America is not wallowing with the PIIGS yet
www.waltonsun.com
My job was to make sure that La Lobas Chocolate Drop cookies were available for the 2nd Congressional District candidate forum.
My mama, a principled, staunch Republican, passed down an interest and a respect for the political process. We have a picture of her campaigning with Bo Callaway during his 1966 gubernatorial race against Lester Maddox. I am tucked over to one side.
My interest in finances, though, got me excited when independent candidate Diane Berryhill asserted that ?no one? wanted to buy Florida bonds. Hold the presses, The Walton Sun has to set the record straight. See what happens when you listen to Glenn Beck too often? In the real world though, there are hundreds of investment grade bonds issued by the state of Florida, Florida government agencies, municipalities or projects backed by revenue. On Aug. 10, 2010, in a halfday?s trading more than 500 individual Florida municipal bonds were purchased. Someone did not get Ms. Berryhill?s message. High quality, AAA-rated issues like Walton County School District bonds generate high demand and are head-andshoulders above the over-priced Goldline coins hyped on Beck?s program.
The media, like generals fighting the last war, is doggedly pursuing the financial crisis du jour and pundits are linking the European sovereign debt crisis with cash-strapped states municipal debt. Local favorite Barbara Olschner touched on this, declaring that within 18 to 24 months our country would face a predicament like Greece. Ignored are important differences that make a Greeklike tragedy less likely in the U.S.
Comparing individual states with peripheral European nations in fiscal distress (PIIGS ? Portugal, Italy, Ireland, Greece and Spain) is like comparing SEC football with ACC football. California, by itself, is the eighth largest economy in the world. Greece?s economy is the equivalent of Massachusetts?. Texas is larger than Spain, and Missouri is ahead of Portugal. A larger and more diverse economy generates more income.
The debt of U.S. states is miniscule compared with the PIIGS. California,the poster child for profligate spending, has a debt percentage around 5 percent. Conversely, Greece and Italy sport ratios over 100 percent. Furthermore,municipal debt is not typically used by states for ongoing operations. Plus, municipal debt is issued in serial structures where interest and principal is repaid annually. Importantly, repayment of municipal debt often has legal priority over other expenditures.
Lehman Brothers and Bear Stearns collapsed because no one would refinance their debt when it matured. Greece has 50 percent of its debt maturing within five years contrasted with 20 percent of California?s. Banks own more than 60 percent of Greek debt while in the United States banks own a much smaller portion of outstanding municipal debt (less than 10 percent). Logically, a problem with Greek debt would cause a crisis in the European banking system.
In the U.S., municipal bond holders generally hold their bonds to maturity. By contrast, European sovereigndebtisoften?soldshort? by speculators who bet the issue with decline in value. U.S. municipal bonds can be ?shorted? but the ownership demographics don?t lend itself to the practice.
This is not an all-clear claxon for the U.S. municipal bond market; states and municipalities face serious fiscal issues. High quality general obligation bonds, pre-refunded securities and essential service revenue bonds are second only to U.S. Treasury bonds in safety and security. If you do not know that then you should not run for Congress as a Republican, Democrat or Independent.
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial? . net.
BUZ LIVINGSTON
Just Plain Talk
www.waltonsun.com
My job was to make sure that La Lobas Chocolate Drop cookies were available for the 2nd Congressional District candidate forum.
My mama, a principled, staunch Republican, passed down an interest and a respect for the political process. We have a picture of her campaigning with Bo Callaway during his 1966 gubernatorial race against Lester Maddox. I am tucked over to one side.
My interest in finances, though, got me excited when independent candidate Diane Berryhill asserted that ?no one? wanted to buy Florida bonds. Hold the presses, The Walton Sun has to set the record straight. See what happens when you listen to Glenn Beck too often? In the real world though, there are hundreds of investment grade bonds issued by the state of Florida, Florida government agencies, municipalities or projects backed by revenue. On Aug. 10, 2010, in a halfday?s trading more than 500 individual Florida municipal bonds were purchased. Someone did not get Ms. Berryhill?s message. High quality, AAA-rated issues like Walton County School District bonds generate high demand and are head-andshoulders above the over-priced Goldline coins hyped on Beck?s program.
The media, like generals fighting the last war, is doggedly pursuing the financial crisis du jour and pundits are linking the European sovereign debt crisis with cash-strapped states municipal debt. Local favorite Barbara Olschner touched on this, declaring that within 18 to 24 months our country would face a predicament like Greece. Ignored are important differences that make a Greeklike tragedy less likely in the U.S.
Comparing individual states with peripheral European nations in fiscal distress (PIIGS ? Portugal, Italy, Ireland, Greece and Spain) is like comparing SEC football with ACC football. California, by itself, is the eighth largest economy in the world. Greece?s economy is the equivalent of Massachusetts?. Texas is larger than Spain, and Missouri is ahead of Portugal. A larger and more diverse economy generates more income.
The debt of U.S. states is miniscule compared with the PIIGS. California,the poster child for profligate spending, has a debt percentage around 5 percent. Conversely, Greece and Italy sport ratios over 100 percent. Furthermore,municipal debt is not typically used by states for ongoing operations. Plus, municipal debt is issued in serial structures where interest and principal is repaid annually. Importantly, repayment of municipal debt often has legal priority over other expenditures.
Lehman Brothers and Bear Stearns collapsed because no one would refinance their debt when it matured. Greece has 50 percent of its debt maturing within five years contrasted with 20 percent of California?s. Banks own more than 60 percent of Greek debt while in the United States banks own a much smaller portion of outstanding municipal debt (less than 10 percent). Logically, a problem with Greek debt would cause a crisis in the European banking system.
In the U.S., municipal bond holders generally hold their bonds to maturity. By contrast, European sovereigndebtisoften?soldshort? by speculators who bet the issue with decline in value. U.S. municipal bonds can be ?shorted? but the ownership demographics don?t lend itself to the practice.
This is not an all-clear claxon for the U.S. municipal bond market; states and municipalities face serious fiscal issues. High quality general obligation bonds, pre-refunded securities and essential service revenue bonds are second only to U.S. Treasury bonds in safety and security. If you do not know that then you should not run for Congress as a Republican, Democrat or Independent.
Buz Livingston is a certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial? . net.
BUZ LIVINGSTON
Just Plain Talk