August is a slow month in D.C. and we thought we’d add some humor to the post-Earthquake news cycle. Obviously, none of the statements or quotes in this post are real.
Financial analyst Meredith Whitney said that the recent earthquake in the mid-Atlantic region is yet another sign of underlying instability in the municipal bond market. In an interview on CNBC’s “Squawk Box,” Whitney warned that tectonic trends beneath the surface could lead to increasing (de)fault risk. “It’s risky to invest in muni bonds when the entire Eastern Seaboard or West Coast could fall into the ocean,” Whitney noted.
Since predicting the possibility of “50 to 100 sizeable defaults” on NBC’s 60 Minutes in late 2010, Whitney has had difficulty defining what she means by municipal default. Originally interpreted by investors to mean widespread defaults on muni bond debt, Whitney later shifted ground, saying that default could mean defaulting on debt or a default in the social contract between state-local leaders and citizens. In an interview with CNBC’s Maria Bartiromo published in USA Today, Whitney said “At this point I don’t really know what a default is. I just know there are going to be a lot of them. It’s scary out there.” Bartiromo responded, “Ooh, that is scary. Thanks for the straight talk Meredith. Keep up the good work.”
But, not all industry experts agree. JP Morgan Chase’s Jamie Dimon countered, “Meredith’s crazy, but I’m loving it. You go girl.” Pimco’s Bill Gross, in a show of support for the muni market, moved his entire personal fortune into conduit bonds issued by housing authorities backed by federal funding.
Meanwhile, savvy short-term investors moved their money into retail giant Starbucks, as lines stretched for blocks in many cities on the east coast after the Earthquake. Personal investor Todd Turner said “When the ground beneath you starts to shift, you need a latte.”