Profit Confidential Reports: Municipal Bankruptcies the New Norm

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According to Michael Lombardi, financial expert and lead contributor to Profit Confidential, the municipal bond market is not a safe place these days. Lombardi believes that municipal bankruptcies are becoming a norm in the current U.S. economy and that bankruptcy is the only way out for many municipalities.

Profit Confidential Reports: Municipal Bankruptcies the New Norm

Profit Confidential Reports: Municipal Bankruptcies the New Norm

“Local governments have to control their budget deficit, and deficit cuts are much needed by municipalities in order to avoid any future disturbance with creditors,” claims Lombardi.

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According to Michael Lombardi, financial expert and lead contributor to Profit Confidential, the municipal bond market is not a safe place these days. Lombardi believes that municipal bankruptcies are becoming a norm in the current U.S. economy and that bankruptcy is the only way out for many municipalities.

“Local governments have to control their budget deficit, and deficit cuts are much needed by municipalities in order to avoid any future disturbance with creditors,” claims Lombardi. According to the editor, the after-effects of local governments taking the usual steps to stay alive will hit the municipal bond investors—a $3.7-trillion market.

In the article “Beware Municipal Bond Buyers; This Situation Isn’t Getting Any Better,” Lombardi reports that cities in California, like Vallejo, Mammoth Lakes, Stockton, and San Bernardino, have already defaulted on their municipal bonds, and he believes that Compton is most likely to be the next to default.

“What do all these towns have in common? They are suffocating under big budget deficits,” says Lombardi.

Lombardi notes that the cities that have already defaulted on their municipal bonds are still scrambling. Stockton, California, he notes, wants its municipal bond insurers to take a bigger hit because it has pensions to pay—$26.0 million each year.

“The insurer of the municipal bonds stands to lose more than $100 million,” says Lombardi.

In sum, the number of municipal bankruptcies is going to increase and the municipal bond investor will certainly be affected by it, concludes Lombardi.

Profit Confidential, which has been published for over a decade now, has been widely recognized as predicting five major economic events over the past 10 years. In 2002, Profit Confidential started advising its readers to buy gold-related investments when gold traded under $300 an ounce. In 2006, it “begged” its readers to get out of the housing market... before it plunged.

Profit Confidential was among the first (back in late 2006) to predict that the U.S. economy would be in a recession by late 2007. The daily e-letter correctly predicted the crash in the stock market of 2008 and early 2009. And Profit Confidential turned bullish on stocks in March of 2009 and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.

To see the full article and to learn more about Profit Confidential, visit http://www.profitconfidential.com.

Profit Confidential is Lombardi Publishing Corporation’s free daily investment e-letter. Written by financial gurus with over 100 years of combined investing experience, Profit Confidential analyzes and comments on the actions of the stock market, precious metals, interest rates, real estate, and the economy. Lombardi Publishing Corporation, founded in 1986, now with over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more on Lombardi, and to get the popular Profit Confidential e-letter sent to you daily, visit http://www.profitconfidential.com.

Michael Lombardi, MBA, the lead Profit Confidential editorial contributor, has just released his most recent update of Critical Warning Number Six, a breakthrough video with Lombardi’s current predictions for the U.S. economy, stock market, U.S. dollar, euro, interest rates and inflation. To see the video, visit http://www.profitconfidential.com/critical-warning-number-six.

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