these unglamorous holdings are still among the safer and more tax-effective instruments around

Author Martin Walsh, Guest Columnist July 8, 2011 at 2:20 PM
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Martin Walsh: There is virtually zero chance of 'hundreds of billions' of municipal defaults in 2011.

Elmer Rich III

Elmer Rich III

July 8, 2011 — 4:47 PM

Oftentimes “expert” predictions are a good contrary indicator — as in this case. There has been quite a bit of research on expert knowledge, practice and predictions in many professional and academic fields — the results are sobering. Some results include the findings that:

- “...the fame of experts is inversely related to their accuracy…”

- “”...more confident predictions are more likely to be wrong.”

However experts, like the best RIAs, advisors and professionals also have processes in place to combat the main mistakes our brains make in evaluating situations and directing behavior.



July 9, 2011 — 2:23 AM

I thought Meredith Whitney’s prediction last fall was reckless and unfounded. In January I added more to my T Rowe Price California Muni Fund. The fund is up 6% since said purchase. Whitney scared a lot of people out of Muni Bonds and those folks lost quite a bit of money. Her recent CNBC appearance and re stated default laden Muni bond forecast pretty much destroyed any credibility she ever had.

Frank Keegan

Frank Keegan

July 15, 2011 — 6:17 PM

Whitney is only half wrong. It’s not how many, it’s which. Right now there is no way to tell because state and local governments have hidden trillions of dollars in obligations off the books.

Glacial GASB is taking too long in forcing honest accounting, so bond lawyers are stepping in:

Until issuers honestly account for how much they really owe over the next three decades, bond markets will face uncertainty. Few issuers may default, but we can’t figure out which ones will.

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August 10, 2021 at 11:46 PM

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