Jamie Dimon on Meredith Whitney's muni bond armageddon call

I love Meredith and all that but, honestly, most of that stuff is hogwash.

~Jamie Dimon, CEO, JP Morgan, CNBC, August 10, 2011

"Bond King" Jeff Gundlach says the muni market is the new subprime

You’ve got a history of low defaults, which is comforting. But that kind of sounds like what subprime sounded like back in 2006. You had a triple-A market that had never traded below par, the fundamentals were getting worse and it was owned for a technical reason. In the case of subprime, it was that triple-A rating that had such good treatment from the bank regulators, and the funds with their prospectuses could buy the triple-A rating and all of that.

And the muni market has never really had defaults and it's always had good recovery rates but the fundamentals are bad and its own for a technical reason, which is the tax benefit! People own it for the tax benefit.

I don't think you need to know what the default rates will be or how low 'low' is, munis are going to go down. There are going to be other shoes to drop. There might be so many that it looks like Imelda Marcos's closet when all of those shoes drop because all the states have to deal with this stuff.

Between here and the end game, lies the valley. And the valley is full of fear. I think the muni market is going to go down by at least, on the long end, something like 15 and 20 percent.

~Jeffrey Gundlach, CEO and "Bond King", DoubleLine Capital, CNBC interview, March 9, 2011 

Barron's Forsyth says smart money is piling into muni bonds

Forecasts of a wave of municipal defaults totaling hundreds of billions contrast with actual experience. S&P reported Friday that actual municipal defaults totaled $2.65 billion in 2010, equal to approximately 0.095% of the $2.8 trillion muni market, down from $2.8 billion in '09. Smart managers are buying munis, not the hysteria.

~Randall Forsyth, columnist, Barron's magazine,  "Yields Soar on Overpunished Munis", January 15, 2011

Jon Markman on the prospect of the bond insurers losing their AAA credit rating

[T]he consequences of a downgrade of the monoline insurers if they were still responsible for guaranteeing muni debt would be too catastrophic to even contemplate... the monolines basically rent out their AAA rating to municipalities in exchange for insurance premiums. So a downgrade of the monolines' ratings would in turn mean a downgrade of the munis. Due to contract covenants that require munis to hold high ratings, a downgrade would in a great many cases require cities and states to buy back much of their trillions of dollars of debt from buyers -- which would be impossible -- and force them into bankruptcy or into enormous tax increases to pay for higher interest rates.

~ Jon Markman, "Buffett's an opportunitst, not a hero," MSN.Money, February 15, 2008