100 Muni-Bond Auctions Fail
Unprecedented disruptions in short-term debt markets.
There were over 100 failed auctions in Auction Rate Securities yesterday, notably some in the closed end space. This is a first and it is important.
Why? Imagine you had a margin account where you were forced to pay a higher margin rate and your bonds were falling in price? It is a lethal combination.
If I could borrow these funds I would short them, but they are notoriously hard to borrow. The sad part is that these funds were more financial alchemy by the folks on Wall Street. There are approximately $265 billion outstanding.
I know this: If I owned 'em, I would blow 'em out. If I could short 'em, I would, in size. This is a mess and mom-and-pop retail won't likely find out about it until it's too late.
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