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December 23, 2011 at 08:45 AM
While Bloomberg continues to delight in Meredith Whitney’s bold “prediction-that-wasn’t,” The Wall Street Journal notes she might not be so far off. They admit she was wrong; the massive wave of defaults the famous analyst warned of in her Dec. 12, 2010 interview on “60 Minutes” never happened, but it’s really only a matter of degree.
“Debt issued by municipalities—a category that includes local governments and other affiliated entities like school districts—has returned 10.2% so far this year,” The Journal writes. “That beat out Treasurys, the second-best performer, with a 9.3% return. Riskier high-yield corporate bonds returned 4.2%.”
However, the paper reminds readers that Moody’s Investors Service said in November that downgrades outpaced upgrades by a ratio of about five to one, “the highest ratio since the start of the financial crisis. The ratings firm also said it expected the downgrade trend to continue in the coming quarters, as deficit-cutting measures from states and the federal governments take hold.”
“Ms. Whitney and others who predicted munis’ demise just had the wrong D-word,” Dan Genter, chief investment and executive officer for RNC Genter Capital Management, told the paper. “People need to be focused on downgrades, not defaults,” he said.
