Where to take a chance: And how to lose money in municipal bonds

Glendale facing bond issues, lawsuit

What in the world is happening with the way the globe looks at credit and risk? Here’s a hint, it’s not good for Glendale looking to raise significant cash to pay lucrative concessions to Matthew Hulsizer.

China and Russia have decided to trade amongst themselves in a currency that is NOT the U.S. dollar.

China is reducing it’s position in U.S. treasury bonds. It is also bailing out Europe. But, there is a new way to do business for China.

China Select Capital Partners have issued bonds on the Toronto Stock Exchange looking for foreign investment sources:

“We are one of the first movers in our nascent industry and eager to capitalize on the growing China private equity market through facilitating foreign investment in China and managing Renminbi-denominated funds.”

The strategy away from the United States bond holdings is underway for China. Instead, they are looking to take ownership positions in firms in the U.S. And that is to the tune of an initial $9.6 Billion which includes banks, even Coca-Cola:

The filing offers a glimpse of how China is trying to diversify its more than $2 trillion in foreign currency holdings with stock, rather than investing almost entirely inUnited States Treasury bonds and other debt securities issued by governments and by government-sponsored enterprises like Fannie Mae.

All the while, Jamie Dimon, the CEO of J.P. Morgan, claimed to be frontrunners in the manipulation of the gold and silver markets to bolster the U.S. dollar, explained that there will be more U.S. municipalities going bankrupt:

“If you are an investor in municipals you should be very, very careful,” Dimon said at the conference.

So, if you are Glendale, AZ looking to sell bonds that total over $100 million you might have a problem.

And that has Winnipeg getting a little excited yet again!:

The worry is there’s credit contagion going on and that a replay of the mortgage market (meltdown) is now hitting the municipal bond market,” said Jack Ablin, chief investment officer of Chicago-based Harris Private Bank, a division of BMO.

Ablin isn’t predicting the sky will fall in Glendale but he said many American cities and towns are financially stretched with rising debts and falling tax revenues. They’re also bearing the brunt of the pullback from the private sector over the last two to three years.

He described the municipal bond market as a “patchwork quilt” of offerings with an average size of $30 million. The money raised is typically used to fund upgrades to sewer systems, hospitals, schools and sports facilities.

On top of it all, despite the woes of raising the cash, the Goldwater Group is investigating the issue and considering a lawsuit against concessions again.

In recap, you have foreign investors leary of bonds preferring ownership positions directly in corporate America, and who knows what the folks in Abu Dhabi are thinking.

And if you think the sub-prime mortgage fiasco, leading into the derivative scandal was fun, you ain’t seen nothing yet – – watch the bubble burst on commercial real estate for the next round of incredible U.S. slaughter known as their economy.

Should be an interesting close to a very twisted case that has Canadians on the edge of their collective seats.

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