Category Archives: commentary

Taxing Muni Bond Income?

Every time I have mentioned the possibility of taxing muni bond interest as a potential risk factor, I get looked at like there’s a third arm growing out of my forehead. Look who has a head-arm now!

Municipal bond income is included in the cap under the new proposal, marking the administration’s first attempt to curb that benefit. That could hurt demand for state and local government securities, said lobbyists who work in the public finance sector.

The reason people don’t consider it a real risk is because the idea sounds so preposterously stupid. Taxing muni interest just raises the cost of borrowing for state and local governments – borrowers that are already strapped. Borrowers that are already laying off employees in droves because they can’t afford them. Remember, this proposal is part of a “jobs” plan that made the hiring of teachers, police and firemen an explicitly stated goal. Brilliant.

When 72% of co’s beat estimates, is that a good sign? Doesn’t it just show how bad analysts are at predicting earnings?

Panic vs. Rational Selling

The market has seen a lot of panic over the last few trading days. Wholesale dumping of everything that isn’t gold or treasury bonds, followed by frenzied buying of everything today. However, there is a big difference between an impulse to act, driven by fear, and rational decision making driven by a predetermined plan. Although they may occasionally happen at the same time, it is the reasoning behind the action that defines them.

Selling that occurs during a market decline is usually defined by the financial press as panic. This appears to be due to a belief that a wise investor only sells in a rising market, in an attempt to take advantage of the greedy buffoons that are buying on the way up. There is another, less popular, school of thought that says attempting to pick market tops is a foolish endeavor. Instead, we should leave the upside unconstrained, but protect the downside with predefined exits, knowing full well that this means never selling at the top. This is a trend following approach. This is an approach that places a higher priority on making money than being right.

Is Gaffe the Right Word Here?

From the OC Register:

Two Orange County Employees Retirement System officials have left the agency after they were placed on administrative leave in connection with a $228 million gaffe.

Use the wrong fork at dinner, incorrectly dial a phone number, wear mismatched socks to work? Gaffes. Fail to collect $228 million over a seven year period? I think you could go so far as to call that a blunder. Maybe goof-up? Whoopsie-daisy?