Randomly Noted

One of this bloggers favorite newsletters is one put together by John Mauldin. Not only does he have his own interesting economic insights, but he flags his readers to insights from others. His most recent newsletter focuses on a year-end review by Hoisington Investment Management. The area of the review that caught my eye were some of the remarks about the municipal fiscal mess we continue to face.

For starters, Hoisington notes that the rise in municipal bond yields significantly increased borrowing costs – which is not something good for already cash-strapped municipalities. That makes it more expense to fund capital projects that were planned, which could place some of those plans in peril. The firm notes that through history, state and local governments don’t undertake big projects when they have huge cyclical deficits. What’s not said here but is another consequence – the fewer capital projects underway, means fewer jobs for the employed and unemployed.

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Two of the brightest people in the financial industry are John Mauldin (great economic insights) and Meredith Whitney (she called the banking industry crisis well before it happened in 2008). And they couldn’t disagree more on how severe the budget crisis is for state and local governments – and what that ultimately means for municipal bond holders.

Whitney appeared in a recent “60 Minutes” segment  called “The Day of Reckoning,” which took a look at the financial condition of states budgets. She thinks the state governments will be ok but not so for city and county governments. She predicts a spate of 50 to 100 sizable government defaults – and was predicting that coud amount to hundreds of billions of dollars. She believes the defaults will begin within a year. (Click here to see the “60 Minutes” segment.)

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One of the more popular newsletter writers/blogger in the FX world is John Mauldin. His most recent newsletter contains yet another sober view of the economy. Mauldin always tries to take a forward view of the world and in this newsletter, he keeps to form. He takes a look at why the recent soft GDP numbers will be, well, soft in quarters ahead. He warns that voters should be careful for what they wish for in this election season regarding deficit reduction and campaign promises that will be hard to keep. And he offers a sharp look at the effect the upcoming expiration of unemployment benefits will have on personal income. A good read all around.

Some of my friends in the foreign exchange world read, read, and read all they can to get a sense of where economies are headed. And one of the writers many of these friends watch very closely is John Mauldin. This closely watched analyst is raising questions about whether the U.S. economy is headed into another recession. To read his full reports, go to his website here. Here’s what he says about the economy:

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